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Key Group Rejects Calls To Limit Seniors' Medigap Policies to Shrink Spending

Insurance Commissioners examine if seniors would use less Medicare  if the most popular Medigap plans were less generous

By Susan Jaffee, Kaiser Health News

Nov. 30, 2012 - A key group of state insurance commissioners dealt a blow Friday to proposals that would shrink Medicare spending by asking seniors to pay more for Medicare supplemental coverage.

The health law requires the National Association of Insurance Commissioners to examine whether seniors would use less Medicare services if the most popular Medigap plans were less generous.

“Everything we’ve looked at has shown that increasing cost-sharing does stop people from seeking medical care,” said Bonnie Burns, training and policy specialist at California Health Advocates who serves on an NAIC committee that has studied the issue for more than a year. “The problem is they stop using both necessary and unnecessary care.”


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How will Medicare Medigap Insurance Change Under Health Law?

Plans F and C are the most popular supplemental plans, chosen by nearly two-thirds of beneficiaries; Will increasing premiums be slowed?

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Aug. 20, 2012

State Insurance Chiefs Tell Congress Don’t Make Seniors Pay More for Medicare Medigap Policies

 ‘…will also cause serious confusion for seniors with fixed incomes who rely on Medigap insurance to protect them...’

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Sept. 16, 2011

Medigap Changes Meet Resistance from States, Insurers, Consumer Advocates

Some seniors may forego medically necessary care because they can't afford it -- even though they have a Medigap policy

By Susan Jaffe

Aug. 30, 2011


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About 9 million Medicare beneficiaries – or one out of five – bought a Medigap policy in 2010, to cover a portion of medical expenses not covered by Medicare. And two-thirds of them purchased the most comprehensive plans that offer “first dollar” coverage, which protects them from having to pay almost anything out of pocket.

In a draft letter approved by the NAIC Senior Issues Task Force Friday, the commissioners said the idea could backfire and raise Medicare costs when seniors don’t receive the medical care they need. The letter, to Secretary of Health and Human Services Kathleen Sebelius, was approved by the task force during the association’s annual meeting near Washington, D.C. Two more committees are expected to approve the letter before it is sent to Sebelius.

“Once the letter has cleared the Senior Issues Task Force, it’s probably a done deal,” said Guenther Ruch, a former administrator of the Wisconsin insurance department who, until March, chaired the Medigap subgroup that prepared the letter.

The Obama administration and congressional leaders are considering such proposals as part of their effort to trim federal spending. The Congressional Budget Office has estimated that cost-sharing changes could save the Medicare program as much as $53 billion over 10 years.

Medigap policies are popular with seniors because Medicare does not cap seniors’ out-of-pocket expenses. The C and F Medigap plans cover nearly all of the out-of-pocket costs that beneficiaries would usually pay, including deductibles and their 20 percent share of doctor visits and other outpatient services.

“People are buying Medigap because they need the [medical] treatment, said Dotti Outland, director of regulatory affairs for UnitedHealthcare and a member of the Medigap subgroup. “And they are paying something out of their pocket now, they are paying premiums.”

Advocates of increased cost-sharing point to studies showing that seniors with Medigap coverage tend to use more Medicare services than those without it, and they likely get unneeded care for which the government pays a large share.

The insurance commissioners were supposed to recommend specific cost-sharing changes for these Medigap plans to reduce Medicare spending for unnecessary medical treatment and, as the law says, “encourage the use of appropriate physicians’ services.” The law requires their recommendations to be based on peer-reviewed studies or current successful managed care practices.

But after a year and a half of research and discussion, they came up empty handed.

“None of the studies provided a basis for the design of nominal cost sharing that would encourage the use of appropriate physicians’ services,” the letter says. “Many of the studies caution that added cost sharing would result in delayed treatments that could increase Medicare program costs later (e.g., increased expenditures for emergency room visits and hospitalizations) and result in adverse health outcomes for vulnerable populations (i.e., elderly, chronically ill and low-income).”

The letter acknowledges that Sebelius may disagree with the NAIC and seek cost-sharing changes regardless. “If that is your decision, please know that the NAIC stands ready to continue its regulatory role in developing Medicare supplement standards.”

Nevada state insurance commissioner Scott Kipper, who chairs the Senior Issues Task Force, said the letter conveys “without any doubt that we want to continue to be the organization that HHS turns to on Medigap.”

An earlier version of the letter had rejected cost-sharing overall, but recommended $25 co-payments for advanced diagnostic imaging tests and $50 co-payments for scooters as a way to reduce fraudulent charges. But the group’s consumer representatives argued strongly against including that option. Three days before the Senior Issues Task Force vote, 15 national consumer and patient advocacy groups, along with eight NAIC consumer representatives, wrote Kipper urging that the co-pay recommendations be dropped.

“The Centers for Medicare and Medicaid Services has the ability, and obligation, to discourage improper use of these services by all Medicare beneficiaries, not only those who purchase Medigap plans,” they said, adding that increasing Medigap cost-sharing is the wrong tool for reducing Medicare spending.

>> Contact Writer Susan Jaffe at

This article was produced by Kaiser Health News with support from The SCAN Foundation.


Some of this information is reprinted from with permission from the Henry J. Kaiser Family Foundation. You can view the entire Kaiser Daily Health Policy Report, search the archives and sign up for email delivery. © Henry J. Kaiser Family Foundation. All rights reserved.


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