Good Point

A thoughtful and important comment from a reader:

"I read your article in today's, (Friday Oct. 2) News & Observer, regarding medicare + Choice, ( of course now called medicare advantage). Were you aware that medicare by itself does not have a cap to out of pocket spending? Insurance is designed to protect people from large out of pocket expenses, something medicare by itself does not do. Many of the people in these Medicare Advantage programs are the low income.These people who cannot afford a medicare supplement, which does protect people from having large out of pocket expenses. This is the flaw of medicare and I have NEVER read any article that addresses this problem. And it is a problem."

A couple of thoughts. First, yes, I am aware that there is no cap on out-of-pocket expenditures under Medicare....from the hospital deductible of $1,068 to cost share for doc visits, etc. (and of course there are huge out of pocket costs for long term care, a hole in Medicare's benefit structure). It is very bad to be elderly, sick and low income. And there are low income beneficiaries in Medicare Advantage plans. However, if the policy goal is to help low income Medicare beneficiaries deal with out of pocket costs, Medicare Advantage as it exists is not the most efficient way to do that. A would be quite open to means testing Medicare....and financing supplemental insurance for low income beneficiaries from within the Medicare population itself....but there will be lots of blood spilled over that one.

Second, there is a general flaw in the notion of health insurance in the American context, not just in Medicare. Typically insurance means you pay a premium in return for protection against a catastrophic expense. So, that would mean you would know clearly what you would be on the hook for, and at what point you would no longer have to pay. But, health insurance is an odd mix of first dollar cover (things we are trying to encourage, like prevention), partial cover (like co-pays and deductibles that may not count against out of pocket maximums if they exist in a plan), and benefits that max out (like my Duke policy has an annual, and a lifetime maximum; or the common case of limits for types of benefits like mental health).

Here is a quote from an interview with Kenneth Arrow writing about how he got interested in health insurance and health care saying it was when he got his first employer based insurance plan and it covered his care first dollar, but then went away at a certain level of expenditure.

"My first health-care plan as a professor had a $15,000 ceiling. A ceiling? I was thinking that should be a floor! $15,000 I can handle, but above that... it would be a problem."

This let him know things were a bit odd with health insurance American style, and this pre-dated Medicare.

A question: Would it be better to have a Medicare deductible, with a certain out of pocket maximum? $3,000? $5,000? You could have a different deductible based on income?