The House Ways and Means Committee is holding a hearing tomorrow on Medicare reform that will focus on proposals to modify beneficiary cost-sharing, including potential changes to Medigap coverage. A new report released today by America’s Health Insurance Plans (AHIP) shows that Medigap coverage is a vital lifeline to more than 10 million Medicare beneficiaries. The study is an update to prior research showing trends in Medigap enrollment and coverage.
Key findings from the report include:
- Enrollment in Plan N, with cost-sharing amounts (i.e., $20 co-pay for physician office visits), grew by 35 percent in 2012 to approximately 360,000 enrollees. Plan L, which covers 75 percent of Part A and Part B cost-sharing and includes a $2,400 out-of-pocket limit, grew by 47 percent in 2012 to 103,000 enrollees.
- Plan F grew by 10 percent in 2012, or 450,000 enrollees, and covered the largest share of Medigap policyholders. Plan C had the second highest share. Plans C and F cover 100 percent of the deductibles and coinsurance not covered by Medicare.
Medigap helps cover significant out-of-pocket costs that are not covered by Medicare and allows seniors and beneficiaries with disabilities to budget for medical costs and avoid the confusion and difficulty of handling complex medical bills. A recent survey found that 9 out of 10 seniors are satisfied with their Medigap coverage, and more than 9 in 10 would recommend Medigap to a friend or relative.
Moreover, Medigap provides stability for vulnerable populations. A recent report shows that low- and moderate-income Medicare beneficiaries, particularly those living in rural areas, rely on the financial protection Medigap provides. The report found that 46 percent of all Medigap policyholders (and 57 percent of policyholders in rural areas) had incomes of $30,000 or less. In addition, Medigap beneficiaries, on average, are more likely to have one or more chronic health care conditions than the Medicare population as a whole, according to research published in Health Affairs.
Proposals to Change Medigap Could Threaten Affordability and Benefits Seniors Rely On
As part of the current debt and deficit discussions, AHIP is urging policymakers to avoid cutting benefits or enacting changes that would harm the millions of seniors and people with disabilities who rely on Medigap coverage. The President’s budget proposal for 2014 includes a new $2.9 billion tax on beneficiaries who choose Medigap policies with low cost-sharing requirements. The Medicare Payment Advisory Commission (MedPAC) has recommended a 20 percent tax on these policies. Adding a new tax on Medigap would increase costs for vulnerable beneficiaries who rely on the predictability and financial protection Medigap provides.
Research has shown that limiting first-dollar coverage in Medigap policies would cause beneficiaries to avoid care that is medically necessary – resulting in higher costs for enrollees and the country. A white paper commissioned by AHIP concluded that “an across-the-board ban on first-dollar coverage Medigap plans is an overly blunt tool for lowering healthcare expenditures and invites adverse, unintended consequences.” These concerns have been echoed by other organizations:
- In a letter to HHS, the National Association of Insurance Commissioners (NAIC) said that “Medigap’s protections are now inappropriately being held responsible for encouraging the overuse of covered services and increasing costs in the Medicare program,” and that “the assertion that Medigap coverage causes overuse of Medicare services fails to recognize that Medigap coverage is secondary and that only Medicare determines the necessity and appropriateness of medical care utilization and services.”
- The Center for Medicare Advocacy said that, “Introducing further cost-sharing in Medigap plans would create a significant financial burden, but that’s not all. When required to pay beyond their means, people skip needed medical care and treatment, leading to poor health outcomes, increased emergency room visits and hospitalizations.”
- A joint letter to the NAIC from a variety of consumer groups said that these proposals “are based on the false assumptions that beneficiaries with supplemental coverage use more Medicare services than necessary and that additional cost sharing will result in federal health care savings.” Moreover, the groups said, “We remain deeply concerned that any attempt to add cost sharing in Medigap plans will cause disproportionate harm to beneficiaries with low and modest incomes, those who are chronically ill and those living in rural communities.”
Importantly, the cost savings often cited by proponents of restricting first-dollar coverage in Medigap are based on proposals that would apply this change to current Medicare beneficiaries. Imposing cost sharing on current Medigap policyholders would add a significant burden on vulnerable Medicare beneficiaries, many of whom have been paying for these benefits for many years, often have very tight budgets, and rely on Medigap for predictability in their health care costs and protection against high medical bills.