Is expanding Medicare coverage cost-effective?

Data from the National Health Interview Survey, the National Death Index, and the Medical Expenditure Panel Survey were analyzed to estimate the costs, changes in life expectancy, and health-related quality of life gains associated with providing private supplemental insurance coverage for Medicare beneficiaries. Model inputs included socio-demographic, health, and health behavior characteristics.Parameter estimates from regression models were used to predict quality-adjusted life years (QALYs) and costs associated with private supplemental insurance relative to Medicare only. Markov decision analysis modeling was then employed to calculate incremental cost-effectiveness ratios.Medicare supplemental insurance is associated with increased health care utilization, but the additional costs associated with this utilization are offset by gains in quality-adjusted life expectancy. The incremental cost-effectiveness of private supplemental insurance is approximately $24,000 per QALY gained relative to Medicare alone.Supplemental insurance for Medicare beneficiaries is a good value, with an incremental cost-effectiveness ratio comparable to medical interventions commonly deemed worthwhile.Medicare, the national health insurance program for the elderly in the U.S., consists of various plans or "parts [1]". Part A covers hospitalization costs and has no premium, but limits and deductibles apply. Part B covers outpatient care and requires a small monthly fee as well as a deductible. Limited prescription drug coverage will be added in 2006, but medications, co-payments, and deductible costs presently create a large and growing private market for Medicare supplemental insurance [2]. Retirees without access to supplemental insurance as a work-related benefit may choose to purchase Medicare supplemental insurance out-of-pocket, a phenomenon that may increase in the near future [3]. However, about 15% of elderly persons forego private supplemental insurance policies, a number that