The Devil in the Details, Part VIII

What’s really in store for seniors on Medicare?

Health reform is now the law of the land, and the 2,000 or so pages of the legislation contain lots of clauses and fine print that lobbyists had managed to insert as the bill wound its way along its tortuous path to reality. These affect nearly everyone who has insurance, whether from an employer or purchased in the perilous individual market. In the first six parts of this series, Campaign Desk reported on a number of provisions that were under serious discussion by the pols. We will continue the series from time to time explaining the details that have now become law. The entire series is archived here.

There’s probably not a Medicare beneficiary on the planet who doesn’t know that the infamous donut hole will eventually be closed, thanks to health reform. The press and the advocacy community have been positively jubilant over the gradual closing of the coverage gap under the prescription drug benefit—the part of the benefit that now excludes coverage for medications when seniors accumulate a certain amount of drug expenses. But while the media have focused on the donut hole, the government’s gift touches only a small number of the nearly 46 million beneficiaries. Some three million seniors have expenses that exceed the amount that can be covered under the benefit—and the number is growing as drug companies continue to raise the prices for the medicines they sell.

The hoopla over the donut hole, however, has helped to mislead older consumers about what they will really be paying in the future by obscuring an important devil lurking in the details that most beneficiaries have heard little about.

A couple weeks ago, the Sun Sentinel ran a piece noting that while South Florida seniors had a tough time choosing among 100-plus Medicare plans, “the new health care overhaul law has confused some of them even more.” Indeed it has. The paper informed readers that they’ll neither lose any Medicare benefits nor pay more for health care, points reinforced by a spokesperson for the state’s senior counseling program, who said: “We have to reassure them. They’re not going to lose anything.”

The Sun-Sentinel didn’t dig into the legislative language that will require the National Association of Insurance Commissions (NAIC), the group of state regulators that writes rules for insurance companies, to come up with new requirements for the most popular Medicare supplement policies, Plan C and Plan F. These policies are purchased by close to 60 percent of all Medicare beneficiaries who have supplemental coverage, including gobs of people living in South Florida. The idea behind this change is to make these Medicare supplements cover less and require seniors to pay more for their coverage—in other words, shift more of the cost of medical care to them.

The theory is that if seniors have to pay more, they won’t go to the doctor as often. “More cost sharing is the continued triumph of the unholy alliance between the academic economists, policy wonks, and the Republicans who think that health care costs so much because people have too much insurance,” says Bruce Vladeck, former Medicare administrator and now a senior adviser at the Greater New York Hospital Association.

Plans C and F are so popular precisely because they cover most gaps (pdf) at a reasonable cost—the average annual premium for Plan C is $1,900; for Plan F, it’s $2,000. Both plans cover the Part B deductible, this year $155. (Part B covers doctor visits, lab and hospital outpatient services.) Plan F owes its popularity to its coverage of all excess charges—the difference between what doctors charge and what Medicare pays when a doctor does not accept Medicare’s reimbursement as full payment. Seniors like those plans because they don’t like risk. When Congress authorized two new Medicare supplements a few years ago with a lot more cost-sharing, there were few takers.

“Consumers vote with their pocketbook,” says Bonnie Burns, a training specialist with California Health Advocates. “Since there is no cap on out-of-pocket expenses, they buy the coverage that provides them with the greatest amount of protection. Seniors are among the most risk averse people around.”

Just what the new cost sharing will be for Plans C and F is not clear, and won’t be for awhile. The law calls for “nominal cost sharing to encourage the use of appropriate physicians’ services.” This might mean making people who buy Plans F and C pay more of the coinsurance. A refresher here: Medicare pays 80 percent of the allowable charge for physician, lab, and outpatient services; seniors must pay 20 percent. But most seniors buy supplemental policies to cover their 20 percent share. So instead of Plans C and F covering the 20 percent coinsurance, they might cover only 10 percent or 15 percent.

Nobody is talking much about this potential expense for seniors, who will feel the financial pinch beginning in 2015—a date that those retiring in the next few years should keep in mind as they embark on their planning. That, to us, suggests some good consumer stories down the road.

Why did this provision slip through virtually undetected by the media? Were their heads too wrapped up in the donut hole, along with the political spin from Dems and Republicans about helping all those folks on Medicare? I asked a top official at the AARP, who replied: “We are conflicted so we have chosen not to comment. I think seniors will be unhappy, and it won’t affect utilization at all.” In other words, seniors will still go to the doctor—they’ll just have to shell out more to cover the bill.

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Trudy Lieberman is a longtime contributing editor to the Columbia Journalism Review. She is the lead writer for The Second Opinion, CJR's healthcare desk, which is part of our United States Project on the coverage of politics and policy. She also blogs for Health News Review. Follow her on Twitter @Trudy_Lieberman.