ECONOMIC REPORT OF THE PRESIDENT

2016 Part D premium was $34.10 per month, a reduction of 29 percent
(Medicare Trustees 2009). For a typical beneficiary enrolled in both parts of
the program, the annual premiums savings will total $336 in 2016.
Medicare beneficiaries are also responsible for cost sharing when
they access services. Enrollees receiving Part A services through traditional
Medicare pay fixed dollar cost sharing amounts when they use specified services;
these dollar amounts are updated annually based on changes in provider
payment rates under Part A. For Part B, traditional Medicare enrollees
are responsible for a deductible, which is updated annually based on the
overall trend in Part B costs, and, once the deductible is met, 20 percent
coinsurance for most services. Because of the structure of these cost sharing
obligations, they vary roughly in proportion to average per beneficiary
spending in these parts of the program.
The rightmost columns of Figure 4-46 reports estimates of the average
Part A and Part B cost sharing obligations incurred by individuals enrolled in
traditional Medicare under projections issued with the 2009 Trustees Report
and the most recent estimates for 2016.39 Cost sharing obligations through
Medicare Part A in 2016 are on track to be 23 percent lower than projected
in 2009 and cost sharing obligations through Medicare Part B are on track to
be 13 percent lower. Across both Parts A and B, the total estimated reduction
in average cost-sharing obligations in 2016 is $372, bringing the combined
reduction in premium and cost sharing obligations to $708.
The incidence of the cost sharing savings reported in Figure 4-46 will
vary across beneficiaries depending on whether they have supplemental coverage
in addition to their Medicare coverage that covers all or part of their
cost sharing. Roughly a fifth of traditional Medicare beneficiaries have no
supplemental coverage and will benefit directly from reduced cost sharing
39 To create these estimates, projections of Medicare’s average cost of providing Part A and
Part B coverage through traditional Medicare in 2016 were obtained from the 2009 and 2016
Medicare Trustees Reports, as were projections of the Part B deductible (Medicare Trustees
2009; Medicare Trustees 2016). For 2009, the estimates were then adjusted to reflect a scenario
in which physician payment rates remained fixed in nominal terms, rather than being cut
sharply as prescribed under the Sustainable Growth Rate formula then in law; projections
for this alternative scenario were published by the CMS Office of the Actuary along with the
2009 Medicare Trustees Report (Clemens, Lizonitz, and Murugesan 2009). Congress routinely
blocked the SGR cuts, so this provides a more accurate picture of the spending trajectory under
the policies in place in 2009. To estimate Part A cost sharing obligations, it was then assumed
that beneficiary cost sharing constituted 8 percent of the total cost of Part A services. This
percentage was estimated using information included in CMS’ annual announcement of Part
A cost sharing parameters; this approach slightly understates actual cost sharing obligations
because it does not account for cost sharing for some small categories of services (CMS 2016c).
To estimate Part B cost sharing liabilities, it was assumed that all beneficiaries use enough
services to pay their full deductible and pay 20 percent coinsurance for all other services; this
approach very slightly overstates actual cost sharing obligations.
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