Medicare: looking for pareto optimal changes.

Medicare enrollees are at risk for potentially unlimited out-of-pocket costs for acute care, defined here as prescription drug costs and copayments on covered services. As a result, many enrollees supplement Medicare with Medigap insurance, which increases their premium costs and their use of Medicare-covered services. The objective of this study was to limit enrollees' risk for acute care costs without increasing federal spending. The study found that savings from prohibiting Medigap would be sufficient to provide a copayment cap under Medicare. If Medicare's copayment requirements were also restructured, the savings would finance a prescription drug benefit as well. Most enrollees could expect lower expenses for premiums and out-of-pocket costs combined, but expenses would be significantly higher for 5% of enrollees, all current Medigap policyholders.