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

A change in the Medicare supplement insurance deductible rules took effect Wednesday, after years of waiting and planning.

The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) now forbids many consumers from buying new Medicare supplement insurance policies that pay the Medicare Part B deductible.

The 2020 Medicare Part B deductible is $198.

The MACRA change means that the consumers who are affected by the change must pay the $198 Medicare Part B deductible themselves, without help from their Medicare supplement insurance coverage.

But Bonnie Burns pointed out in November, in an article for ThinkAdvisor.com, that figuring out which consumers are actually affected by the new MACRA rules will be a little complicated.


Resources

  • The main Center for Medicare and Medicaid Services Medigap page is available here.
  • A collection of National Association of Insurance Commissioners materials related to the MACRA Medigap plan deductible rule change is available here.
  • The America’s Health Insurance Plans (AHIP) guide to the MACRA change is available here.
  • Bonnie Burns’ MACRA article is available here.

The History

Congress developed the legislation that created the Original Medicare program in the 1960s, when commercial health insurance policies relied heavily on patient cost-sharing payments to hold down coverage costs and discourage unnecessary use of care.

The Original Medicare designers assumed that most patients could use their own savings to take care of routine medical bills.

The Medicare Part A plan pays Medicare enrollees’ hospital bills.

The Medicare Part B plans Medicare enrollees’ physician services bills and outpatient care bills.

Medicare Advantage plans, which operate under Medicare Part C rules, and reflect the effects of the “managed care” and “health maintenance” movements, typically provide what looks to the patient like seamless, comprehensive care, with low or no deductibles for in-network care, relatively simple cost-sharing rules, and use of a variety of utilization management programs to prevent unnecessary use of care.

The Original Medicare program, in contrast, pays for care delivered by any providers who accept Medicare, without the same kinds of utilization management measures that Medicare Advantage plan enrollees face. But, to compensate for the lack of utilization management programs and provider network restrictions, the program requires patients to pay many types of cost-sharing payments.

Medicare supplement insurance policies, which are also known as “Medigap” policies, help Original Medicare users cope with the coverage gaps.

The Numbers

About 13.6 million people, or 35% of the 38.4 million people with Original Medicare coverage, use Medigap policies to cope with Medicare cost-sharing requirements, according to data from Mark Farrah Associates.

Federal law requires Medigap policy issuers to base their policies on standardized templates designated by letters. The most popular Medigap “letter plan” has been Plan F. Plan F pays all Original Medicare cost-sharing amounts, including the Medicare Part B deductible.

In 2018, 52% of the people with Medigap coverage had Plan F coverage, according to the Mark Farrah data.

The MACRA Changes

Some health policy specialists have argued for years that use of no-deductible Plan F coverage shielded enrollees from the true cost of health care, and led to use of unnecessary care.

Some other health policy specialists argued that many cash-strapped seniors would have a hard time coming up with even enough extra cash to pay the Medicare Part B deductible, and that exposing enrollees to more out-of-pocket costs, or “skin in the game,” could backfire, by causing enrollees to put off necessary care, and leading to an increase in the number of enrollees with catastrophic problems.

Advocates of increasing Medigap users’ level of skin in the game succeeded at putting a ban on no-deductible Medigap plans in MACRA.

The provision generally blocks the sale of no-deductible Medigap plans to Medicare enrollees who become newly eligible for coverage on or after Jan. 1, 2020.

The Letter Plan Shift

In practice, the MACRA Medigap deductible provision means that many people who, in the past, would have bought Medigap Plan F policies now will have to buy Medigap Plan G policies. Medigap Plan G policies are like Medigap Plan F policies, except that they require the enrollee to pay the Medicare Part B deductible.

Consumers were able to buy a high-deductible version of Medigap Plan F.

Medigap Plan F High-Deductible coverage will become Medigap Plan G High-Deductible coverage. Users of Medigap Plan G High-Deductible coverage will have to pay the Medicare Part B deductible themselves, but the amount paid to satisfy the Medicare Part B deductible will now go toward satisfying the Medicare Part G deductible.

The MACRA changes also affect sales of new Medigap Plan C policies.

Medigap Plan C policies are similar to Medicare Plan F policies, except that they offer no coverage for “Medicare Part B excess charges,” or the extra amounts charged by providers who don’t participate in Medicare. Many people who would have bought Medigap Plan C policies will now have to buy Medigap Plan D policies.

Medicare Part D prescription drug policies pay for drugs.

Medigap Plan D policies are different products from Medicare Part D prescription drug policies.

A consumer with Original Medicare who wants supplemental coverage, doesn’t want coverage that pays Medicare Part B excess provider charges, and wants drug coverage may have to buy both a Medigap Plan D policy and a Medicare Part D prescription drug policy.

The Wrinkles

For agents and brokers, selling Medigap coverage will now be more complicated, because the ban on Medicare Plan C and Medicare Plan F policies includes exemptions.

The biggest exemption is a grandfathering provision for people who became eligible for Medicare before Jan. 1, 2020, and who already have Medigap Plan C, Medigap Plan F, or Medigap Plan F High-Deductible coverage.

Those consumers can keep their no-deductible coverage.

“Medicare supplement coverage is guaranteed renewable and coverage cannot be cancelled, so long as the policyholder pays the premium,” according to an agent alert provided by the National Association of Insurance Commissioners (NAIC).

People who first became eligible for Medicare before Jan. 1, 2020, can still buy new Medigap Plan C, Medigap Plan F, or Medigap Plan F High-Deductible coverage.

Bonnie Burns, a training and policy specialist consultant at California Health Advocates, says the following types of people are also be eligible to buy new Medigap Plan C, Medigap Plan F, or Medigap Plan F High-Deductible coverage:

  • People who turned 65 before Jan. 1, 2020, but put off enrolling in Medicare.
  • People who are awarded Social Security Disability Insurance retroactively, with their eligibility for Medicare starting before Jan. 1, 2020.

The Centers for Medicare and Medicaid Services (CMS) is in charge of overseeing the Medigap program.

CMS could create other special Medigap Plan C, Medigap Plan F and Medigap Plan F High-Deductible coverage enrollment opportunities for consumers affected by unusual circumstances, such as natural disasters.

— Read NAIC Task Force Creates Medigap Subgroupon ThinkAdvisor.

— Connect with ThinkAdvisor Life/Health on LinkedIn and Twitter.