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Medigap Reform: Setting the Context for Understanding Recent Proposals

Issue Brief
  1. See Testimony of Patricia Neuman, “Rethinking Medicare’s Benefit Design: Opportunities and Challenges,” U.S. Congress, House Energy and Commerce Committee, Subcommittee on Health, June 26, 2013.

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  2. This brief updates prior work that used earlier years of data.  See Kaiser Family Foundation, “Medigap Reform: Setting the Context,” September 2011.

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  3. Plans in Massachusetts, Minnesota, and Wisconsin were not part of the federal standardization program.  All existing Medigap policies in the other states were grandfathered, and could continue to not conform to the standard federal benefit packages.

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  4. Rice, T., M.L. Graham, and P.D. Fox.  1997. "The Impact of Policy Standardization on the Medigap Market."  Inquiry 34(2): 106-116.

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  5. For a more thorough history of the federal involvement in the Medigap market, see Kaiser Family Foundation, “Medigap: Spotlight on Enrollment, Premiums, and Recent Trends,” April 2013.

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  6. Plan F also covers extra charges incurred by beneficiaries seeing physicians who do not accept assignment.

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  7. Kaiser Family Foundation, “Medigap: Spotlight on Enrollment, Premiums, and Recent Trends,” April 2013.

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  8. In this analysis, estimates of Medigap enrollment are based upon total covered lives reported as of December 31 of each year, and represent a snapshot of enrollment at that time.

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  9. Some states have open enrollment periods with guaranteed issue requirements for beneficiaries under the age of 65 with disabilities.  For details see Kaiser Family Foundation, “Medigap: Spotlight on Enrollment, Premiums, and Recent Trends,” April 2013.

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  10. Plans in Massachusetts, Minnesota, and Wisconsin were grandfathered and were not part of the federal standardization program.

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  11. Premium data is from the NAIC in 2010.

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  12. In 2013, eight states (AR, CT, MA, ME, MN, NY, VT, and WA) required Medigap premiums to be community rated, four states (AZ, FL, GA, and ID) required premiums to be issue age rated (and permitted community rating), and 38 states and the District of Columbia allowed attained age rating for premiums.

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  13. Other policy options are also described in Kaiser Family Foundation, “Policy Options to Sustain Medicare for the Future,” January 2013.

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  14. Lemieux, J., T. Chovan, K. Heath.  2008.  “Medigap Coverage and Medicare Spending:  A Second Look.”  Health Affairs 27(2): 469-477.

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  15. Hogan, C. 2009. Exploring the effects of secondary coverage on Medicare spending for the elderly. Washington, DC: Contractor report for MedPAC.

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  16. Golberstein, E., K. Walsh, Y. He, and M.E. Chernew. 2012. “Supplemental Coverage Associated With More Rapid Spending Growth For Medicare Beneficiaries.” Health Affairs 32(5): 873-881.

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  17. For a review of the literature, see Swartz, K. December 2010. “Cost-sharing: Effects On Spending and Outcomes.” Robert Wood Johnson Foundation, Research Synthesis Report No. 20.  Also see, Medicare Payment Advisory Commission (MedPAC), Report to Congress:  Aligning Incentives in Medicare, June 2010.  See also Lohr, K.N., R.H. Brook, C.J. Kamberg, et al. 1986.  “Effect of Cost Sharing on Use of Medically Effective and Less Effective Care.”  Medical Care 24(9, Supplement): S31-S38.

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  18. Kaiser Family Foundation, “Medigap Reforms:  Potential Effects of Benefit Restrictions on Medicare Spending and Beneficiary Costs,” July 2011.

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  19. Capps C. and D. Dranove. “Intended and Unintended Consequences of a Prohibition on Medigap First-Dollar Benefits,” for America’s Health Insurance Plans, October 2011.  Similarly, the NAIC has argued that focusing on Medigap as the driver of medical care use discourages the use of all care, in contrast to other reforms that would aim to incentivize the use of necessary and appropriate care.  See National Association of Insurance Commissioners, Senior Issues Task Force, Medigap PPACA Subgroup, “Medicare Supplement Insurance First-Dollar Coverage and Cost Shares Discussion Paper,” October 31, 2011.

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  20. The CBO analyzed a proposal that would bar Medigap policies from paying the first $550 in cost-sharing liability and limit coverage to 50 percent of the next $4,950 before the plan could cover 100 percent of beneficiaries’ out-of-pocket costs.  The cost estimate assumed no beneficiaries were grandfathered and amounts were indexed to increase at the same rate as per capita traditional Medicare spending.  See Congressional Budget Office (CBO), Options for Reducing the Deficit:  2014 to 2023, November 2013.

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  21. Kaiser Family Foundation, “Medigap Reforms:  Potential Effects of Benefit Restrictions on Medicare Spending and Beneficiary Costs,” July 2011.

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  22. Office of Management and Budget, “Fiscal Year 2014 Budget of the U.S. Government,” April 10, 2013.

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  23. Congressional Budget Office (CBO), Budget Options Volume I:  Health Care, December 2008.

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  24. This proposal was authored by Jonathan Gruber.

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