Medigap plans are plans that work with the Government’s traditional Medicare program (Medicare Parts A & B) to fill in some, or all, of the “gaps” in Medicare. Medigap plans are sold by private insurance companies, and they are standardized by the Federal Government. In other words, each company must offer plans off of the standardized plans chart that the Federal Government sets forth.
There has been a bevy of talk recently about Medigap plans, as part of the discussions for health care/Medicare reform. Although these plans are NOT part of Medicare and are optional, many policymakers believe that revising the way they work will “save” Medicare or make it more viable long-term.
The biggest impetus for this discussion centers around the elimination of “first-dollar coverage”. First-dollar coverage is when a plan pays everything that Medicare doesn’t cover, so that the insured has no out-of-pocket exposure. The argument is that this causes Medicare-eligible people to use Medicare more and their supplements more, since they have no “skin in the game”. Someone that has Plan F (the most comprehensive Medigp plan) could, literally, go to the doctor 10 times a month, and as long as it was deemed medically-necessary, they would not have any out of pocket costs.
While this certainly seems like a viable argument, and there is no doubt that something must be done in order to ensure the long-term viability of Medicare, there are some holes in this theory in our opinion.
First and foremost, there is the question about whether the government should have control of individual’s purchasing decisions. The free market (claims experiences, administrative costs, competitive concerns, etc) determines the cost of Medigap plans. Medicare-eligible individuals have the choice – get a plan and pay the respective premium or forego a plan. Should individuals who wish to pay the going price for a Medigap plan be told that they cannot purchase such a plan? If $5 is too high for a gallon of milk, do we prohibit people from paying it and tell them they have to drink water instead?
The second fallacy in this argument against first-dollar coverage is the possibility that people would not get necessary or needed services/procedures if they had to pay more for those services. Most projections are that Medigap plans will continue to go up, particularly if “guaranteed issue” provisions from PPACA are applied to Medicare insurance. So, people will be paying more for Medigap, although the plans will cover less. Most are on a fixed income already – so will they get the needed services when they have to come out of pocket for them?
The last problem with the argument against “first dollar coverage” is quite simply that it will cost more for the Medicare beneficiary. Since this population is primarily on fixed-incomes already, this can cause a major disruption to the security of the Baby Boomers aging in to Medicare. Simply put, if the people who want to cannot buy “first dollar coverage”, they will have to pay more every time they visit the doctor, hospital, etc. With all this happening at the time that we have 11,000 people turning 65 each day and an unstable economy, this could be a recipe for disaster for our over-65 population.
While we certainly see the need for Medicare reform that provides legitimate change, we would strongly assert that changing what type of insurance private individuals can buy from private companies is not the answer. If you have any questions about this topic or wish to discuss further, you can reach us at 877.506.3378 or on our website hhp://medicare-supplement.us.