Congress Could Hit Medigap With Bursts of High-Cost Enrollees

Some issuers of Medicare supplement (Medigap) insurance — which has been a relatively calm life and health niche — could eventually face new inflows of enrollees with sky-high annual medical bills. Democrats in the U.S. House put a Medigap coverage access provision for Medicare enrollees under age 65 in H.R. 3, the "Elijah E. Cummings Lower Drug Costs Now Act" bill. The provision, Section 801, could make Medigap coverage available to all people who become eligible for Medicare before 65, either because the government determines that they are disabled or because they suffer from end-stage renal disease. (Related: House Passes Drug Bill That Could Add Dental Benefits to Medicare) "End-stage renal disease" means severe kidney disease. A majority of Medicare enrollees with severe kidney disease are either using dialysis machines to clean poisons out of their blood, or they are dealing with the effects of kidney transplants. In 2016, the average Original Medicare program enrollee under 65 who was disabled but did not have end-stage kidney disease had claims about 50% higher than the typical Medicare enrollee over age 65, according to a report posted in June to by the federal Medicare Payment Advisory Commission, or MedPAC. The average Original Medicare program enrollee under 65 with end-stage renal disease had claims that were at least six times higher than the typical enrollee. For more data on the three major classes of Medicare enrollees, see the data cards in the slideshow above. Wiggle your pointer over the first slide to make the control arrows show up. About 40,000 people under 65 become eligible to enroll in Medicare due to end-stage renal disease every year. In states without state-required Medigap access for people with severe kidney disease, H.R. 3 Section 801 could help people with severe kidney disease get the coverage of their choice, and it could help the agents trying to get those people covered. Some health policy specialists contend, however, that many people with severe kidney disease would be better off in a well-run Medicare Advantage special needs plan designed to serve people with end-stage renal disease than using Medigap coverage and trying to manage their own care. Those health policy specialists say a well-run special needs plan can improve the well-being of a patient with severe kidney problems by providing extra patient education and care coordination services.

The Current Rules

About 33 states now require insurers to offer at least some Medigap coverage access to disabled Medicare enrollees under age 65, but many of those states have different rules for people under 65 with end-stage renal disease, according to a 2017 analysis developed by Stephen Weiss, a senior health policy analyst with Virginia's Joint Commission on Health Care. Weiss prepared the analysis because the Virginia state Senate was considering a Medigap access bill that could have helped new Medicare enrollees under 65 with disabilities, but without kidney failure. The Virginia bill ended up dying in committee. People with end-stage renal disease now have only limited access to Medicare Advantage plans. Section 17006 of the 21st Century Cures Act requires all Medicare Advantage plans to cover people with end-stage renal disease starting in 2021.

An Analysis

William Schiffbauer, a lawyer who helps insurers analyze legislation, says in written comments on H.R. 3 that Section 801 could also create other types of Medigap access rights. One subsection, for example, could permit a consumer who has been in a Medicare Advantage plan for a year or more to return to Original Medicare and Medigap coverage at any time, Schiffbauer says. Medicare Advantage plans use provider networks and care management efforts to try to hold down costs. Buying Original Medicare with Medigap coverage typically costs more but gives the enrollees more flexible access to care. A provision that makes it easy for Medicare Advantage enrollees to return to Original Medicare with Medigap coverage at any time could cause health claims costs problems for the Original Medicare program and Medigap issuers, because the Medicare Advantage plan enrollees interested in returning to the Original Medicare program might be enrollees with serious health problems, Schiffbauer writes. If the Section 801 Medigap provisions now in H.R. 3 take effect as written, without new support programs, those provisions "will have the effect of significantly increasing the premiums charged for current Medigap policyholders," Schiffbauer predicts in the written commentary.

H.R. 3's Future

Some House bills related to health have attracted strong bipartisan support. H.R. 3 is not one of those bills. House Democrats voted 228 for H.R. 3. Republicans voted 2-191 against the bill. Because of the lack of the support from House Republicans, the bill appears to have little chance of reaching the Senate floor in its current form. But Section 801 may start discussions that will end up shaping Medigap access provisions in other bills. In the mid-1990s, for example, members of Congress held many hearings and debates on "patient bill of rights" proposals. Twenty years later, the patient bill of rights proposals came to life as part of the Affordable Care Act package.

Resources

A copy of the 12:07 p.m. Dec. 9 version of H.R. 3 is available here. The MedPAC report that includes data on the cost of care for Medicare enrollees under age 65 is available here. —Read Tell Your Clients How Medicare Advantage Plans Are Changing,  on ThinkAdvisor. — Connect with ThinkAdvisor Life/Health on Facebook and Twitter.