This post was written by Nancy Sheliga.

At the request of Senate Republican policymakers seeking a better understanding regarding the impact of supplemental coverage on overall Medicare spending, the Government Accountability Office (GAO) recently compared the health care expenditures of beneficiaries with only traditional fee-for-service (FFS) Medicare coverage to those of beneficiaries who have supplemental coverage from either private insurance companies (a.k.a., Medigap) or employer-sponsored plans. Based on a review of 2010 data, the GAO concluded that health care expenditures are higher for beneficiaries with supplemental coverage than for beneficiaries with FFS Medicare only. More specifically, both average Medicare spending and out-of-pocket expenses for beneficiaries with Medigap were significantly greater than for those with Medicare FFS coverage only. Within the FFS only group, those who are enrolled in Medicare’s Part D prescription drug program spent considerably more on health care than those who are not enrolled in Part D.

While other research has found similar patterns, and Congressional policymakers have expressed concern that those with supplemental coverage may be less cost-conscious in their use of medical services, the GAO report also found that those with poorer health status and greater age have higher average health care expenditures in general. In addition, the GAO report references other past studies that have indicated that (1) characteristics such as health status and age may influence the decision to purchase supplemental coverage, possibly providing a partial explanation of the differences in expenditures, and (2) reducing supplemental coverage may cause some individuals to consider forgoing necessary services, possibly exacerbating their health care needs and perhaps increasing their long-term health care costs.