CHA Blog

Below is a letter that Bonnie Burns, our Training and Policy Specialist sent to the National Association of Insurance Commissioners (NAIC) voicing CHA’s opposition to a proposal for adding a copayment under Medigap Plans C and F for Part B physician office visits. Burns is part of an NAIC subgroup that has been given the task of adding nominal copays to Medigap Plans C and F as a way to encourage “appropriate use” of physician services.

Deputy Commissioner Michelle Robleto,

Chair, NAIC PPACA Subgroup

Florida Office of Insurance Regulation

200 E. Gaines Street, Suite 121

Tallahassee, FL 32399-0326

 

Jane Sung, NAIC Senior Health Policy Analyst and Counsel

444 North Capitol Street, N.W., Suite 701

Washington, DC 20001

 

Dear Deputy Commissioner Robleto:

California Health Advocates (CHA) is an independent, non-profit consumer group that provides education and advocacy on behalf of California’s Medicare beneficiaries.  I represent CHA as a funded consumer representative to the NAIC and am an appointed consumer group member of the Medigap PPACA (B) Subgroup.

The subgroup has been discussing adding ways to add nominal cost sharing to Medigap plans C and F that will encourage the “appropriate use” of physician services under Part B of Medicare as specified in the Patient Protection and Affordable Care Act (PPACA).  Adding a copayment for office visits under Part B is one option the subgroup has discussed, and one that I have consistently opposed.

 

Cost sharing puts a financial barrier between the sickest beneficiaries and their doctor

Our organization firmly believes that applying copayments to office visits is a blunt instrument affecting sick people to a far greater degree than those who are not yet sick.  Copayments create a financial barrier likely to cause Medicare beneficiaries to delay or go without necessary care from their physicians.   Cost sharing by definition shifts cost to beneficiaries who use medical services, and clearly imposes the highest costs on people with chronic illnesses who use the most services.  This effect is well known in Medicaid where certain populations like infants are protected from cost sharing mechanisms to ensure that vulnerable populations receive medical and preventive care without restriction.^[1]

 

Cost Sharing Cannot “Encourage Appropriate Use” of Physician Services

The subgroup has not seen any studies that support copayments as a means of encouraging or discouraging the use of appropriate medical services.  In fact, some studies have shown that cost sharing methodology that reduces costs in one sector of health care is likely to increase costs in another.^[2] Examples of that dynamic include people “pill splitting” or reducing their daily dosage of expensive medications leading to other health care costs later, or cost sharing that reduces outpatient use and later results in higher inpatient costs. ^[3]

The subgroup has also heard from CMS and others of the impossibility of applying various amounts of cost sharing to particular types of office visits or other physician ordered medical services due to the complex nature of Medicare coding and reimbursement methods used to pay for these services.

 

Medicare beneficiaries already pay high out-of-pocket costs

It’s important to understand that Medicare beneficiaries pay Medicare Part B and D premiums, the cost of additional coverage such as retiree benefits, Medigap or Medicare Advantage, cost sharing for prescription drugs, and other expenses that are not covered by Medicare at all such as dental, vision, hearing, and long-term care.

Half of all beneficiaries with annual incomes of about $22,000 spent at least $3,138 in out-of-pocket costs for their health care expenses.^[4] About 10 percent of all beneficiaries spent as much as $7,861 on their health care.  Additional front end costs in the form of copayments for office visits will add yet another amount to the costs beneficiaries already pay from fixed incomes.

 

Existing cost sharing Medigap plans

Only one Medigap benefit package, Plan F, eliminates all cost sharing.  The remaining standardized plans all impose some amount of cost sharing that Medicare beneficiaries over the years have largely shunned in an effort to protect themselves from large, unpredictable and unlimited amounts of medical costs.

Medigap Plan F, and Plan C that doesn’t cover excess charges, are the two most preferred Medigap plans by beneficiaries precisely because those plans provide predictable coverage for their Medicare covered expenses.  Both plans also provide a predictable cost each month that can be budgeted against existing income.  Most Medicare beneficiaries cannot afford large unpredictable medical expenses.  When those unpredictable costs occur it frequently means tapping existing assets to pay for them, and that in turn may reduce any earning capacity of those assets.

 

Conclusion

The NAIC has been asked to perform a nearly impossible feat, i.e., to determine an amount of nominal cost sharing based on peer reviewed studies that can be added to Medigap Plans C and F that will in turn result in more appropriate use of physician services.  The impetus for this task is based on a viewpoint that the mere fact of owning a retiree or Medigap plan causes over utilization of Medicare outpatient services.  No study yet presented to the subgroup has been able to connect higher utilization of Medicare covered services with care that was not medically necessary.  As one study notes, the effect of supplemental insurance cannot be clearly distinguished from unobserved personal characteristics associated with higher medical spending^.[5]

We disagree with the contention that the mere presence of supplemental benefits whether those are retiree, Medigap, or TriCARE for Life benefits, causes the inappropriate use of Medicare covered outpatient services.  We continue to oppose adding cost sharing to office visits, and to question whether it is even possible to meet the specific set of tasks the legislation requires.

We appreciate the opportunity to add our comments to this important discussion.

Sincerely,

Bonnie Burns, NAIC Consumer Representative

California Health Advocates

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[1] Leighton and Wachino, “The Effect of Increased Cost-Sharing in Medicaid” Center on Budget and Policy Priorities, July 7, 2005

[2] Chandra A, Gruber J, McKnight R. “Patient Cost-Sharing and Hospitalization Offsets in the Elderly.” American Economic Review, vol. 100, no. 1, 2010.

[3] Wong et al.; American Journal of Public Health, November 2001, Vol.  91, No. 11, Increased Ambulatory Care Copayments and Hospitalizations among the Elderly.

[4] Lind, Keith D., JD, MS; Setting the Record Straight about Medicare, AARP Public Policy Institute.

[5] Cost sharing effects on spending and outcomes, Schwartz, Katherine, Ph.D., Robert Wood Johnson Research Synthesis Report No. 20, December 2010

 

Currently, there are multiple proposals in Congress, the Super Committee and the Administration, all of which will limit how much Medigap insurance will be able to pay in benefits as a way to address the current deficit. The thinking is that beneficiaries who don’t have enough “skin in the game,” i.e. beneficiaries who have supplemental coverage and don’t pay deductibles and copayments, end up using too many services, thus costing the Medicare program too much money. While there are no studies to support this thinking, and while the thinking doesn’t make sense, as Medicare will only cover those services it deems as reasonable and “medically necessary” anyway, the proposals are written as if this thinking is the truth.

Some of these proposals would apply retroactively, regardless of the serious legal issues this poses, and would prevent the payment of benefits people already have in Medigap plans (i.e. benefits that cover the Part A and B deductibles, coinsurance and copayments).  The National Association of Insurance Commissioners (NAIC) recently released a Discussion Draft reflecting the views of regulators, industry and consumer groups about the dangers of eliminating existing benefits and prohibiting Medigap plans from paying a newly proposed Medicare deductible and half of the copayments.

These proposals are not limited to Medigap. Congress is also trying to apply these prohibitions on benefits to retiree plans and to TriCare for Life.  Few Medicare beneficiaries know this is happening. We will be posting an article on these proposals and our views as an organization on them.

A provision in the 2010 federal health care reform law calls for changes in Medigap policies that essentially shift the burden of health care costs more onto the hands of beneficiaries. Several members in Congress have come to the unsubstantiated conclusion that because some Medigap plans (the most popular ones, C and F) cover most of the costs Medicare doesn’t — hence this insurance is referred to as MediGAP, beneficiaries use more services than they need. Therefore, they claim that Medicare pays more health care costs for these beneficiaries than others. To to help reduce these costs and hence the federal deficit, Congress has asked the National Association of Insurance Commissioners (NAIC) to propose changes to these Medigap plans so that beneficiaries pay more out-of-pocket for their health care.  The Congressional Budget Office estimated in March that such changes could save the government $53 billion in Medicare spending over a decade by strengthening incentives “for more prudent use of medical services.”

Yet despite this request, as written in the health care reform law, an unlikely group of health insurance regulators, insurers and consumer advocates are raising opposition to these Medigap changes. In several interviews with reporters, Bonnie Burns, our Training and Policy Specialist who also serves on the NAIC, points out some substantial flaws or blind spots in Congress’ thinking. First, she strongly questions the idea that beneficiaries need an incentive not to use services. After all, physicians are the ones who order services, not the beneficiaries. Also, although some studies have found that seniors with Medigap policies use more Medicare services, they may be sicker than the average Medicare beneficiary, which is why they bought Medigap coverage in the first place.

“To suggest that Medicare beneficiaries overutilize services on a whim because they don’t have ‘skin in the game,’ is pretty disturbing,” says Burns, as quoted in a recent article on Kaiser Health News.

Second, Mary Beth Senkewicz, Florida’s deputy insurance commissioner, who chairs the NAIC’s senior issues committee, which includes the Medigap group, questions the legality of making changes that apply to Medigap policies beneficiaries have already purchased. The policies are contracts between the insurer and the beneficiary which contain certain promises of coverage. When state regulators require changes in insurance, those typically apply to future policies only, not to existing ones as well.

Similar to Burns’ point of Medicare beneficiaries not being directly responsible for their higher health costs noted above, several members of this group have also suggested that Medigap policies are not responsible for Medicare’s growing costs. These carriers, the Medigap plans, only pay for services that Medicare deems to be medically necessary. Those determinations are not made by the Medigap insurance company.

In Conclusion

Some of Congress’ proposed Medigap changes dramatically shift costs onto seniors, leaving members of diverse interest groups concerned for good reasons. Medigap insurance has long been a product that has worked well for many benficiaires, currently 7 million, which comprise about 1/6 of the population with Original Medicare. These policies have helped maintain beneficiaries’ peace of mind, knowing that they have coverage for the gaps in Medicare. Putting this coverage in jeapordy may not be the best or even a mediocre move to help save some money to help the federal budget deficit, especially when savings aren’t even a guaranteed outcome.

For more information on this issue, see the following articles:

• Changes to Medigap Plans Meet Resistance
• Lawmakers Propose Cuts to Medicare and Medigap Coverage

The California Department of Insurance (CDI) just mailed a notice on the upcoming Medigap changes to the thousands of licensed insurance agents throughout the state. Produced with CHA’s input, this notice provides a helpful Q&A about the changes occurring as of June 1, 2010.

The federal Medicare Improvements for Patients and Providers Act of 2008 required states to adopt certain changes to Medigap policies, and these changes were adopted in California law on July 2, 2009 with the signing of Assembly Bill 1543 (Chapter 10, Statutes of 2009).

Anyone enrolled in Medicare can purchase a Medigap policy, also referred to as Medicare supplement insurance. These plans are designed to cover some of the out-of-pocket expenses people have when they use their Medicare benefits.

Under the new state law, all of the Medigap plans (plans lettered A-L) have been revised; some of the lettered plans were changed, some were dropped and some new ones were added. As mentioned, these new Medigap plans will not take effect until June 1, 2010—but agents may advertise and market the new plans prior to that date.

For more information about the changes, see:

• FAQs on the New Standardized Medigap Policies Available June 2010
• Summary of Medigap Changes: A.B. 1543 (Jones)
• Snapshot of Changes to Medigap Policies

You can also see a copy of the CDI’s notice (PDF) to insurers, agents, brokers and other interested parties.