Medicare BackgroundIn fiscal year 2013, the federal government spent $498 billion, or approximately 14 percent of the federal budget, on Medicare (Center on Budget, 2014). Policy experts expect that number to rise as the baby boomer generation continues to age and enter the Medicare rolls. In 2010, approximately 47.7 million Americans were enrolled in Medicare. By 2050, the Kaiser Family Foundation projects that this number will nearly double to 92.4 million (Kaiser Family Foundation, 2013). Although there has been a recent slowdown in health care and thus Medicare spending over the past decade, health spending growth accelerated in 2013, suggesting that long, slow downside effects of the recession on health spending may have finally bottomed out. (Schwartz, 2014). Together, increasing enrollment and growing health care spending are of great concern to policymakers. Not only is Medicare spending expected to double to more than $1 trillion by 2023 (Kaiser Family Foundation, 2013), but at this level of growth, there is widespread concern that Medicare spending will crowd out investments such such as education, research and development, and infrastructure. That's why policymakers are looking for ways to reduce Medicare costs per capita and save money. Policy Solution One such solution that has been proposed to create savings within Medicare is to impose limits on “Medigap.” Medigap is the supplemental coverage that gives Medicare beneficiaries financial protection for things that Medicare doesn't pay for, like Medicare deductibles and copays that beneficiaries would otherwise pay out of pocket. In 2010, 23 percent of Medicare enrollees, or about 1 in 4...... middle of paper ...... e, 90 percent of beneficiaries receive supplemental coverage through an employer, Medigap, Medicaid, Medicare Advantage or other plan that reduces their risks and makes health coverage more predictable and affordable. Private insurance companies sell Medigap plans based on a system developed by the National Association of Insurance Commisioners. These plans are offered in 10 standard benefit packages, identified by the letters A through D, F, G, and K through N (Cassidy, 2011). Medigap plans must cover the following basic benefits: coinsurance for extended hospital stays, total costs for 365 days of hospitalization after enrollees have exhausted all their Medicare hospital benefits, payment of all cost-sharing amounts once that enrollees have met their annual Part B deductible, and the first three liters of blood enrollees may need during their care.