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Consumer reps: Medigap is not the bad guy

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Members of the Senior Issues Task Force are trying to figure out how to tell U.S. Health and Human Services (HHS) Secretary Kathleen Sebelius just how important they believe generous Medicare supplement insurance products are to older consumers.

The task force,  an arm of the Health Insurance and Managed Care Committee at the National Association of Insurance Commissioners (NAIC), has been working on an expression of support for Medicare supplement products, or Medigap products, that sharply limit consumers’ out-of-pocket health care costs.

The expression of support would go into a cover letter that would accompany an NAIC review of the existing NAIC Medigap model regulation.

Sebelius has asked the NAIC to think about ways to change the NAIC’s Medigap model regulation.

The Obama administration wants the NAIC and the states to change the rules governing Medigap plans C and F, which hold purchasers’ out-of-pocket costs to especially low levels. Officials say Medicare enrollees who buy Medigap plans C and F now have no incentive to be good health consumers. The Obama administration wants the plans to add “nominal cost-sharing” features, to get the users to shop for care more carefully.

The Obama administration has also talked about the possibility of raising $2.5 billion over 10 years by imposing a surcharge on the Medicare enrollees who buy the “near first-dollar” Medigap products. The government would collect the surcharge by adding an amount equal to about 15% of the average Medigap policy premium onto a Medigap policy owner’s Medicare Part B premium.

In the current draft of the NAIC cover letter, drafters state that, “We strongly disagree with the assertion that Medigap is the driver of unnecessary medical care by Medicare beneficiaries. Medigap insurance pays benefits only after Medicare has determined that the services are medically necessary and has paid benefits. Medigap cannot alter Medicare’s determination and the assertion that first-dollar coverage causes overuse of Medicare services fails to recognize that Medigap coverage is secondary and that only Medicare determines the necessity and appropriateness of medical care utilization and services.”

America’s Health Insurance Plans (AHIP) has suggested adding language reporting that NAIC officials have reviewed the data they could get and found no studies showing whether Medicare enrollees with Medigap coverage are really overusing medical services.

“Instead, the majority of the available studies caution that added cost sharing would result in delayed treatments that would only increase Medicare program costs later,” AHIP says in a proposed addition to the NAIC Medigap letter. “Research suggests that decreasing use of some services among older populations can result in increased use of other services later on.”

Three individuals who officially represent consumer interests in NAIC proceedings — Bonnie Burns, David Lipschutz and Stacy Sanders — proposed adding language emphasizing that new cost-sharing requirement could hurt the sick people and low-income people who most need predictability in out-of-pocket health care costs.

Adding even “nominal cost sharing” requirements “will disproportionately affect the populations noted above and may result in unintended harm and/or adverse health consequences for these beneficiaries,” the consumer reps say in their proposed addition to the letter. “Additionally, the relevant literature reinforces that it is health providers – not beneficiaries – who determine the appropriateness of health care services.”

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