MEDICARE 

SUPPLEMENTAL 

COVERAGE

Medigap and Other 

Factors Are 

Associated with 

Higher Estimated 

Health Care 

Expenditures

Report to the Ranking Member, 

Committee on Finance, U.S. Senate

September 2013

GAO-13-811

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-13-811, a report to the 

Ranking Member, Committee on Finance, 

U.S. Senate

September 2013

MEDICARE SUPPLEMENTAL COVERAGE

Medigap and Other Factors Are Associated with 

Higher Estimated Health Care Expenditures

Why GAO Did This Study

Medicare provides coverage for the 

cost of many health care services. At 

the same time, because some services 

are not covered by Medicare, and 

because of cost-sharing such as 

copayments and deductibles, 

beneficiaries enrolled in Medicare FFS 

may have significant out-of-pocket 

expenditures. Most Medicare 

beneficiaries have some form of 

additional health care coverage— 

referred to as supplemental 

coverage—to help them pay for these 

costs. For example, Medicare FFS 

beneficiaries may have supplemental 

coverage from private insurance 

companies, called Medigap, or that 

they receive as retirees through a 

former employer, referred to as 

employer-sponsored coverage. This 

supplemental coverage may reduce 

any incentive that out-of-pocket costs 

creates for beneficiaries to be more 

cost-conscious in their use of services.

GAO was asked to provide information 

about how Medicare beneficiaries with 

supplemental coverage compare to 

Medicare beneficiaries without 

supplemental coverage with respect to 

total health care costs and the sources 

of payment for those costs. In this 

report, GAO compares average total 

health care expenditures and sources 

of payment for Medicare FFS 

beneficiaries with and without 

supplemental coverage. GAO analyzed 

data from the 2010 MCBS, the most 

recent MCBS data available at the time 

we conducted our analysis. GAO also 

reviewed original research studies 

published since 2008 to understand 

factors that could affect spending for 

Medicare beneficiaries with and 

without supplemental coverage.

What GAO Found

GAO’s analysis of the Centers for Medicare & Medicaid Services’ 2010 Medicare 

Current Beneficiary Survey (MCBS) showed that estimated average total health 

care expenditures were higher for beneficiaries with Medigap or employersponsored coverage than for beneficiaries with traditional fee-for-service (FFS) 

Medicare only. While estimated average expenditures were lower for 

beneficiaries with Medicare FFS-only, those who were enrolled in Medicare’s 

Part D prescription drug program had higher average health care expenditures 

than those without Part D (see fig. below). Although some research has found 

similar patterns of higher health care expenditures for those with supplemental 

coverage, other studies have found that certain characteristics, such as health 

status and age, may influence the decision to purchase supplemental coverage, 

which could provide a partial explanation of the differences in expenditures. 

Furthermore, some studies suggest that increasing cost-sharing for those with 

supplemental coverage could decrease the utilization of (and associated health 

care expenditures for) certain types of health care such as physician visits, but 

increase the utilization of (and expenditures for) other types of health care such 

as inpatient hospitalizations.

Estimated Average Total Health Care Expenditures per Beneficiary by Supplemental Coverage 

Category and by Part D Enrollment for Medicare FFS-only, 2010

Note: This analysis excludes beneficiaries residing in long term care facilities such as nursing homes.

When looking at the source of payment for health care expenditures, GAO’s 

analysis of 2010 MCBS data showed that estimated average spending by 

Medicare for those with Medigap or employer-sponsored coverage was greater 

than for those with Medicare FFS-only. Average Medicare spending for 

beneficiaries with Medigap was more than twice as much as Medicare spending 

for beneficiaries with Medicare FFS-only. Similarly, out-of-pocket spending for 

beneficiaries with Medigap was greater than for those with Medicare FFS-only.

We provided a draft copy of this report to HHS for review. HHS provided 

technical comments and we addressed them as appropriate.

View GAO-13-811. For more information, 

contact John E. Dicken, (202) 512-7114, 

dickenj@gao.gov.
Page i GAO-13-811 Medicare Supplemental Coverage

Letter 1 

Background 3

Estimated Expenditures Were Higher for Beneficiaries with 

Supplemental Coverage, but Other Factors May Also Contribute

to Spending Differences 7

Agency Comments 17

Appendix I Methodology 18

Appendix II Tables on Estimated Health Care Expenditures and Spending 

per Beneficiary by Type of Supplemental Coverage 23

Appendix III GAO Contact and Staff Acknowledgments 27

Tables

Table 1: Studies Identified by the Literature Review 21

Table 2: Estimated Average Health Care Expenditures per 

Medicare Beneficiary by Type of Supplemental Coverage 

and Part D Enrollment, 2010 23

Table 3: Estimated Average Health Care Expenditures per 

Medicare Beneficiary by Type of Supplemental Coverage 

and Age, 2010 24

Table 4: Estimated Average Health Care Expenditures per 

Medicare Beneficiary by Type of Supplemental Coverage 

and Self-Reported Health Status, 2010 25

Table 5: Estimated Average Total Spending per Medicare 

Beneficiary by Type of Supplemental Coverage and 

Source, 2010 26

Contents 
Page ii GAO-13-811 Medicare Supplemental Coverage

Figures

Figure 1: Estimated Average Health Care Expenditures per 

Medicare Beneficiary by Supplemental Coverage 

Category, 2010 8

Figure 2: Estimated Average Health Care Expenditures per 

Medicare FFS-only Beneficiary and per Medicare FFSonly Beneficiaries with and without Part D, 2010 9

Figure 3: Estimated Average Health Care Expenditures per 

Medicare Beneficiary by Supplemental Coverage Category 

and Self-Reported Health Status, 2010 11

Figure 4: Estimated Average Health Care Expenditures per 

Medicare Beneficiary by Supplemental Coverage Category 

and Age, 2010 12

Figure 5: Estimated Average Medicare Spending per Beneficiary by 

Supplemental Coverage Category, 2010 15

Figure 6: Estimated Average Out-of-Pocket Spending per Medicare 

Beneficiary by Supplemental Coverage Category, 2010 16

Abbreviations

CMS Centers for Medicare & Medicaid Services

FFS fee-for-service 

MCBS Medicare Current Beneficiary Survey

MedPAC Medicare Payment Advisory Commission

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately.
Page 1 GAO-13-811 Medicare Supplemental Coverage

441 G St. N.W.

Washington, DC 20548

September 19, 2013

The Honorable Orrin G. Hatch

Ranking Member

Committee on Finance

United States Senate

Dear Senator Hatch:

Spending for Medicare—the federal health insurance program for elderly 

and certain other individuals—accounted for 16 percent of the federal 

budget in 2013, and is expected to grow as a share of the nation’s 

economy.1

While Medicare covers a broad range of health care services, 

beneficiaries enrolled in the traditional fee-for-service (FFS) Medicare 

program may still have significant out-of-pocket expenditures, including 

copayments, coinsurance, deductibles, and the full cost of services not 

covered by Medicare.

Policymakers seeking to reduce the federal deficit are 

considering a range of proposals for controlling Medicare spending, 

including proposals to give beneficiaries greater incentives to limit their 

use of health care services.

2

 

1

The Medicare program provides health coverage for persons age 65 or over, certain 

individuals with disabilities, and individuals with end-stage renal disease.

Most Medicare FFS beneficiaries have some form 

of additional health care coverage, which is referred to as supplemental 

coverage, to help them pay for these costs. Supplemental coverage may 

reduce the incentive for beneficiaries to be cost-conscious in making 

decisions about the use of health services, leading them to use more 

services than they need. However, reducing supplemental coverage may 

create a risk that some individuals may forgo necessary services, 

exacerbating their health care needs and perhaps the long-term cost of 

their care.

2

Traditional FFS Medicare includes Part A, which covers hospital services, and Part B, 

which covers certain services not covered by Part A, such as physician and outpatient 

services. Beneficiaries enrolled in Parts A and B may choose to enroll in a managed care 

Medicare Advantage plan (Part C) in lieu of Medicare FFS. Also, since 2006, Medicare 

Part D—prescription drug coverage—has been available to Medicare beneficiaries.

 
 

Page 2 GAO-13-811 Medicare Supplemental Coverage

To better understand the role of supplemental coverage in Medicare 

spending, you asked us to provide information about how Medicare 

beneficiaries with supplemental health coverage compare to Medicare 

beneficiaries without supplemental health coverage with respect to total 

health care spending and the sources of payment for this spending. In 

this report we examine average health care expenditures and sources of 

payment for Medicare FFS beneficiaries across three categories of 

supplemental coverage: those with no supplemental coverage, those with 

Medigap, and those with employer-sponsored or other supplemental 

coverage.3

To describe how expenditures for Medicare FFS beneficiaries with 

supplemental health coverage differ from expenditures for Medicare FFS 

beneficiaries without supplemental health coverage, we analyzed data 

from the 2010 Cost and Use component of the Medicare Current 

Beneficiary Survey (MCBS) from the Centers for Medicare & Medicaid 

Services (CMS), the agency that administers Medicare. The MCBS is a 

continuous, multipurpose survey of a representative sample of the 

Medicare population, including both aged and disabled beneficiaries.4

 

3

Medigap insurance policies may be purchased by Medicare beneficiaries to cover—or 

supplement—certain costs not covered by Medicare FFS. In addition, some beneficiaries 

may have supplemental coverage through employer-sponsored retiree programs or other 

sources such as their union. 

The 2010 MCBS data was the most recent data available at the time we 

conducted our analysis. The expenditures presented in this report are 

estimates based on this survey, unless otherwise noted. We took a 

number of steps to assess the reliability of CMS’s data, including 

interviewing CMS officials on the limitations of the data and reviewing

CMS documentation about the survey. We determined the data to be 

sufficiently reliable for the purposes of estimating the average total health 

care expenditures and sources of payment for Medicare FFS 

beneficiaries across different categories of supplemental coverage. (See 

app. I for more information on our analysis of the CMS data and our 

assessment of the data’s reliability.) We excluded beneficiaries living in 

facilities such as nursing homes to limit our analyses to those who did not 

have the significant expenditures that can accompany residential care. 

We focused our analysis on comparing expenditures for beneficiaries with 

4

Participants in the survey are interviewed three times a year over four years to form a 

continuous profile of their health care experiences and expenditures.
 

Page 3 GAO-13-811 Medicare Supplemental Coverage

Medicare FFS-only to those with Medigap or those with employersponsored or other supplemental coverage.5

To put the findings from this analysis in context, we also examined 

original research published from 2008 to June 2013 on health care 

expenditures or payment source by different supplemental coverage 

categories to understand factors that could affect spending for Medicare 

beneficiaries with and without supplemental coverage. To identify the 

research studies, we conducted a systematic review of several research 

databases, and reviewed relevant research organization and other 

Websites. Additionally, we identified articles through recommendations by 

interviewed experts and reviewed the references to other research found 

in studies we identified in our initial search. We identified a total of eight 

studies through these strategies. (See app. I for more information about 

the methodology we used to analyze MCBS data and to select research 

studies.)

We conducted our performance audit from May 2013 through August 

2013 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based our audit objectives.

Individuals eligible for Medicare may choose among several coverage 

options within the Medicare program. Depending on which option they 

select, beneficiaries may have cost-sharing requirements such as 

copayments, coinsurance and deductibles, or they may have to pay 

varying amounts of premiums. Many Medicare beneficiaries have 

supplemental coverage, such as coverage that they purchase from 

private insurance companies or that they may receive as retirees through 

a former employer. In addition to cost-sharing for services covered by 

 

5

We did not analyze expenditures for beneficiaries with Medicare Advantage because 

2010 MCBS spending data for these beneficiaries was not as complete as for other 

groups of beneficiaries. While MCBS makes estimates to compensate for missing data, 

we did not include this category in our analysis. We also did not analyze expenditures for 

beneficiaries dually eligible for Medicare and Medicaid because their coverage varies 

significantly by state as well as by whether they are fully eligible for state Medicaid 

benefits or only eligible to have their Medicare premiums paid for by Medicaid.

Background 
 

Page 4 GAO-13-811 Medicare Supplemental Coverage

Medicare, beneficiaries pay for health care services that are not covered 

by Medicare. The total health care expenditures for Medicare 

beneficiaries include spending on services that are covered by Medicare 

as well as services not covered by Medicare.

While most individuals become eligible for Medicare when they reach age 

65, individuals who are under the age of 65 can become eligible if they 

have permanent disabilities and have received Social Security Disability 

Insurance for 24 months, or if they have end-stage renal disease. 

Although the majority of the Medicare population is age 65 or over, in 

2010 about 17 percent was under age 65.

Medicare coverage can include Parts A, B, C, and D. Medicare Parts A 

and B are known as traditional Medicare fee-for-service (FFS). Medicare 

Part A covers hospital and other inpatient stays. Medicare Part B is 

optional, and covers hospital outpatient, physician, and other services. As 

an alternative to traditional Medicare FFS, Medicare beneficiaries have 

the option of obtaining coverage for Medicare services from private health 

plans that participate in Medicare Advantage—Medicare’s managed care 

program, also known as Part C. All Medicare beneficiaries may purchase 

coverage for outpatient prescription drugs under Part D, either as a standalone benefit or as part of a Medicare Advantage plan. Other Medicare 

beneficiaries who have low incomes may also be enrolled in Medicaid, 

the joint federal and state program that finances health insurance 

coverage for certain categories of low-income individuals.

Medicare beneficiaries pay a portion of the program’s costs through costsharing provisions, including premiums, deductibles, and coinsurance. 

Individuals who are eligible for Medicare automatically receive Part A 

benefits, which help pay for inpatient hospital, skilled nursing facility, 

hospice, and certain home health services. A beneficiary generally pays 

no premium for this coverage, but the beneficiary is responsible for 

required deductibles, coinsurance, and copayment amounts. Medicareeligible beneficiaries may elect to purchase Part B, which helps pay for 

certain physician, outpatient hospital, laboratory, and other services. 

Beneficiaries must pay a premium for Part B coverage. Beneficiaries are 

also responsible for Part B deductibles, coinsurance, and copayments. 

Beneficiaries enrolled in Parts A and B may elect to obtain coverage for 

Medicare services from private health plans under Part C through 

Medicare Advantage plans, which are managed care plans. Beneficiaries 

covered by Medicare Advantage plans are responsible for paying monthly 

Part B premiums and, depending on their chosen plan, may be 

Medicare Eligibility, 

Coverage, Cost Sharing
 

Page 5 GAO-13-811 Medicare Supplemental Coverage

responsible for additional monthly premiums, copayments, coinsurance, 

and deductibles. Finally, under Medicare Part D, beneficiaries may elect 

to purchase coverage for outpatient prescription drugs from private 

companies. Beneficiaries who enroll in a Part D plan are responsible for a 

monthly premium, which varies by the individual plan selected, as well as 

for copayments or coinsurance. In total, some of these out-of-pocket 

costs associated with these various Medicare options can be substantial. 

For example, in 2013 under Part A, beneficiaries must pay a $1,184 

deductible per benefit period for inpatient hospital care, and are liable for 

all hospital costs incurred after 150 days.6

Medicare FFS beneficiaries may have supplemental coverage, such as 

coverage that they purchase from private insurance companies or that 

they receive as retirees through an employer.

• Medigap insurance policies – Medigap policies are a set of 

standardized insurance plans sold by private insurance companies to 

cover certain costs not paid for by Medicare FFS. These plans are 

available to beneficiaries who are enrolled in Medicare FFS and they 

are subject to regulation of the scope of benefits they cover.7 If a 

beneficiary purchases Medigap during the six month period after 

turning 65, that individual cannot be charged a higher premium due to 

health status. In 2010 an estimated 12 percent, or 5.6 million, of 

Medicare beneficiaries were enrolled in Medigap without other 

supplemental coverage.8 Further, according to one estimate, in 2012 

about 66 percent of beneficiaries with Medigap were enrolled in plans 

that had “first-dollar coverage”—meaning that the plans covered all of 

the deductibles and coinsurance not covered by Medicare FFS.9

 

6

A benefit period begins the day a beneficiary is admitted as an inpatient in a hospital and 

ends when the beneficiary has not received any inpatient hospital care for 60 days in a 

row. No deductible is charged for second and subsequent hospital admissions if they 

occur within 60 days of the beneficiary’s most recent covered inpatient day.

7

In 2010 there were ten different standard Medigap Plans. These plans varied with 

respect to benefits and cost-sharing provisions.

8

GAO analysis of MCBS 2010 Cost and Use data.

9

America’s Health Insurance Plans, Center for Policy and Research, Trends in Medigap 

Coverage and Enrollment, 2012, (Washington, D.C.: America’s Health Insurance Plans, 

2013). 

Supplemental Coverage
 

Page 6 GAO-13-811 Medicare Supplemental Coverage

• Employer-sponsored retiree coverage or other supplemental 

coverage – Similar to Medigap, employer-sponsored coverage for 

retirees is structured to supplement Medicare.10 In addition to 

employer-sponsored coverage, some Medicare beneficiaries may 

obtain other non-Medigap supplemental coverage for health care 

services from other sources such as their union. In 2010 an estimated 

39 percent—or 17.6 million—of Medicare beneficiaries received 

supplemental coverage through their employers or other private 

sources.11

A Medicare beneficiary may incur costs for health care services that go 

beyond what Medicare covers. Total health care expenditures for a 

Medicare beneficiary therefore include expenditures for Medicare-covered 

services as well as for services that are not covered by Medicare. 

Examples of services that are not generally covered by Medicare include 

routine dental or eye care, hearing aids, routine foot care, dentures, and 

cosmetic surgery. Throughout this report when we refer to expenditures 

we mean expenditures for both Medicare covered services and services 

not covered by Medicare.

Payment for services may come from several sources depending on the 

beneficiary’s coverage, including Medicare, Medigap, employersponsored or other coverage, Medicaid, and out-of-pocket spending by 

beneficiaries. Beneficiaries may pay out-of-pocket to cover deductibles, 

copayments, or coinsurance for Medicare-covered services, as well as for 

the cost of services not covered by Medicare. In addition to out-of-pocket 

spending for services, beneficiaries may also pay premiums for Medicare 

 

10Employer-sponsored coverage may involve the purchase of a Medigap plan. For the 

purposes of our report, we consider beneficiaries who have employer-sponsored Medigap 

plans as having employer-sponsored supplemental coverage, and consider only 

beneficiaries who have individually purchased Medigap plans as having Medigap 

coverage.

11Some individuals have employer-sponsored coverage and also purchase private 

Medigap coverage. Based on our analysis of MCBS data, in 2010 about 3 percent, or 

1.4 million, of Medicare beneficiaries reported having supplemental coverage through both 

Medigap and an employer. The focus of this report is on beneficiaries who do not have 

supplemental coverage from both employers and individually-purchased Medigap, in order 

to identify differences in spending related to Medigap or employer-sponsored coverage.

Health Care Expenditures 

and Sources of Payment
 

Page 7 GAO-13-811 Medicare Supplemental Coverage

Part B, Part D, and other types of insurance such as Medigap.12 For the 

purposes of this report, premiums are not included in total health care 

expenditures or in sources of payment unless otherwise noted in 

discussing other research.

Our analysis of the 2010 MCBS showed that estimated average total 

health care expenditures were higher for beneficiaries with Medigap or 

employer-sponsored coverage than for Medicare FFS-only beneficiaries 

(see fig. 1). Specifically, beneficiaries with Medigap had estimated 

average spending about 94 percent higher than beneficiaries with 

Medicare FFS-only. Beneficiaries with Medigap had estimated average 

spending about 9 percent higher than beneficiaries with employersponsored or other supplemental coverage in 2010, although this 

difference was not statistically significant.

 

12Medigap insurers must pay out at least 65 percent of total premiums they receive as 

claims payments to beneficiaries who purchase individual policies.

Estimated 

Expenditures Were 

Higher for 

Beneficiaries with 

Supplemental 

Coverage, but Other 

Factors May Also 

Contribute to 

Spending Differences
 

Page 8 GAO-13-811 Medicare Supplemental Coverage

Figure 1: Estimated Average Health Care Expenditures per Medicare Beneficiary by 

Supplemental Coverage Category, 2010

Notes: This analysis excludes beneficiaries residing in long term care facilities such as nursing 

homes. This analysis focuses on beneficiaries with either Medicare FFS-only, Medigap, or employersponsored or other general insurance.

While estimated average health care expenditures were lower for 

beneficiaries with Medicare FFS-only than for those with supplemental 

coverage, among beneficiaries with Medicare FFS-only those who were 

enrolled in Part D had higher average health care expenditures than 

those without Part D (see fig. 2).13

 

13We did not present the difference in health expenditures for beneficiaries with Medigap 

and employer-sponsored or other coverage with respect to their enrollment in Part D 

because these types of supplemental insurance coverage may already provide 

prescription drug coverage.

Medicare FFS-only beneficiaries with 

Part D coverage had 133 percent higher average health care 

expenditures than those without Part D coverage.
 

Page 9 GAO-13-811 Medicare Supplemental Coverage

Figure 2: Estimated Average Health Care Expenditures per Medicare FFS-only 

Beneficiary and per Medicare FFS-only Beneficiaries with and without Part D, 2010

Note: This analysis excludes beneficiaries residing in long term care facilities such as nursing homes.

Other research has found similar patterns of higher health care 

expenditures for those with supplemental coverage. For example, one 

study found that Medicare beneficiaries with individually purchased 

supplemental insurance had 33 percent higher Medicare expenditures 

than those in Medicare FFS-only.14

 

14C. Hogan, Exploring the Effects of Secondary Coverage on Medicare Spending for the 

Elderly, Direct Research LLC, no. 09-2R (Washington, DC: MedPAC, June 2009).

Another study found that Medicare 

beneficiaries with supplemental coverage had higher health care 

expenditures ($1,806 and $1,562 higher for those with employersponsored and Medigap coverage, respectively, in 2005), and higher 
 

Page 10 GAO-13-811 Medicare Supplemental Coverage

rates of expenditure growth (on average about 1 percent more annually 

between 1992 and 2005), than those without supplemental coverage.15

It is important to note that other beneficiary characteristics may be 

associated with the level of and growth in health care expenditures, such 

as health status and age. We found that health status and age were 

associated with differences in estimated health care expenditures. For 

example, beneficiaries who reported their health to be “fair or poor” had 

higher average health care expenditures than those who reported their 

health to be “good to excellent” (see fig. 3).

 

15E. Golberstein, K. Walsh, Y. He, and M. Chernew, “Supplemental Coverage Associated 

With More Rapid Spending Growth for Medicare Beneficiaries,” Health Affairs, vol. 32, 

No. 5 (2013).
 

Page 11 GAO-13-811 Medicare Supplemental Coverage

Figure 3: Estimated Average Health Care Expenditures per Medicare Beneficiary by 

Supplemental Coverage Category and Self-Reported Health Status, 2010

Notes: This analysis excludes beneficiaries residing in long term care facilities such as nursing 

homes. This analysis focuses on beneficiaries with either Medicare FFS-only, Medigap, or employersponsored or other general insurance.

In addition, beneficiaries age 75 and older had higher estimated average 

health care expenditures than those between the ages of 65 and 74. 

Further, Medicare beneficiaries under age 65—who are eligible for 

Medicare due to a permanent disability and often have high health care 

expenditures because of their disability—generally had higher average 

health care expenditures than other age groups (see fig. 4).
 

Page 12 GAO-13-811 Medicare Supplemental Coverage

Figure 4: Estimated Average Health Care Expenditures per Medicare Beneficiary by 

Supplemental Coverage Category and Age, 2010

Notes: This analysis excludes beneficiaries residing in long term care facilities such as nursing 

homes. This analysis focuses on beneficiaries with either Medicare FFS-only, Medigap, or employersponsored or other general insurance.

This result is consistent with research that found that characteristics such 

as health status and age may influence the decision to purchase 

supplemental coverage, which could partially explain why individuals with 

supplemental coverage have higher expenditures than those without 

supplemental coverage. One study found that Medicare beneficiaries with 

Medigap were more likely than those in other coverage categories to 

have chronic conditions like diabetes and cancer, suggesting that 

individuals may self-select into types of coverage based on their 
 

Page 13 GAO-13-811 Medicare Supplemental Coverage

anticipated need for services.16 Another study found that the relationship 

between having supplemental coverage and health status varied 

depending on what measure of health status was used.17 Some of the 

research on this topic has tried to account for characteristics that may 

influence a beneficiary’s choice of coverage and has found that 

differences in expenditures among coverage types persist even after 

adjusting for factors such as beneficiaries’ age, health status, and 

income, with beneficiaries with supplemental coverage still incurring 

higher Medicare or overall health care expenditures than those with 

Medicare FFS-only.18

Other research has examined cost-sharing in Medicare supplemental 

coverage to explore the role of this coverage in health care expenditures. 

This research suggests that increasing cost-sharing for those with 

supplemental coverage could decrease the utilization of, and associated 

health care expenditures for, certain types of health care, but increase the 

utilization of, and expenditures for, other types of health care. Specifically, 

one study of Medicare beneficiaries with supplemental coverage found 

that certain subgroups—in particular, those with chronic conditions—may 

be more sensitive than other beneficiaries to cost-sharing in ways that 

actually increase health care expenditures. The researchers found that 

increased cost-sharing for physician visits and prescription drugs 

decreased utilization of these services, which lowered expenditures. 

However, the cost savings were partially offset by increased expenditures 

for hospitalizations, particularly among the chronically ill.19

 

16J. Lemieux, T. Chovan, and K. Heath, “Medigap Coverage And Medicare Spending: A 

Second Look,” Health Affairs, vol. 27, no. 2 (2008).

While this 

study suggests that Medicare beneficiaries may change their utilization of 

health care services based on the amount of cost-sharing, there may be 

additional factors not included in the analysis that influence utilization and 

associated health care expenditures. Another study has noted that there 

17D. Zimmer, “The Relationship between Medicare Supplemental Insurance and Healthcare Spending: Selection Across Multiple Dimensions,” Eastern Economic Journal, vol. 39 

(2012).

18Hogan, “Exploring the Effects of Secondary Coverage,” 25. Golberstein, Walsh, He and 

Chernew, “Supplemental Coverage” 877. Zimmer, “Medicare Supplemental Insurance,” 

126.

19A. Chandra, J. Gruber, and R. McKnight, “Patient Cost-Sharing and Hospitalization 

Offsets in the Elderly,” American Economic Review, vol. 100, no. 1 (2010).
 

Page 14 GAO-13-811 Medicare Supplemental Coverage

is always a possibility of additional unmeasured factors that influence 

utilization—for example, larger employers may offer coverage with 

particular types of cost-sharing, and employees of larger companies may 

be systematically different with regard to health, age, income, or 

preferences for risk.20

When looking at specific sources of payment for health care 

expenditures, there may also be relationships between Medicare 

supplemental coverage and expenditures paid by Medicare or by 

beneficiaries out-of-pocket. Our analysis of the 2010 MCBS data showed 

that estimated Medicare spending for those with Medigap or employersponsored coverage was greater than for those with Medicare FFS-only. 

Average Medicare spending for beneficiaries with Medigap was more 

than twice as much as Medicare payments for beneficiaries with Medicare 

FFS-only (see fig. 5).

 

20K. Baicker and D. Goldman, “Patient Cost-Sharing and Healthcare Spending Growth,” 

Journal of Economic Perspectives, vol.25, no.2 (2011).
 

Page 15 GAO-13-811 Medicare Supplemental Coverage

Figure 5: Estimated Average Medicare Spending per Beneficiary by Supplemental 

Coverage Category, 2010

Notes: This analysis excludes beneficiaries residing in long term care facilities such as nursing 

homes. This analysis focuses on beneficiaries with either Medicare FFS-only, Medigap, or employersponsored or other general insurance.

Similarly, out-of-pocket spending for beneficiaries with Medigap was 

greater than for those with Medicare FFS-only (see fig. 6). Out-of-pocket 

spending for beneficiaries with employer-sponsored coverage was also 

higher than for those with Medicare FFS-only, but the difference was not 

statistically significant. Other research has found that Medicare 

beneficiaries with supplemental coverage (Medigap, employer-sponsored 

coverage, or other private coverage) had higher out-of-pocket spending 

than those with Medicare FFS-only.21

 

21T. Neuman, J. Cubanski, and A. Damico, Revisiting “Skin in the Game” Among 

Medicare Beneficiaries: An Updated Analysis of the Increasing Financial Burden of Health 

Care Spending From 1997 to 2005, (Menlo Park, CA: The Henry J. Kaiser Family 

Foundation, February 2009). (Note: This study included premiums in out-of-pocket 

payments.); A. Davidoff, M. Erten, T. Shaffer, J. Shoemaker, I. Zuckerman, N. Pandya, 

M. Tai, X. Xe and B. Stuart, “Out-of-Pocket Health Care Expenditure Burden for Medicare 

Beneficiaries with Cancer,” Cancer, vol. 119, 2013. (Note: This study looked at Medicare 

beneficiaries with newly diagnosed cancer.)

In addition, beneficiaries with 
 

Page 16 GAO-13-811 Medicare Supplemental Coverage

Medigap pay a premium for this supplemental coverage, resulting in even 

higher out-of-pocket spending than those in Medicare FFS-only who do 

not pay this additional premium.22

Figure 6: Estimated Average Out-of-Pocket Spending per Medicare Beneficiary by 

Supplemental Coverage Category, 2010

(See app. II for additional analyses of 

these data.)

Notes: This analysis excludes beneficiaries residing in long term care facilities such as nursing 

homes. This analysis focuses on beneficiaries with either Medicare FFS-only, Medigap, or employersponsored or other general insurance.

 

22Medigap premiums vary widely by state. For example, according to one study, the 

average monthly premium for Medigap Plan F in 2010 was $193 in Maryland, $149 in 

Virginia, and $170 in Washington, D.C.
 

Page 17 GAO-13-811 Medicare Supplemental Coverage

We provided a draft of this report to HHS for review and comment. HHS 

provided technical comments and we addressed them as appropriate.

As arranged with your office, unless you publicly announce the contents 

of this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to the Secretary of Health 

and Human Services, the Administrator of the Centers for Medicare & 

Medicaid Services, and appropriate congressional committees. In 

addition, the report will be available at no charge on the GAO website at 

http://www.gao.gov. If you or your staff have any questions about this 

report please contact me at (202) 512-7114 or dickenj@gao.gov. Contact 

points for our Offices of Congressional Relations and Public Affairs may 

be found on the last page of this report. GAO staff that made key 

contributions to this report are listed in appendix III.

Sincerely yours,

John E. Dicken

Director, Health Care

Agency Comments
Appendix I: Methodology

Page 18 GAO-13-811 Medicare Supplemental Coverage

To determine how Medicare beneficiaries with supplemental coverage 

compare to Medicare beneficiaries without supplemental coverage with 

respect to their health care expenditures and the sources of payment for 

those expenditures, we analyzed data from the Centers for Medicare & 

Medicaid Services (CMS) 2010 Medicare Current Beneficiary Survey 

(MCBS), specifically the Cost and Use component of the survey. The 

MCBS is a continuous, multipurpose survey of a representative sample of 

the Medicare population, including both aged and disabled beneficiaries. 

The 2010 data was the most recent data available from MCBS on health 

care expenditures at the time we conducted our analysis.

Specifically, for beneficiaries with different types of coverage we 

examined: (1) estimated health care expenditures, including expenditures 

for health services not covered by Medicare; and (2) estimated health 

care expenditures by the source of payment, including spending by 

Medicare and out-of-pocket spending by beneficiaries. We also examined 

expenditures for beneficiaries based on age category and self-reported 

health status. The 2010 MCBS collected information on a sample of 

10,742 beneficiaries.

In our analysis we excluded beneficiaries who lived in facilities such as 

nursing homes during 2010. We excluded those living in facilities in order 

to focus our analysis on comparing expenditures for beneficiaries who did 

not have significant expenditures for residential care. Our analysis 

focused on beneficiaries with Medigap, beneficiaries with employersponsored or other general insurance coverage, and beneficiaries with 

only Medicare fee-for-service (FFS). We did not analyze expenditures for 

beneficiaries with Medicare Advantage because 2010 MCBS survey data 

for these beneficiaries was not as complete as for other groups of 

beneficiaries. Further, we did not analyze beneficiaries dually eligible for 

Medicare and Medicaid because their coverage varies significantly by 

state as well as by whether they are fully eligible for state Medicaid 

benefits or only eligible to have their Medicare premiums paid for by 

Medicaid. Finally, expenditures for beneficiaries who had both Medigap 

and employer-sponsored or other coverage are provided in tables in the 

appendix but are not included in the figures in the report because of their 

relatively small population size in the survey. Our analysis included 

beneficiaries with both Part A and Part B benefits as well as those with 

only Part A or Part B.

We analyzed the MCBS’ Cost and Use file representing individuals 

enrolled in Medicare in calendar year 2010. The Cost and Use file 

contains a combination of self-reported data from the MCBS and 

Appendix I: Methodology
Appendix I: Methodology

Page 19 GAO-13-811 Medicare Supplemental Coverage

Medicare claims and other data from CMS administrative files. 

Respondents are interviewed three times each year. Survey-reported 

data includes information on the costs and use of health care services as 

well as information on supplemental health coverage, living 

arrangements, income, health status, and physical functioning. The 

survey also collects information on health services not covered by 

Medicare. The Cost and Use file provides detailed and summary 

information about medical goods and services the beneficiary used in 

calendar year 2010 (such as inpatient and outpatient care, drugs, and 

home health services), the expenditures associated with those services, 

and the share of these expenditures borne by all payers. CMS notes that 

there may be some underreporting of services and expenditures by 

beneficiaries who are surveyed. To compensate in part for survey 

respondents who may not know how much an episode of care costs, 

CMS uses Medicare administrative data to adjust or supplement survey 

responses for some information, including spending information. While we 

did not independently verify the accuracy of the information in the 

computerized file, we took several steps to assess the reliability of the 

data, including reviews of related documentation and interviews with CMS 

officials and other researchers who have used MCBS data, and testing of 

data for errors by comparing it to other published sources. We determined 

that the data were sufficiently reliable for the purposes of this report.

Because some Medicare beneficiaries had coverage from several 

sources during the period of the MCBS survey, we prioritized the source 

of coverage individuals reported to avoid double counting. That is, if 

individuals reported having coverage from two or more kinds of coverage 

during the year, we used the following hierarchy of coverage categories:

1. Beneficiaries with Medicare Advantage. These beneficiaries were 

identified based on CMS administrative data that identified 

beneficiaries enrolled in Medicare Advantage plans.

2. Beneficiaries with Medicaid. These beneficiaries were identified based 

on a combination of administrative and survey data, since the 

submission of Medicaid administrative data by states may lag behind 

the survey, making it unreliable as the sole source of data.

3. Beneficiaries with Medigap, beneficiaries with employer-sponsored 

coverage or other non-Medigap general supplemental coverage, or 

beneficiaries who had both Medigap and employer-sponsored or other 

supplemental coverage at the same time. These categories of 

beneficiaries were identified based on their responses to survey 

questions about their purchase of supplemental coverage.
Appendix I: Methodology

Page 20 GAO-13-811 Medicare Supplemental Coverage

Beneficiaries who did not fall into any of these categories were classified 

as Medicare FFS-only.

After reviewing a draft of our report, CMS identified several observations 

in the 2010 MCBS that may have had unreasonably high expenditures 

based on imputed values. We conducted sensitivity testing to determine 

how these expenditures would affect our estimates. While including these 

observations increased average costs for the category of beneficiaries 

with employer-sponsored or other supplemental coverage, it did not affect 

the overall findings of the report as expenditures for this category of 

beneficiaries remained above those with Medicare FFS-only, whether or 

not these observations are included.

To provide context for our analysis and discussion of how Medicare 

beneficiaries with supplemental coverage compare to Medicare 

beneficiaries without supplemental coverage with respect to their health 

care expenditures and the sources of payment for those expenditures, we 

used two strategies to identify relevant research. First, we conducted a 

systematic search of the medical, policy, social science, and economic 

literature. We included original research published since 2008 in 

scholarly, peer-reviewed journals on the Medicare population. We used 

search terms to identify research on health care expenditures or payment 

source by different supplemental coverage categories. Second, we 

identified additional studies recommended by interviewed experts,

research reports on the Websites of policy organizations, and citations in 

our literature review. We identified a total of eight articles through these 

two strategies. Table 1 describes the studies, along with summaries of 

their methodology and conclusions. 
Appendix I: Methodology

Page 21 GAO-13-811 Medicare Supplemental Coverage

Table 1: Studies Identified by the Literature Review

Author(s), Title, Journal, Year Methodology Findings

A. Chandra, J. Gruber, and 

R. McKnight, “Patient CostSharing and Hospitalization 

Offsets in the Elderly,” American 

Economic Review, vol. 100, 

no. 1 (2010).

Analyzed data from people in the California 

Public Employees Retirement System 

enrolled in several insurance plans from 

2000-2003.

Used a quasi-experimental design to 

examine the effects of a policy change that 

raised patient cost-sharing for enrollees on 

utilization and expenditures.

Medicare beneficiaries with supplemental 

coverage who experienced increases in costsharing for physician office visits and prescription 

drugs decreased their utilization of these services; 

however, the savings achieved were partially 

offset by the costs of an increase in 

hospitalizations that also occurred.

These offset effects were concentrated in the 

sickest enrollees.

A. Davidoff, M. Erten, T. Shaffer, 

J. Shoemaker, I. Zuckerman, 

N. Pandya, M. Tai, X. Ke and 

B. Stuart, “Out-of-Pocket Health 

Care Expenditure Burden for 

Medicare Beneficiaries with 

Cancer,” Cancer, vol. 119, no.6, 

(2013). 

Analyzed Medicare Current Beneficiary 

Survey (MCBS) data from 1997-2007 that 

is linked to Medicare claims.

Beneficiaries with cancer who had employersponsored or Medigap coverage with prescription 

drug coverage had higher out-of-pocket spending 

than those with Medicare fee-for-service (FFS)

only.

E. Golberstein, K. Walsh, Y. He, 

and M. Chernew, “Supplemental 

Coverage Associated With More 

Rapid Spending Growth for 

Medicare Beneficiaries,” Health 

Affairs, vol. 32, no. 5 (2013).

Analyzed MCBS data from 1992-2005.

Used multivariate models incorporating 

supplemental coverage, time variables, and 

other factors, to investigate whether 

Medicare supplemental coverage is 

associated with higher rates of health care 

expenditures over time.

After controlling for socio-demographic 

characteristics like income, disease, and disability, 

and health behaviors such as smoking, Medicare 

beneficiaries with supplemental coverage had 

higher health care expenditures, and higher rates 

of expenditure growth, than those without 

supplemental coverage.

Annual Medicare spending for those with no 

supplemental coverage grew by 6.27 percent a 

year on average, while rates of Medicare 

spending growth were highest for those with selfpurchased coverage, at 7.09 percent a year.

C. Hogan, Exploring the Effects of 

Secondary Coverage on Medicare 

Spending for the Elderly, Direct 

Research LLC, no. 09-2R 

(Washington, DC: MedPAC, 

June 2009).

Analyzed (MCBS) data from 2003-2005.

Used regression analysis to explain 

variation in Medicare spending as a 

function of supplemental coverage type and 

other factors likely to affect spending.

Having supplemental (individually-purchased or 

employer-sponsored) coverage was a primary 

factor in increased Medicare Part B expenditures.

After adjusting for factors such as age, education, 

health status, and income, Medicare beneficiaries 

with individually-purchased supplemental 

coverage had 33 percent higher Medicare 

expenditures than those in Medicare FFS-only. 
Appendix I: Methodology

Page 22 GAO-13-811 Medicare Supplemental Coverage

Author(s), Title, Journal, Year Methodology Findings

J. Lemieux, T. Chovan, and 

K. Heath, “Medigap Coverage And 

Medicare Spending: A Second 

Look,” Health Affairs, vol. 27, 

no. 2 (2008).

Analyzed MCBS data from 2002-2003, data 

from three large Medigap insurers from 

2002-2004, and Medicare 5 percent sample 

file from 2001.

Used beneficiaries’ diagnosis information to 

analyze the relationship between Medigap 

coverage and Medicare spending.

Beneficiaries with Medigap had higher Medicare 

expenditures than those with Medicare FFS-only; 

however, a high proportion of those with Medicare 

FFS-only received additional care through military 

health care and the Department of Veterans 

Affairs and when these expenditures were 

controlled for, the difference in expenditures was 

reduced.

Medicare beneficiaries with Medigap were more 

likely than those in other coverage categories to 

be diagnosed with chronic conditions like diabetes 

and cancer.

T. Neuman, J. Cubanski, and A. 

Damico, Revisiting “Skin in the 

Game” Among Medicare 

Beneficiaries: An Updated 

Analysis of the Increasing 

Financial Burden of Health Care 

Spending From 1997 to 2005

(Menlo Park, CA: The Henry J. 

Kaiser Family Foundation,

February 2009). 

Analyzed MCBS data from 1997-2005.

Used bivariate t-tests to assess if out-ofpocket health spending as a share of 

income changed over time, and differed 

across subgroups of beneficiaries. 

Medicare beneficiaries with Medigap had higher 

out-of-pocket spending (including premiums) than 

those with no supplemental coverage.

Beneficiaries with Medigap had higher out-ofpocket spending as a percent of income than 

those with employer-sponsored health coverage, 

and those with no supplemental coverage.

The financial burden of health spending was 

greater for poor and near-poor (those under 

200 percent of poverty level) than for those at 

higher income levels, and the financial burden of 

out-of-pocket health spending increased as health 

status declined.

B. Shang and D. Goldman, 

“Prescription Drug Coverage and 

Medicare Spending among U.S. 

Elderly,” The Geneva Papers, vol. 

35 (2010). 

Analyzed MCBS data from 1992-2000.

Used a discrete-factor model to estimate 

how prescription drug coverage affects 

Medicare spending.

Beneficiaries with Medigap with prescription drug 

coverage had significantly higher drug 

expenditures, but lower Medicare Part A 

expenditures, than beneficiaries without drug 

coverage, indicating a substitution effect.

D. Zimmer, “The Relationship 

between Medicare Supplemental 

Insurance and Health-care 

Spending: Selection Across 

Multiple Dimensions,” Eastern 

Economic Journal, vol.38 (2012). 

Analyzed 2000–2005 Medical Expenditure 

Panel Survey data.

Used a mixed multinomial logit model of

insurance choice to determine whether 

beneficiaries who possessed certain traits, 

particularly health- and risk-related factors, 

chose supplemental coverage based on 

expectations of healthcare needs; also 

modeled healthcare expenditures.

Higher income was associated with a higher 

probability of having employer-sponsored 

supplemental coverage.

It was unclear whether sicker beneficiaries were 

more likely to self-select into purchasing 

supplemental coverage. 

Beneficiaries with Medigap and employersponsored coverage had higher total health care 

expenditures that those with Medicare FFS-only, 

after controlling for variables including health 

status, sociodemographic variables, and 

employment status.

Source: GAO review of literature from 2008-2013.
Appendix II: Tables on Estimated Health Care 

Expenditures and Spending per Beneficiary by 

Type of Supplemental Coverage

Page 23 GAO-13-811 Medicare Supplemental Coverage

Table 2: Estimated Average Health Care Expenditures per Medicare Beneficiary by Type of Supplemental Coverage and 

Part D Enrollment, 2010

Supplemental Coverage

Beneficiary 

characteristics

Beneficiaries with 

Medicare FFS-only 

(no supplemental coverage)

Beneficiaries 

with Medigap

Beneficiaries with 

employer-sponsored or 

other supplemental

Beneficiaries with Medigap 

and employer-sponsored 

or other supplemental

All beneficiaries in coverage category

Average expenditure $8,064 $15,612 $14,363 $12,417

Standard error ($652) ($810) ($879) ($1,043)

Beneficiaries in millions [3.4] [5.6] [17.6] [1.4]

Enrolled in Part D

Average expenditure $12,168 $16,660 $15,837 $13,178

Standard error ($1,321) ($1,011) ($1,216) ($1,648)

Beneficiaries in millions [1.4] [4.4] [3.6] [0.7]

Not enrolled in Part D

Average expenditure $5,226 $11,929 $13,990 $11,719

Standard error ($571) ($1,264) ($1,087) ($1,080)

Beneficiaries in millions [2.0] [1.2] [14.1] [0.7]

Source: GAO Analysis of 2010 Cost and Use File Data from the Medicare Current Beneficiary Survey

Notes: Excludes beneficiaries residing in long term care facilities. The standard error is a measure of 

variation around the estimate, in this case the estimate of average total health care expenditures. 

Because the MCBS is based on a sample, any estimates derived by the survey are subject to 

sampling errors. A sampling error indicates how closely estimates (such as mean) obtained from a 

sample approximate estimates from the population. A sampling error is commonly measured by a 

standard error, which is inversely related to the sample size. The larger the sample size, the smaller 

the standard error, and the closer the sample mean approximates the population mean. The 

estimated number of beneficiaries is based on applying the MCBS weights to the sampled population. 

Numbers may not total due to rounding.

Appendix II: Tables on Estimated Health Care 

Expenditures and Spending per Beneficiary 

by Type of Supplemental Coverage
Appendix II: Tables on Estimated Health Care 

Expenditures and Spending per Beneficiary by 

Type of Supplemental Coverage

Page 24 GAO-13-811 Medicare Supplemental Coverage

Table 3: Estimated Average Health Care Expenditures per Medicare Beneficiary by Type of Supplemental Coverage and Age, 

2010

Supplemental Coverage

Beneficiary 

characteristics

Beneficiaries with

Medicare FFS-only 

(no supplemental coverage)

Beneficiaries 

with Medigap

Beneficiaries with 

employer-sponsored or 

other supplemental

Beneficiaries with Medigap 

and employer-sponsored 

or other supplemental

All beneficiaries in coverage category

Average expenditure $8,064 $15,612 $14,363 $12,417

Standard error ($652) ($810) ($879) ($1,043)

Beneficiaries in millions [3.4] [5.6] [17.6] [1.4]

Up to age 64a

Average expenditure $10,211 $20,633 $18,577 NA

Standard error ($1,363) ($5,977) ($2,846)

Beneficiaries in millions [1.2] [0.2] [1.6]

Age 65 – 74

Average expenditure $4,581 $12,865 $11,816 $9,607

Standard error ($574) ($1,148) ($1,184) ($1,091)

Beneficiaries in millions [1.4] [2.7] [9.1] [0.7]

Age 75+

Average expenditure $11,166 $17,918 $16,710 $14,730

Standard error ($1,402) ($1,131) ($1,440) ($1,670)

Beneficiaries in millions [0.8] [2.8] [7.0] [0.7]

Legend: NA indicates a sample size that is too small to yield reliable results.

Source: GAO Analysis of 2010 Cost and Use File Data from the Medicare Current Beneficiary Survey

Notes: Excludes beneficiaries residing in long term care facilities. The standard error is a measure of 

variation around the estimate, in this case the estimate of average total health care expenditures. 

Because the MCBS is based on a sample, any estimates derived by the survey are subject to 

sampling errors. A sampling error indicates how closely estimates (such as mean) obtained from a 

sample approximate estimates from the population. A sampling error is commonly measured by a 

standard error, which is inversely related to the sample size. The larger the sample size, the smaller 

the standard error, and the closer the sample mean approximates the population mean. The 

estimated number of beneficiaries is based on applying the MCBS weights to the sampled population. 

Numbers may not total due to rounding.

a

Individuals below age 65 are eligible for Medicare due to a permanent disability and often have high 

health care expenditures. There is no federal requirement that insurers sell Medigap plans to disabled 

individuals, although some states require that Medigap plans be available to some or all of these 

individuals, and in other states, insurers may choose to sell Medigap plans to disabled beneficiaries.
Appendix II: Tables on Estimated Health Care 

Expenditures and Spending per Beneficiary by 

Type of Supplemental Coverage

Page 25 GAO-13-811 Medicare Supplemental Coverage

Table 4: Estimated Average Health Care Expenditures per Medicare Beneficiary by Type of Supplemental Coverage and SelfReported Health Status, 2010

Supplemental Coverage

Beneficiary 

characteristics

Beneficiaries with 

Medicare FFS-only 

(no supplemental coverage)

Beneficiaries 

with Medigap

Beneficiaries with 

employer-sponsored or 

other supplemental

Beneficiaries with 

Medigap and 

employer-sponsored or 

other supplemental

All beneficiaries in coverage category

Average expenditure $8,064 $15,612 $14,363 $12,417

Standard error ($652) ($810) ($879) ($1,043)

Beneficiaries in millions [3.4] [5.6] [17.6] [1.4]

Beneficiary reports health to be good to excellent

Average expenditure $6,108 $12,259 $11,193 $10,462

Standard error ($565) ($746) ($725) ($1,025)

Beneficiaries in millions [2.2] [4.5] [14.4] [1.2]

Beneficiary reports health to be fair or poor

Average expenditure $11,867 $29,851 $28,576 $26,241

Standard error ($1,442) ($2,822) ($3,714) ($3,735)

Beneficiaries in millions [1.2] [1.0] [3.2] [0.2]

Source: GAO Analysis of 2010 Cost and Use File Data from the Medicare Current Beneficiary Survey

Notes: Excludes beneficiaries residing in long term care facilities. The standard error is a measure of 

variation around the estimate, in this case the estimate of average total health care expenditures. 

Because the MCBS is based on a sample, any estimates derived by the survey are subject to 

sampling errors. A sampling error indicates how closely estimates (such as mean) obtained from a 

sample approximate estimates from the population. A sampling error is commonly measured by a 

standard error, which is inversely related to the sample size. The larger the sample size, the smaller 

the standard error, and the closer the sample mean approximates the population mean. The 

estimated number of beneficiaries is based on applying the MCBS weights to the sampled population. 

Numbers may not total due to rounding.
Appendix II: Tables on Estimated Health Care 

Expenditures and Spending per Beneficiary by 

Type of Supplemental Coverage

Page 26 GAO-13-811 Medicare Supplemental Coverage

Table 5: Estimated Average Total Spending per Medicare Beneficiary by Type of Supplemental Coverage and Source, 2010 

Supplemental Coverage

Source of Payment

Beneficiaries with 

Medicare FFS-only 

(no supplemental coverage)

Beneficiaries

with Medigap

Beneficiaries with 

employer-sponsored or 

other supplemental

Beneficiaries with 

Medigap and 

employer-sponsored 

or other supplemental

Total all sources

Average spending $8,064 $15,612 $14,363 $12,417

Standard error ($652) ($810) ($879) ($1,043)

Beneficiary out-of-pocket

Average spending $1,737 $2,343 $2,155 $1,809

Standard error ($128) ($118) ($173) ($115)

Medicare

Average spending $5,008 $10,465 $7,800 $7,745

Standard error ($520) ($602) ($628) ($907)

All other sources

Average spending $1,318 $2,803 $4,408 $2,863

Standard error ($166) ($343) ($419) ($184)

Source: GAO Analysis of 2010 Cost and Use File Data from the Medicare Current Beneficiary Survey

Notes: Excludes beneficiaries residing in long term care facilities. The standard error is a measure of 

variation around the estimate, in this case the estimate of average health care spending. Because the 

MCBS is based on a sample, any estimates derived by the survey are subject to sampling errors. A 

sampling error indicates how closely estimates (such as mean) obtained from a sample approximate 

estimates from the population. A sampling error is commonly measured by a standard error, which is 

inversely related to the sample size. The larger the sample size, the smaller the standard error, and 

the closer the sample mean approximates the population mean. The estimated number of 

beneficiaries is based on applying the MCBS weights to the sampled population. Numbers may not 

total due to rounding.
Appendix III: GAO Contact and Staff 

Acknowledgments

Page 27 GAO-13-811 Medicare Supplemental Coverage

John E. Dicken, (202) 512-7114 or dickenj@gao.gov

In addition to the contact named above, Gerardine Brennan, Assistant 

Director, Todd Anderson, Reginald Duckett, Lori Fritz, Mary Giffin, and 

Laurie Pachter made key contributions to this report.

Appendix III: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Acknowledgments 

(291138)
The Government Accountability Office, the audit, evaluation, and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and 

policies; and provides analyses, recommendations, and other assistance 

to help Congress make informed oversight, policy, and funding decisions. 

GAO’s commitment to good government is reflected in its core values of 

accountability, integrity, and reliability.

The fastest and easiest way to obtain copies of GAO documents at no 

cost is through GAO’s website (http://www.gao.gov). Each weekday 

afternoon, GAO posts on its website newly released reports, testimony, 

and correspondence. To have GAO e-mail you a list of newly posted 

products, go to http://www.gao.gov and select “E-mail Updates.”

The price of each GAO publication reflects GAO’s actual cost of 

production and distribution and depends on the number of pages in the 

publication and whether the publication is printed in color or black and 

white. Pricing and ordering information is posted on GAO’s website, 

http://www.gao.gov/ordering.htm. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or 

TDD (202) 512-2537. 

Orders may be paid for using American Express, Discover Card, 

MasterCard, Visa, check, or money order. Call for additional information.

Connect with GAO on Facebook, Flickr, Twitter, and YouTube. 

Subscribe to our RSS Feeds or E-mail Updates. Listen to our Podcasts. 

Visit GAO on the web at www.gao.gov. 

Contact:

Website: http://www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470

Katherine Siggerud, Managing Director, siggerudk@gao.gov, (202) 512-

4400, U.S. Government Accountability Office, 441 G Street NW, Room 

7125, Washington, DC 20548

Chuck Young, Managing Director, youngc1@gao.gov, (202) 512-4800

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, DC 20548

GAO’s Mission 

Obtaining Copies of 

GAO Reports and 

Testimony 

Order by Phone

Connect with GAO

To Report Fraud, 

Waste, and Abuse in 

Federal Programs

Congressional 

Relations 

Public Affairs

Please Print on Recycled Paper.