As part of the current “fiscal cliff” discussions, policymakers should avoid cutting benefits that millions of seniors and people with disabilities rely on. While some people have proposed limiting first-dollar coverage in Medicare supplement (Medigap) coverage, research has shown that this would cause beneficiaries to avoid care that is medically necessary – resulting in higher costs for enrollees and the country.
Proponents of limiting first-dollar coverage in Medigap often cite the findings from a 1970’s RAND experiment to make the case zero cost-sharing leads to higher health care spending. AHIP commissioned a white paper to examine the relevance of this study to current Medicare beneficiaries. The white paper found that the RAND study “was set in a reimbursement environment far different from today’s Medicare,” and noted that “a higher proportion of Medicare beneficiaries are low income (and low wealth), and so the impact of higher cost-sharing may be magnified for this population.” The authors conclude that “an across-the-board ban on first-dollar coverage Medigap plans is an overly blunt tool for lowering healthcare expenditures and invites adverse, unintended consequences.”
As these discussions continue, it is important to keep in mind the vital protection and peace of mind Medigap provides. Nearly 10 million Medicare beneficiaries currently rely on Medigap coverage to help cover significant out-of-pocket costs that are not covered by Medicare, such as deductibles, coinsurance, and copayments. Medigap coverage allows seniors and Medicare beneficiaries with disabilities to budget for medical costs and avoid the confusion and difficulty of handling complex medical bills.
Medigap provides policyholders with financial security and peace of mind about their health care coverage.
A recent survey conducted by American Viewpoint found that the vast majority of Medigap policyholders are satisfied with their coverage. According to the survey:
- Nine out of ten Medigap policyholders are satisfied with their coverage. Overall satisfaction with Medigap coverage is comparable to levels found in 2009 (88 percent) and 2005 (90 percent).
- The vast majority of enrollees (79 percent) say their Medigap policy provides an excellent or good value for the money, consistent with similar findings in 2009 (77 percent) and 2005 (80 percent).
- More than nine out of ten (91 percent) would recommend Medigap coverage to a friend or relative when they turn 65 and enroll in Medicare. This is higher than scores reported in either 2009 (87 percent) or 2005 (84 percent).
Medigap is particularly important to vulnerable populations.
An AHIP study found that Medigap continues to be a vital source of coverage for low-income and rural beneficiaries:
- Thirty-two (32) percent of Medigap policyholders resided in rural areas in 2010; by comparison, 23 percent of all Medicare beneficiaries resided in rural areas.
- More than half of all Medigap policyholders (51 percent) and nearly two-thirds (60 percent) of rural Medigap policyholders had incomes below $30,000.
- Overall, 45 percent of Medigap policyholders had incomes ranging from $10,001 to $30,000 in 2010. This income bracket accounted for the highest proportion of Medigap purchasers. In rural areas, 53 percent of Medigap policyholders had incomes in the $10,001 to $30,000 range.
In addition, Medigap beneficiaries, on average, are more likely to have one or more chronic health care conditions than the Medicare population as a whole, according to research published in Health Affairs.
The Partnership to Protect Medigap is helping seniors who rely on Medigap stay informed of these discussions and make their voices heard as changes to their coverage options are debated in Washington. For more information, visit www.protectmedigap.org.