Various studies have found that Medigap —which allows enrollees to pay a flat premium in exchange for little or no cost-sharing — increases beneficiaries’ utilization of healthcare services and subsequently drives up Medicare costs. For instance, a recent study conducted by researchers at the University of Texas in Austin and the University of Chicago found enrollment in Medigap increases the number of Medicare Part B physician service claims by 33.7 percent and Part A hospital stays by 23.9 percent. As a result, Medigap increases the amount Medicare spends on an individual by $1,396 per year (22.2 percent).
That same study found a 15 percent tax on Medigap premiums would decrease Medigap coverage by 13 percentage points and reduce net government cost by 4.3 percent per beneficiary. Numerous reform proposals have suggested similar measures. However, according to a new issue brief from the Kaiser Family Foundation, critics of such proposals say that increasing cost-sharing could also drive up spending for some vulnerable beneficiary populations by discouraging them from getting needed care, leading them to need more high-cost, acute-care services down the road.
Gretchen Jacobson, PhD, associate director of the Kaiser Family Foundation’s program on Medicare policy and one of the issue brief’s authors, says it’s hard to predict the long-term impact of reforming Medigap to increase cost-sharing.
“Many studies have shown increasing cost sharing for beneficiaries would reduce utilization and could, for some beneficiaries, reduce Medicare spending,” she says. “Others have also argued it could increase federal spending for some individuals because they could forgo necessary services and use higher cost services in the future. With any proposal, it’s challenging to strike a balance between reducing Medicare spending and federal spending without imposing additional financial barriers to care or additional access barriers to care.”
According to Dr. Jacobson, healthcare providers should make sure they’re aware of the cost-sharing requirements for Medigap enrollees currently and under any reform measures that may be enacted in the future.
Changes to Medigap have the ability to affect healthcare utilization, spending and out-of-pocket costs for beneficiaries. Below are five key takeaways from the KFF issue brief to give healthcare executives more information on the program as it stands currently.
1. In 2010, 23 percent of Medicare beneficiaries had a Medigap policy, including beneficiaries with multiple sources of supplemental coverage. The percentage of beneficiaries enrolled in Medigap has been relatively stable since 2006.
2. Of those enrolled in Medigap, 86 percent had incomes of less than $40,000 per person, and 47 percent had incomes less than $20,000 per person. Reform proposals increasing costs for Medigap beneficiaries could potentially have a disproportionate effect on middle-income beneficiaries who don’t qualify for Medicaid and also don’t have employer-sponsored retiree healthcare, according to the Kaiser Family Foundation.
3. Twenty-eight percent of beneficiaries who purchase Medigap coverage live in rural areas, compared with 23 percent of all Medicare beneficiaries.
4. Eighty-two percent of Medigap plan enrollees are in relatively good health, compared with 73 percent of Medicare beneficiaries in general.
5. Medigap beneficiaries paid an average of $183 per month in premiums for their policies in 2010, although premiums varied significantly across states and by plan type. For instance, average premiums for Medigap plan F (which provides “first dollar” coverage including both the Medicare Part A and Part B deductible) range from $129 per month in Vermont to $226 in New York. The national average plan F premium was $181.
More Articles on Medicare:
Medigap Drives Up Medicare Costs, Study Finds
MedPAC Approves Final 2015 Hospital Payment Recommendations
Bill Would Tie Medicare Payments to Outcomes for Chronically Ill Patients
