By Mary Johnson
President Obama’s Fiscal Commission recently voted in favor of changes that would saddle some of the oldest and sickest seniors, with potentially thousands in new out-of-pocket costs annually if they require medical services. Healthcare policy wonks say the “first dollar” coverage that Medicare supplements like Medigap provide, “encourages over-utilization of healthcare.” The idea behind the Fiscal Commission’s proposal is to make people pay more for their healthcare upfront so they think twice before seeking medical treatment, or seek less costly forms of care, thus saving the government money.
Medigap polices cover Medicare deductibles and the difference or “gap” between what doctors, hospitals, and other healthcare providers charge, and the amount that Medicare actually pays. Medicare only covers about 64 percent of the cost of healthcare services for beneficiaries, and seniors purchase supplemental coverage for that very reason — since out-of-pocket costs can become an unaffordable hardship.
The Fiscal Commission’s proposal would combine the Part A (hospital care) deductible, $1,132 in 2011, and the Part B (doctors and hospital outpatient) deductible, $162 in 2011, into a single deductible of $550. While that may sound like a savings, there’s a catch. In a single year, only 20 percent of seniors are ever hospitalized, so the $550 deductible hikes what the majority pays every year by hundreds of dollars.
Currently seven out of the ten standard Medicare supplements cover all the Part A deductible. But the Fiscal Commission’s proposal would bar Medigap plans from covering the first $500 and ALSO limit what the plans may cover in other co-insurance — to 50 percent of the next $5,000. That would potentially add another $3,000 annually in new out-of-pocket costs to Medigap enrollees. Under the Fiscal Commission’s proposal, once beneficiaries and plans have spent $5,000, the co-insurance would drop to 5%. The commission proposal would cap total cost sharing at $7,500, a protection the majority of older Medigap plans don’t currently have.
The table below illustrates the Commission’s proposal comparing the coverage loss using Medigap plan F, the most comprehensive plan under current law:
How the Fiscal Commission’s Proposal Would Change Medigap Cost Sharing
| Medigap Benefits | Medigap Plan F — 2011 | Fiscal Commission Proposal |
|
Medicare Part A Deductible |
$0 |
$500 (Plans would only be allowed to cover $50 of $550 deductible) |
|
Medicare Part B Deductible |
$0 |
Included in the above |
|
Medicare Part A Hospital Coinsurance up to an additional 365 days after Medicare benefits are used up |
$0 |
50%/5% * |
|
Medicare Part B Coinsurance or Copayment |
$0 |
50%/5%* |
|
Blood (First 3 Pints) |
$0 |
50%/5%* |
|
Part A Hospice Care Coinsurance or Copayment |
$0 |
50%/5%* |
|
Skilled Nursing Facility Care Coinsurance |
$0 |
50%/5%* |
|
Medicare Part B Excess Charges |
$0 |
50%/5%* |
|
Foreign Travel Emergency (Up to plan limits) |
$0 |
50%/5%* |
|
Medicare Preventive Care Part B Coinsurance |
$0 |
50%/5%* |
|
Total cost sharing** |
Plan F covers all costs |
$3,100 new-out-of-pocket |
* 50 % of the next $5,000 after the $500 deductible, drops to 5% of the next $2,000.
There already have been a number of major changes in Medigap plans in 2010, and according to Medicare’s Chief Actuary, another round of changes under healthcare reform will trim an estimated $380 million in government reimbursements through 2019. That means Medicare beneficiaries are already in line to pay a greater share of their Medicare costs under changes that have yet to be implemented. But the debate over what the government will cover in the near future and what seniors will be required to pay out-of-pocket is far from decided yet, so it’s in all of our interests to stay tuned to the debate.
TSCL is closely monitoring the debate and very interested in what seniors think about this proposal in order that we can relay concerns to Members of Congress. Please send us a letter to:The Senior Citizens League, 1001 N. Fairfax St. #101, Alexandria, VA 22314.
Sources: “The Moment of Truth” The National Commission on Fiscal Responsibility and Reform, December 2010. Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” Richard S. Foster, Chief Actuary, CMS, April 22, 2010.
