As Washington continues to look for ways to reduce the deficit and reform the nation’s entitlement programs, changes to Medicare supplement insurance (Medigap) are being considered as part of these conversations.
Medigap coverage helps protect nearly 10 million Americans from the high medical costs not covered by Medicare. A variety of Medigap policies allow individuals to choose the coverage that is right for them, offering a sense of security and predictability to budget for medical costs that are both known and unknown. 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. When asked what they liked most about Medigap coverage, beneficiaries highlighted a variety of benefits, including limits on out-of-pocket costs, ease of dealing with medical bills and paperwork, and the ability to budget for unexpected medical costs.
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.
As part of the current budget discussions, AHIP is urging policymakers to avoid changes that will threaten benefits that millions of seniors and people with disabilities rely on. Earlier this week, the President released a budget proposal for 2014, which calls for a 15 percent surcharge on new beneficiaries who choose Medigap policies with low cost-sharing requirements. The recent budget proposal is one of several proposals that would impose a new tax on the average Medigap premium. The Medicare Payment Advisory Commission (MedPAC) has discussed a 20 percent surcharge. Adding a new tax on Medigap would increase costs for vulnerable beneficiaries who rely on the predictability and financial protection Medigap provides.
Other proposals would limit first-dollar coverage in Medigap policies. Yet research has shown that this 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.
AHIP continues to reach out to Medigap beneficiaries through The Partnership to Protect Medigap, a coalition of seniors and their families who support the program. For more information, visit www.protectmedigap.org.
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