Additional Plan Details

Medicare.gov - MOC: Calculating Out-of-Pocket Cost Data

How We Calculate the Out-of-Pocket Costs (OOPC) Data

The Centers for Medicare & Medicaid Services (CMS) used the events or incidents of health care usage reported by individual people with Medicare from the Medicare Current Beneficiary Survey (MCBS). Each person included in the MCBS self-reported their health status, and health care utilization. We also matched the reported use of health care to the individual claims history to make sure we included Medicare covered services as well as services not covered by Medicare.


CMS combined 2004 and 2005 MCBS data to create statistically valid and reliable cost estimates. Of the 11,089 people with Medicare in the 2004 MCBS file, information for 6,708 was used in calculating out-of-pocket costs. Of the 11,510 people with Medicare in the 2005 MCBS file, information for 6,823 was used in calculating out-of-pocket costs. Data from both years was combined to create a nationally representative cohort of 13,531 people with Medicare.


We excluded individuals for certain reasons including if they did not participate in both Medicare Parts A & B for the full 12 months of the year or if they were in a long-term care facility for any part of the year. We wanted to focus on people in Original Medicare so that we could link both MCBS survey results and the Medicare claims data for the same period. We also excluded certain categories of individuals whose claims are paid differently or for whom we would not have a full complement of data. We created 5 health status categories (excellent, very good, good, fair, poor). We also created 3 high cost diagnostic conditions: diabetes, congestive heart failure, heart attack.


For each of the 5 health status categories and 3 diagnostic conditions we calculated estimated average monthly out-of-pocket costs for health plan. CMS used the actual Medicare claims payment experience and the MCBS self-reported health care utilization to determine total health care utilization for each of the 13,531 people with Medicare. CMS then computed the out-of-pocket costs based on the benefits covered and co-payments/coinsurance for each health care service. For the Medicare Advantage out-of-pocket costs projections, CMS used the data entered into the Plan Benefit Packages (PBP) to compute out-of-pocket costs. For the Original Medicare Plan and Medigap, CMS applied coinsurance and deductibles to Medicare payment amounts.


CMS made the following basic assumptions related to the out-of-pocket cost estimates for the Original Medicare Plan and Medicare Advantage Plans:


Original Medicare:

People with Medicare:


Medigap:
Medicare Advantage Plans:
Medicare and Non-Medicare covered services in the out-of-pocket cost calculations for Original Medicare, Medigap and Medicare Advantage Plans are:

For Original Medicare, Medigap, and Medicare Advantage Plans without prescription drug coverage, full drug costs assuming no insurance, are calculated. The calculations also use PDE coverage prices.


Medicare covered services only included in the out-of-pocket cost calculations for Original Medicare, Medigap and Medicare Advantage Plans are:

Some services are excluded from the out-of-pocket cost calculations. For example, some Medigap policies cover additional benefits that were not included in the out-of-pocket cost estimates such as:


Medicare Advantage plans offer a wide range of benefits, some of which were not included in the out-of-pocket costs estimates. Some examples of benefits not included in the out-of-pocket cost estimates for Medicare Advantage plans are:


Note to Researchers, Medicare providers, and Others: A more in-depth explanation of the exact methodology is available on www.cms.gov. Click here to view more information.


Page Last Updated: July 16, 2013

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