Study: Supplemental Plans Raise Medicare Costs 22%

Restaurants know customers eat more at fixed-price buffets than when they pay à la carte. Economists have been saying for years that the same kind of behavior goes on in the federal Medicare program for seniors and the disabled.

Supplemental "Medigap" plans shield millions from Medicare's deductibles and other out-of-pocket costs. Pay a flat Medigap premium to a private insurer such as UnitedHealthcare or Humana and you might have little or no out-of-pocket expense for doctor visits, hospitalization or other Medicare services.

Naturally many worry that the all-you-can-eat model inflates Medicare's costs by encouraging consumers to seek -- or doctors to order -- potentially unnecessary procedures. Now economists at the University of Texas and the University of Chicago have taken what some call the closest look yet at the relationship between Medigap coverage and Medicare spending.

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Source: Kaiser Health News