Budget 2013: Tax Targets Medigap

Bonnie Burns of California Health Advocates, Sacramento, Calif., says the surcharge would be terrible for consumers.

Burns, who represents consumer interests at the National Association of Insurance Commissioners (NAIC), Kansas City, Mo., serves on an NAIC panel that released a discussion paper on first-dollar Medigap coverage in 2011.

Regulators, insurance industry representatives and consumer advocates on the panel all agree on the need to protect consumer access to Medigap products with low out-of-pocket costs, Burns says.

Researchers at the RAND Corp., Santa Monica, Calif., found 40 years ago that high out-of-pocket costs reduced health care use, but the study sample included no Medicare enrollees, and no one tried to determine whether the extra care the subjects with low out-of-pocket costs received was medically necessary, Burns says.

Burns says she thinks consumers with near first-dollar Medigap coverage tend to have high Medicare costs because the rich, high-premium Medigap plans appeal to consumers who already have health problems.

“They’re trying to budget their health care expenses,” Burns says.

Blaming Medigap issuers and customers for any over-use of care seems particularly unfair because federal law prohibits sellers of Medigap insurance from determining whether the care a policyholder has received is medically necessary, Burns says.

If the government wants to guard against Medicare waste, it should do more to enforce existing rules that require providers to document that the care they provide is medically necessary, Burns says.