Two economists say gap-filling products lead to so much extra Medicare spending that simply taxing the products could lead to big savings.
Marika Cabral of the University of Texas and Neale Mahoney of the University of Chicago make that argument in a copyrighted working paper posted behind a paywall on the website of the National Bureau of Economic Research.
Cabral and Mahoney looked at the effects of Medicare supplement insurance, or “Medigap” policies, on spending at the traditional Medicare program.
The eonomists studied the market to analyze a real-world example of how supplemental insurance which reduces consumer out-of-pocket costs, or “skin in the game,” can affect claims at the main insurance plan.
The economists analyzed Medicare program spending data in hospital service areas that cross state borders and have different Medigap premiums on each side of the border.