State insurance commissioners: No way should we charge seniors more for Medigap policies

A key group of state insurance commissioners dealt a blow Friday to a proposal to shrink Medicare spending by asking seniors to pay more for Medicare supplemental coverage. 

The health law requires the National Association of Insurance Commissioners to examine whether seniors would use less Medicare services if the most popular Medigap plans were less generous.  About 7 million Medicare beneficiaries buy these policies to cover a portion of medical expenses not covered by Medicare.

“Everything we’ve looked at has shown that increasing cost-sharing does stop people from seeking medical care,” said Bonnie Burns, training and policy specialist at California Health Advocates who serves on an NAIC committee that has studied the issue for more than a year. “The problem is they stop using both necessary and unnecessary care.”


In a draft letter approved by the NAIC Senior Issues Task Force Friday, the commissioners said the idea could backfire and raise Medicare costs when seniors don’t receive the medical care they need. The letter, to Secretary of Health and Human Services Kathleen Sebelius, was approved by the task force during the association’s annual meeting near Washington, D.C. Two more committees are expected to approve the letter before it is sent to Sebelius.  


“Once the letter has cleared the Senior Issues Task Force, it’s probably a done deal,” said Guenther Ruch, a former administrator of the Wisconsin insurance department who, until March, chaired the Medigap subgroup that prepared the letter. 

The Obama administration and congressional leaders are considering that and similar cost-cutting proposals as part of their effort to trim federal spending. The Congressional Budget Office has estimated that cost-sharing changes could save the Medicare program as much as $53 billion over 10 years.

Medigap policies are popular with seniors because Medicare does not cap seniors’ out-of-pocket expenses. The C and F Medigap plans cover nearly all of the out-of-pocket costs that beneficiaries would usually pay, including deductibles and their 20 percent share of doctor visits and other outpatient services.

“People are buying Medigap because they need the [medical] treatment, said Dotti Outland, director of regulatory affairs for UnitedHealthcare and a member of the Medigap subgroup.  “And they are paying something out of their pocket now, they are paying premiums.”

Advocates of increased cost-sharing point to studies showing that seniors with Medigap coverage tend to use more Medicare services than those without it, and they likely get unneeded care for which the government pays a large share.

The insurance commissioners were supposed to recommend specific cost-sharing changes for these Medigap plans to reduce Medicare spending for unnecessary medical treatment and, as the law says, “encourage the use of appropriate physicians’ services.” The law requires their recommendations to be based on peer-reviewed studies or current successful managed care practices.

But after a year and a half of research and discussion, they came up empty handed.

“None of the studies provided a basis for the design of nominal cost sharing that would encourage the use of appropriate physicians’ services,” the letter says. “Many of the studies caution that added cost sharing would result in delayed treatments that could increase Medicare program costs later (e.g., increased expenditures for emergency room visits and hospitalizations) and result in adverse health outcomes for vulnerable populations (i.e., elderly, chronically ill and low-income).”

The letter acknowledges that Sebelius may disagree with the NAIC and seek cost-sharing changes regardless.  “If that is your decision, please know that the NAIC stands ready to continue its regulatory role in developing Medicare supplement standards.” 

Nevada state insurance director Scott Kipper, who chairs the Senior Issues Task Force, said the letter conveys “without any doubt that we want to continue to be the organization that HHS turns to on Medigap.”

Contact Susan Jaffe at [email protected].

Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.

This article was produced by Kaiser Health News with support from The SCAN Foundation.

[Image of a bill bridging the gap from BigStock]

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