Friday, August 23, 2013

Fwd: qotd: Is Medigap for wealthy people who want more health care?

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-------- Original Message --------
Subject: qotd: Is Medigap for wealthy people who want more health care?
Date: Fri, 23 Aug 2013 14:14:56 -0700
From: Don McCanne <>
To: Quote-of-the-Day <>

JAMA Internal Medicine
August 19, 2013
The Future of Medicare Supplemental Insurance
By Gail R. Wilensky, PhD

Even these highly regulated versions of Medigap have problems. They are
expensive and, frequently, are not a very good buy. And Medigap
insurance imposes significant costs on the Medicare program. Because
Medigap plans pay for the deductibles, coinsurance, and copayments
associated with Medicare, they frequently are paying for low-cost,
routine care. Such payments are prepayments, rather than "real
insurance," but Medigap plans have to set premiums to cover the costs of
this expected use, as well as the administrative costs associated with
the insurance.

More than half of the people who buy Medigap insurance buy one of the 2
most expensive plans—"C" or "F." These plans pay almost all of the
beneficiaries' costs, thus providing first-dollar coverage, which has
been the cause for congressional concern.

Currently, the Obama administration and Congress are focused on the
costs that Medigap insurance imposes on the Medicare program. Because
the plans typically cover all or most cost sharing, seniors with
supplemental insurance use more medical services than seniors without
supplemental insurance.

The Patient Protection and Affordable Care Act (Pub L No. 111-148)
requires the National Association of Insurance Commissioners to review
the benefit designs of plans C and F and introduce cost sharing for
physician services for plans purchased as of 2015.

President Obama's fiscal year 2014 budget proposal introduces a $100
home health copayment and a 30% surcharge on Part B premiums for new
Medicare beneficiaries who purchase Medigap policies with low
cost-sharing requirements.

The National Commission on Fiscal Responsibility and Reform (known as
the Fiscal Commission) recommended that Medigap plans not be allowed to
cover the first $550 per year in cost sharing and cover no more than
half of the cost sharing up to $5500 per year.

The health care cost containment initiative of the Bipartisan Policy
Center recommended a prohibition on first dollar supplemental insurance
and a more coherent and rational cost-sharing benefit structure for
traditional Medicare, as part of broader changes to the US health care

Medicaid would protect low-income beneficiaries, but other high users of
Medicare services would be more likely to incur higher costs.

Not surprisingly, many of these proposals raise concerns about
inappropriate reductions in the use of health care and increased costs
for some Medicare beneficiaries. According to a Kaiser Family Foundation
study, the majority of elderly persons would have reduced costs, but 20%
would have higher costs.

Neither the outdated structure of Medicare nor the costs imposed on the
program by Medigap insurance are new issues. Medicare needs to be a
viable program, while providing insurance coverage appropriate for the
21st century. Congress and the Obama administration know that reforms to
supplemental insurance are needed, and the specific types of changes
that make most sense.

June 2013
Health Care Spending and the Medicare Program

Chart 5-6. Out-of-pocket spending for premiums and health services per
beneficiary, by insurance and health status, 2009

Beneficiaries who report they are in good, very good, or excellent health:

Medicare only

$1,079 Premium
$1,643 Out-of-pocket

Medicare plus Medigap

$3,264 Premium
$1,900 Out-of-pocket

Beneficiaries who report they are in fair or poor health:

Medicare only

$1,128 Premium
$3,446 Out-of-pocket

Medicare plus Medigap

$3,191 Premium
$3,382 Out-of-pocket

Comment: Former HCFA Administrator Gail Wilensky has long been a
supporter of patient cost sharing as a means of discouraging use of
health care services, hopefully reducing spending in government health
programs such as Medicare. She has particularly targeted Medigap plans
because they remove cost sensitivity by providing first-dollar coverage.
So do we need to prohibit Medigap plans from providing full coverage of
deductibles and other cost sharing, as she recommends?

MedPAC has provided us with the numbers that indicate how patients
respond to Medigap incentives. When Medicare beneficiaries elect to
purchase Medigap plans, their premiums triple, no matter the status of
their health. But look at their out-of-pocket expenses, excluding the
premiums. If they are healthy, the out-of-pocket expenses are not much
different, whether or not they are enrolled in a Medigap plan. If they
are not healthy, the out-of-pocket expenses are quite a bit higher, but
still with not much difference between those with and those without a
Medigap plan.

According to the MedPAC report, "Insurance that supplements Medicare
does not shield beneficiaries from all out-of-pocket costs.
Beneficiaries who report being in fair or poor health spend more out of
pocket for health services than those reporting good, very good, or
excellent health regardless of the type of coverage they have to
supplement Medicare."

The report also speculates that "this result likely reflects the fact
that beneficiaries who have Medigap have higher incomes and are likely
to have stronger preferences for health care." Rich people want more
health care? It is much more likely that these numbers represent two
other factors: 1) the actual dollar benefit of Medigap plans is truly
paltry (except for a cap on the costs of catastrophic events), and 2)
Medicare benefits are quite spartan, covering on average only about half
of seniors' health care costs.

Considering their high premiums, administrative excesses, and relatively
paltry benefits, Medigap plans don't need revision; they need to be
eliminated, with the benefits being rolled into the traditional Medicare

Perhaps the most telling comment in Wilensky's article is her statement
that Medicare plus Medigap payments are "prepayments, rather than 'real
insurance.'" The consumer-driven advocates have created the meme that
"real insurance" is catastrophic insurance only; it should not pay for
routine medical care. That arbitrary definition is nonsense. Insurance
is pooling risk, and you can include all health care costs in that pool,
including routine and preventive care. Perhaps a better term is "prepaid
health care."

Regardless, when routine care exposes too many individuals to financial
hardship, the system needs to be changed, and certainly not by
increasing that exposure, as Wilensky recommends. Her diversionary
strategy is to prevent us from considering a program that really would
work for all of us - a government-run (OMG!) single payer, improved
Medicare for all.

Why is she and her ilk so opposed? Is adhering to their ideology really
more important to them than preventing physical suffering and financial
hardship for the rest of us? I've tried to understand them, but I'll
never get it.

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