Medicare card (Image: Centers for Medicare and Medicaid Services)

The number of people with Medicare supplement (Medigap) insurance increased to 13.6 million in 2017, from 13.1 million a year earlier, according to the American Association for Medicare Supplement Insurance (AAMSI).

Medigap plan use has increased 40% since 2010, according to AAMSI.

(Related: Medigap Group Finds Price Stability)

Congress designed the original Medicare Part A hospitalization program and the Medicare Part B physician and outpatient services program with many coverage restrictions and coverage holes, to hold down coverage costs and discourage unnecessary use of care.

Medicare enrollees often buy private Medigap insurance to fill in the Medicare coverage gaps.

Congress tried to help consumers shop for Medigap coverage on an apples-to-apples basis by establishing standardized “letter plan” benefits design rules on the market in 1990.

Since then, Medigap plan issuers and agents have faced many obstacles.

Some policymakers say generous Medigap plans drive up overall Medicare spending, by encouraging patients to get unnecessary care.

Insurers now offer many Medicare Advantage plans, which offer comprehensive coverage with low out-of-pocket costs.

But some consumers still prefer to combine traditional Medicare coverage with Medigap insurance, because that strategy lets them see any provider who takes Medicare, without worrying about a Medicare Advantage plan provider network.

For insurers, designing a Medigap product that meets federal Medigap policy standards is easier than going through the complicated Medicare Advantage plan bidding process. The simpler product approval process has made the Medigap market friendlier to smaller insurers than the Medicare Advantage market.

Many agents prefer selling Medigap to selling Medicare Advantage, because the marketing rules for Medigap are simpler, and Medigap commissions tend to be higher. For eHealth Inc., a major web-based health insurance broker, the average anticipated lifetime commission amount is just $140 for individual major medical coverage purchased outside of the Affordable Care Act exchange system, $880 for Medicare Advantage coverage, and $1,029 for Medigap coverage.

Jesse Slome, the director of AAMSI, said in a statement about Medigap enrollment growth that he believes Medigap enrollment will continue to grow.

“With 10,000 Americans turning 65 every day, the growth trend will continue as people want coverage to supplement their Medicare health benefits,” Slome said.

Slome, who is also the head of the American Association for Long-Term Care Insurance, organized AALTCI in 1998 and AAMSI in 1999.

AAMSI is preparing to start a three-day Medigap market conference in St. Louis June 12.

One hot topic could be the federal Medicare program rules that govern what the traditional Medicare plan, Medicare Advantage plans, and Medicare supplement insurance plans can cover. Program managers have said that they will start letting Medicare Advantage plans cover home care and adult day care, if they choose to do so.

Witnesses at a recent congressional hearing on Medicare in Washington asked whether loosening the rules for Medicare Advantage plan issuers would be fair to enrollees in the basic Medicare program, and to the participants in the Medigap market.

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