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House Republicans criticize rich Medigap plans

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Four top House Republican leaders are calling for curbing the use of Medicare supplement (Medigap) plans that hold down consumers’ out-of-pocket expenses for routine care.

Instead of insulating consumers’ from the true cost of care with plans that minimize out-of-pocket expenses, Medicare should offer enrollees protection against catastrophic expenses, the lawmakers say in a new commentary.

The authors — House Energy & Commerce Chairman Fred Upton, R-Mich.; Rep. Joe Pitts, R-Tenn., chairman of the Energy and Commerce health subcommittee; House Ways and Means Chairman Dave Camp, R-Mich.; and Rep. Kevin Brady, R-Texas, chairman of the Ways and Means health subcommittee — say the commentary will be the first in a series of Medicare reform papers.

Policymakers should start by creating a single combined annual deductible for the Medicare Part A hospitalization program and the Medicare Part B physician services program, the lawmakers said.

Policymakers should then set “a simplified coinsurance rate that is applicable to spending above such deductible,” the lawmakers said.

“Reforms must protect Medicare beneficiaries from any out-of-pocket costs that exceed a defined and reasonable catastrophic limit,” the lawmakers said.

The lawmakers cited a study in which researchers concluded that Medicare enrollees who paid less than 5 percent of total Part B out-of-pocket costs had total Medicare spending that was 68 percent to 83 percent higher than the spending of enrollees who paid 100 percent of traditional Medicare out-of-pocket costs themselves.

Defenders of rich Medigap plans have argued that the spending of holders of those plans tends to be high because the plans are especially attractive to consumers who know they have serious health problems.

Upton and his colleagues said they believe the spending of Medicare enrollees with rich Medigap coverage is high because those enrollees know that the Medigap coverage will minimize the amount they must pay to see the doctor.

“This over-utilization of services directly contributes to higher costs for all seniors in Medicare,” the Republican lawmakers said. 

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