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HHS takes NAIC's Medigap advice

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The U.S. Department Health and Human Services (HHS) has taken the NAIC’s counsel to not impose nominal cost sharing in Medicare Supplement insurance (Medigap) Parts C and F, HHS Secretary Kathleen Sebelius revealed in a letter to NAIC President Jim Donelon dated May 28.

“I value the NAIC’s expertise on Medigap and other health insurance issues and the strong partnership between NAIC and the U.S. Department Health and Human Services. This partnership has been instrumental in the effective implementation of numerous provisions of the Affordable Care Act,” Sebelius wrote.

She even added a hand-written post-script to Donelon in the letter, saying that it was good to spend some time with him in Washignton, D.C. They met here May 16.

The NAIC recommended against nominal cost sharing and did not revise the standard benefit packages for these model plans. “I accept the NAIC’s recommendation pursuant to Section 3210 and appreciate the hard work and dedication that characterized the NAIC’s review,” wrote Sebelius, a former NAIC president herself. 

The response left much time for review — the NAIC had written to Sebelius on Dec. 19, 2012, in a letter signed by NAIC leadership under then-president Kevin McCarty of Florida about its concerns with the standards for Plans C and F under Section 3210 of PPACA.

The NAIC, besides studying the issue, communicated caution with proceeding with nominal Medigap cost sharing because it could possibly delay treatments for people that really need it, making them worse off and causing higher costs down the road.

HHS had requested under PPACA that the NAIC review and revise the NAIC Medicare supplement insurance (Medigap) model regulation to include nominal cost sharing in Medigap Plans C and F to encourage the use of appropriate physicians’ services under Medicare Part B.

Section 3210 directs the NAIC to base these revisions on evidence published in peer-reviewed journals or current examples used by integrated delivery systems.

“We were unable to find evidence in peer-reviewed studies or managed care practices that would be the basis of nominal cost sharing designed to encourage the use of appropriate physicians’ services. Therefore, our recommendation is that no nominal cost sharing be introduced to Plans C and F. We hope that you will agree with this determination,” the NAIC wrote in the Dec. 19 letter.

Sebelius, in fact, did agree.

The NAIC did its work and “discovered that there is a limited amount of relevant peer-reviewed material on this topic. “

Moreover, none of the studies provided a basis for the design of nominal cost sharing that would encourage the use of appropriate physicians’ services. 

Importantly, the NAIC pointed to caution in implementing added cost-sharing because it could result in delayed treatments that could increase Medicare program costs later, for example, increased expenditures for emergency room visits and hospitalizations, and result in adverse health outcomes for vulnerable populations like the elderly, chronically ill and low-income, the NAIC warned.

Significant new changes to Medigap plan offerings were implemented in 2010, which introduced new plans with increased beneficiary cost sharing. “We are still learning the impact of these new offerings on both the Medigap market and to the Medicare program,” the NAIC wrote in the letter last year.

Of interest, today Treasury Secretary Jacob Lew stated that “the President also has a specific plan to further strengthen Medicare. He wants to shrink the cost of health care spending, reduce excessive subsidies to prescription drug companies, and ask wealthy seniors to contribute a little more. This plan will not only make Medicare stronger, it will help lower future budget deficits.”

Lew made his comments while speaking on the release of the Medicare Trustees report that projected that the trust fund that finances Medicare’s hospital insurance coverage will remain solvent until 2026 — two years beyond what was projected in last year’s report.

Part B of Supplementary Medical Insurance (SMI), which pays doctors’ bills and other outpatient expenses, and Part D, which provides access to prescription drug coverage, are both projected to remain adequately financed into the indefinite future because current law automatically provides financing each year to meet the next year’s expected costs.

However, Lew cautioned that the aging population and rising health care costs cause SMI projected costs to grow steadily from 2 percent of GDP in 2012 to approximately 3.3 percent of GDP in 2035.

Roughly three-quarters of these costs will be financed from general revenues and about one-quarter from premiums paid by beneficiaries, Lew stated.