HEARING - U.S. Senate Special Committee on Aging

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We believe a new federal program could be particularly problematic if it were
mandatory. A voluntary program such as S. 210 assures that no low-income
beneficiaries would be forced to drop their Part B coverage In order to afford the cost
of "catastrophic" coverage. However, the voluntary nature of the program proposed by
S. 210 could increase expenses through 'adverse selection." That is, persons who
expected to need 'catastrophic" protection might enroll disproportionately.
On the other hand, from our perspective, a voluntary program, such as embodied in S.
210, is preferable to a mandatory one. A voluntary government program does permit
the elderly to choose between governmental and private sector products.
In summary, because the private market is working well, we believe that the
government's role should be limited to a residual one for those for whom private
coverage is not affordable.
Alternatives to a New Federal Program
Congress could consider several alternatives to a new federal program. We would urge
to you consider expanding Medicaid eligibility; providing lower-Income beneficiaries
with greater purchasing power in the private market through subsidies or other
mechanisms; and providing for the expansion, promotion and adequate payment of
alternative health plans for Medicare beneficiaries.
In addition, we recommend Increased beneficiary education on the limitations of
current Medicare benefits and on additional benefits available through private Medigap
plans. Expanded beneficiary education could increase knowledge of Medicare's
coverage limits. A major study by Rice and McCall found beneficiaries' belief that