magnitude of the costs to Medicare of extending coverage, but they could be considerably higher or lower than what Medicare might actually spend were coverage policies changed. The text and tables in this appendix will allow readers to vary some of the assumptions and calculate alternative estimates.

We followed generic Congressional Budget Office (CBO) estimation practices such as not discounting future costs to present value. Our analytic process required estimations of both gross and net costs to Medicare for the 5-year period 2000–2004. Gross costs are the direct costs to Medicare of the services, and net costs are the gross costs minus the potential cost offsets (e.g., avoided hospitalization costs due to prevented infections) that Medicare would realize as a result of covering these services. Estimates of cost offsets are derived from the committee’s analysis of the available research and expert judgement. We also reduced our cost estimates to account for cost-sharing offsets of 20% and premium offsets of 25% per CBO standards.1 Numbers in the tables may not total exactly due to rounding.

Projections of the Medicare Part B population for the years 2000 through 2004, as well as other sources of Medicare Part A and Part B population statistics (such as race and sex), were provided by the Health Care Financing Administration (HCFA) Office of the Actuary.

The following sections discuss each of these estimates in detail.


For each of the coverage extension options considered here, Medicare would cover skin cancer screening for basal cell carcinoma, squamous cell carcinoma, and malignant melanoma. We assume skin cancer screening would be made available to all Medicare Part B beneficiaries.

Gross costs to Medicare of screening are built from estimates of the target population, and estimates of the costs of the services provided. Medicare net costs would be derived by offsetting Medicare savings from gross costs, but none were identified from the literature on skin cancer screening.

The major determinant of cost for Medicare coverage of skin cancer screening is the size of the target population. With more than 39 million enrollees in Medicare Part B, the costs depend on how many Medicare enrollees participate in skin cancer screenings.

We consider gross and net costs of three possible approaches to skin cancer screening:


The Medicare Part B premium offset is set at 25% of Part B expenditures for the elderly Medicare population only. Because most transplant recipients qualify for Medicare based on disability or diagnosis of end-stage renal disease rather than age, premium offsets were not deducted from gross cost estimates for dental care or immunosuppressive therapy for transplant recipients.

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