By Mary Johnson
Should seniors with Medigap supplements that provide “first dollar coverage” be required to pay more up-front? Should Medicare continue to pay for services based on medical necessity, or should the government change to a system “based on evidence of the value of services?” Congress may be debating these questions this month when the Medicare Payment Advisory Commission (MedPAC) issues its June report to Congress. The idea is to make Medicare beneficiaries “think twice” before scheduling doctor, outpatient services, or hospital stays in order to reduce government spending on Medicare.
The recommendation of MedPAC would combine the deductibles for Part A and Part B services. Currently the deductibles are charged separately and for good cause. About 80 percent of Medicare beneficiaries never pay a Part A deductible because they don’t require hospitalization in most years. The Part A deductible for hospital inpatient services is $1,156, a cost that is covered in full today by all Medigap supplements. Some Medigap supplements also cover all of the Part B deductible, which is $140 in 2012. Costs differ for seniors enrolled in Medicare Advantage depending on the plan. Co-payments would also change and vary by the type of service and provider.
This sounds similar to the current Medicare Advantage system except for one big difference — the Health and Human Services secretary would be given authority to set beneficiary cost-sharing “based on evidence of the value of services.” Under this criterion, who do you think would be more likely to get the best coverage for expensive services like CT scans that can cost $2,000 — an 84-year-old, or a 43-year-old mother with two children? Finally, the recommendation would require insurers to pay a surcharge on the Medigap policies that they offer to beneficiaries. This proposal is not new.
Last fall, as part of his deficit reduction plan, President Obama recommended charging a 30 percent surcharge on Part B premiums to new beneficiaries who purchase Medigap polices with “near first-dollar” coverage. But do Medigap supplements encourage the over use of services? According to the Kaiser Family Foundation, about 20% of Medicare beneficiaries have a Medigap policy and they paid an average of $178 per month for premiums in 2010 (premiums vary significantly). People purchase the policies specifically to protect against the considerable costs that Medicare does not cover, and to help keep budgets in retirement years more predictable. They have modest incomes, but don’t qualify for Medicaid. About 66% have incomes below $40,000 and nearly 31% have incomes below $20,000.
The fact is no one can know ahead of time what healthcare will be needed in the future, let alone the actual costs of the services that providers charge. Doctors frequently refer patients to expensive specialists, and order endless expensive tests without spending adequate time to explain why the tests are necessary, how much they cost, or the chances of improving treatments through their use.
TSCL is carefully monitoring these recommendations and believes they would be financially punitive to seniors who are depending on Medigap supplements to provide a more secure retirement.
TSCL opposes legislative efforts that would make today’s seniors and those nearing Medicare-age pay higher costs for their Medicare coverage.
Sources: “Draft MedPAC Language Calls For Medicare Benefit Redesign,” John Reichard, CQ HealthBeat, March 8, 2012. Medigap Reform: Setting The Context, Kaiser Family Foundation, September 2011.