NAIC Cautions Obama Administration Against Added Cost Sharing in Medigap Plans

Washington, DC — Earlier this week, the National Association of Insurance Commissioners (NAIC) recommended against adding further cost sharing to Medigap plans—a widely-used form of supplemental coverage to Original Medicare—in a letter to Secretary Kathleen Sebelius of the U.S. Department of Health and Human Services.

Pursuant to the Affordable Care Act, the NAIC was directed to “review and revise the standards for benefits in Medigap Plan C and Plan F” and to update those standards to include cost-sharing, if practicable, so as to “encourage the use of appropriate physicians' services…” To fulfill this charge, the NAIC convened a taskforce, including state insurance regulators, insurers and trade associations, consumer advocates and other Medicare experts, that spent almost two years reviewing available literature on cost-sharing and patient behaviors.

But after extensive research, the NAIC concluded, “We were unable to find evidence in peer-reviewed studies or managed care practices that would be the basis of nominal cost-sharing designed to encourage the use of appropriate physicians’ services. Therefore, our recommendation is that no nominal cost-sharing be introduced to Plans C and F.” Medicare Rights Center, Center for Medicare Advocacy, and California Health Advocates represented Medicare beneficiaries throughout this process and strongly support the NAIC’s conclusion.

The NAIC findings will be a significant consideration as policymakers continue to grapple with how to bring down the nation’s deficit. Some policymakers suggest limiting Medigap coverage by increasing beneficiary out of pocket costs, but shifting costs to beneficiaries is shortsighted. Increasing costs would not only harm beneficiaries, it may also lead to increased costs in the system elsewhere.

“One in five people with Medicare choose a Medigap plan to help cover Medicare cost-sharing and other health care costs not covered by Medicare. Most of these beneficiaries have modest incomes. Many are poor. Introducing further cost-sharing in Medigap plans would create a significant financial burden, but that’s not all. When required to pay beyond their means, people skip needed medical care and treatment, leading to poor health outcomes, increased emergency room visits and hospitalizations,” said Judith Stein, Executive Director of the Center for Medicare Advocacy, Inc.

Joe Baker, President of the Medicare Rights Center, stated, “This recommendation confirms what we know to be true through our work counseling Medicare beneficiaries—it is providers, not beneficiaries, who determine whether a medical treatment is necessary or not. The NAIC’s conclusion sends a clear message to the Administration and to Congress: people with Medicare should not be forced to second-guess their doctor’s decisions by increasing the already high costs of health care.”

Bonnie Burns of California Health Advocates concluded, “This recommendation from NAIC means the most for the poorest and the sickest who would lose the guaranteed health security afforded by their Medigap coverage. People with low incomes and chronic illnesses, and those who live in rural areas rely most on Medigap coverage to manage their Medicare out-of-pocket costs. By preserving Medigap, we protect those who need comprehensive health coverage most of all.”

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The Center for Medicare Advocacy, Inc., established in 1986, is a national nonprofit, nonpartisan organization that provides education, advocacy and legal assistance to help older people and people with disabilities obtain fair access to Medicare and necessary health care. The Center is headquartered in Connecticut with offices in Washington, DC and throughout the country.