| Medigap insurance, which reduces consumer out-of-pocket expense, can affect claims at the heart of any plan; says two economists who studied the Medicare Supplement market and analyzed real-world scenarios. The economists believe that simply taxing the Medicare Supplement products could lead to big savings.
Economists Marika Cabral of the University of Texas and Neale Mahoney of the University of Chicago agree that Madigap products encourage extra Medicare spending.
Marika and Neale analyzed Medicare program spending data in hospital service areas across state borders and have also analyzed different Medicare premiums on each side of the border.
The data underwent many variables that could skew comparisons of Medicare Supplement appeals towards the needier elderly, who would also spend heavily even if they only had traditional Medicare.
The findings showed an increase of 22 percent in Medicare spending or about $1400 per year, a 24% increase in hospitalization, with a 34% increase in physician service fee.
The economist estimate a simple 15% Med Supp premium tax could generate $13 billion per year in spending cuts and tax revenue, and that a "Pigouvian tax,” could generate $32 billion in yearly savings.
The research did not focus on the Medigaps effects to patients' health, care, or product satisfaction; however, they found no noticeable effect on the likelihood that patients would get genuinely urgent procedures with or without the use of Medigap.
The economists make their research available on a copyrighted working paper on the National Bureau of Economic Research website.
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