Latest Concern Surrounding Deficit Reduction and Medigap

By Bryan Neary on September 22, 2011

Another twist was added earlier this week to our government’s deficit reduction plan and its potential negative impact on the Medicare market.

Monday, during an afternoon conference call, NAIC Health Insurance and Managed Care Committee members (and other meeting attendees) raised concerns about the consideration for eliminating or restricting the ability of Medigap plans to provide “first-dollar” coverage for Medicare enrollees. This is just one deficit reduction consideration, being made by the 12-member “Super Committee” (tasked with popping out a plan by Thanksgiving to trim $1.2 trillion).

President Obama’s Plan for Economic Growth and Deficit Reduction — rolled out last week — features its own Medigap coverage changes, argued to save approximately $2.5 billion over 10 years.

The Administration proposes a Part B premium surcharge equivalent to about 15 percent of the average Medigap premium (or about 30 percent of the Part B premium) for new beneficiaries that purchase Medigap policies with particularly low cost-sharing requirements, starting in 2017.

Related concerns were raised in July when CSG Actuarial reported on the questionable benefits of the proposed Medigap Medical Loss Ratio Improvement Act — specifically, the increase of Medicare Supplement minimum loss ratio (“MLR”) requirements and the potential negative consequences of implementing such changes.

At the heart of the concerns raised Monday is how many seniors will be impacted. Eliminating Medigap first-dollar coverage would shift more costs to seniors, most of whom have not prepared for such expenditures. Soon, the NAIC Committee will mail a letter to members of Congress articulating its concerns surrounding Medigap first-dollar coverage of Medicare cost-sharing.

We’ll continue to monitor Washington and the decisions being made that will affect everyone in the senior markets. Stay updated by entering your contact info in the “Get Free Publications” form of the CSG News page.

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