Medicare essential: An option to promote better care and curb spending growth

Karen Davis, Cathy Schoen, Stuart Guterman

Research output: Contribution to journalArticlepeer-review

7 Scopus citations


Medicare's core benefit design reflects private insurance as of 1965, with separate coverage for hospital and physician services (and now prescription drugs) and no protection against catastrophic costs. Modernizing Medicare's benefit design to offer comprehensive benefits, financial protection, and incentives to choose high-value care could improve coverage and lower beneficiary costs. We describe a new option we call Medicare Essential, which would combine Medicare's hospital, physician, and prescription drug coverage into an integrated benefit with an annual limit on out-of-pocket expenses for covered benefits. Cost sharing would be reduced for enrollees who seek care from high-quality low-cost providers. Out-of-pocket savings from lower premiums and health care costs for a Medicare Essential enrollee could be $173 per month, compared to what an enrollee would pay with traditional Medicare, prescription drug and private supplemental coverage. Financed by a budget-neutral premium, we estimate that this new plan choice could reduce total health spending relative to current projections by $180 billion and reduce employer retiree spending by $90 billion during 2014-23. Given its potential, such an alternative should be a part of the debate over the future of Medicare.

Original languageEnglish (US)
Pages (from-to)900-909
Number of pages10
JournalHealth Affairs
Issue number5
StatePublished - May 2013

ASJC Scopus subject areas

  • Health Policy


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