Do Medigap holders spend more because of rich coverage, health problems, or both? (USDA photo)

Holders of Medicare supplement insurance who said they had health problems spent an average of about $30,000 on care in 2010.

The ailing Medigap holders spent about 2.5 times as much on care that year as consumers who said they had health problems but only had traditional Medicare fee-for-service (FFS) coverage, without help from a Medigap policy, a Medicare Advantage plan, or employer-sponsored retiree health benefits.

Medigap holders who said they were in good or excellent health spent about $12,000 on care, or about $6,000 as much as traditional Medicare FFS-only enrollees who said they were in good or excellent health.

Average spending on out-of-pocket expenses was about one-third higher for all Medigap holders than for all Medicare FFS-only enrollees.

John Dicken, a GAO director, published those figures today in a report on the factors associated with Medigap holders’ health care spending.

Analysts at the GAO — a congressional research arm — prepared the report at the request of Sen. Orrin Hatch, R-Utah.

Dicken said the GAO left Medicare Advantage plan enrollees out of the analysis because they lacked the same kind of data they had for other Medicare enrollees.

The analysts had only self-reported status, and they did not distinguish between holders of richer Medigap products and products that expose holders to more out-of-pocket costs.

Federal law requires Medigap issuers to sell policies that include standardized packages of benefits. Each package is represented by a letter, such as D or F.

Defenders of Medigap products argue that the products help elderly people with health problems and fixed incomes get desperately needed care and manage expenses that otherwise could hurt their quality of life.

Medigap product critics argue that at least some types of Medigap plans, especially the plans that do the most to minimize co-payment and coinsurance requirements, correlate with high enrollee expenditures.

Medigap defenders say Medigap enrollees have high average expenses because they are sicker than other enrollees. Product critics suggest that the higher expenses may be due partly to enrollees’ getting unnecessary care or partly to doctors and hospitals sending the Medigap holders bigger bills.

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