People who enroll in senior-focused HMOs to supplement their basic Medicare coverage had the lowest out-of-pocket costs in nearly every circumstance examined by researchers. This was particularly the case among those seniors who used the most health services, according to a report by RAND Health researchers.

So-called “Medigap” insurance-sold by traditional insurance plans to supplement Medicare-did little to insulate seniors from high medical bills. The best protection came from employer-provided supplemental plans, which are predominant among the more affluent, and Medicaid for the very poor.

Overall, seniors who had Medigap coverage had the highest out-of-pocket expenses, spending an average of $2,585 in the two-year study period on items such as co-payments and prescriptions. Those with no supplemental coverage averaged $2,431 in costs over two years, followed by those with HMOs, who spent an average of $1,738. Those enrolled in employer-sponsored plans spent an average of $1,676 and those with Medicaid spent an average of $963.

Among seniors who reported having fair or poor health, those enrolled in the HMOs had lower costs than their peers enrolled in other types of plans, excluding Medicaid. Among seniors who used the most medical services, HMOs provided significant cost savings compared with other commercially available health plans.

The more wealth people reported, the more likely they were to have supplemental insurance, according to researchers. Nearly one-fourth of the low-wealth seniors had no supplemental coverage, while just 7% of the wealthiest group did not buy coverage.

RAND researchers found the most popular insurance option for senior citizens is coverage offered by former employers. Just over 32% of seniors reported such coverage, which cost an average of $519 per year. Just slightly less popular was Medigap insurance sold to cover costs not paid by Medicare. Nearly 32% of the seniors in the study had Medigap insurance, which cost an average of $1,459 per year.

About 15% of the seniors were enrolled in Medicare HMOs, which cost an average of $238 per year. About 8% of the seniors were enrolled in Medicaid, the government insurance plan for the poor. About 14% of the seniors had no supplemental Medicare coverage.

The study found that a few seniors account for much of the out-of-pocket spending, which drives the average spending estimates higher. About 10% of the seniors spent $4,800 or more over two years and the top 1% spent more than $15,000 over the period.

Federal payments to Medicare HMOs have been trimmed in recent years, causing some plans to increase co-payments, reduce benefits, raise enrollment fees and, in some instances, leave the market. Other research has shown that fewer Medicare supplements now offer prescription drug benefits and many have limited the types of medicines covered.

In addition, fewer employers are offering low-cost supplemental health benefits to their retirees. Higher costs and changing corporate accounting rules have caused many employers to drop this benefit, a trend expected to continue.

The researchers examined information collected in 1998 from the US Health and Retirement Study, a national effort that surveys a representative sample of the nation’s elderly and near elderly every two years about a wide range of health issues.