Medicare Uncovered: the pain from ‘skin in the game’

A report puts a hole in the plan to make people pay more

This is the first of a series of occasional “Medicare Uncovered” posts that will look at how the media are covering Medicare, the nation’s vast and publicly accountable health system for the elderly, and a political target in ongoing discussions about the deficit.

Right before Christmas, when Beltway reporters were absorbed in the fisticuffs on the edge of the fiscal cliff, the National Association of Insurance Commissioners (NAIC), a group of state insurance regulators that drafts model laws, delivered some important news that has yet to surface as much of a story. It should.

The Affordable Care Act tasked the insurance commissioners group with helping to think through the implementation of Obamacare, and the commissioners poked a pretty big hole in one of the ways the health reform law seeks to control medical costs.

Buried deep in the Act is a little-noticed provision—that is, little noticed so far by the press and the public—that would require seniors who have bought two popular Medigap plans (more on those below) to pay a lot more out-of-pocket for them because the plans would be required to pay for a lot less out than they do today. The theory behind the move is that consumers will not use as many medical services if they have to pay more each time.

This is another variation on the “skin-in-the-game” approach to cost control—forcing the patients to carry a higher share of their medical bills so they’ll use fewer services. That’s a popular idea with some policy people and with certain healthcare special interests, since it tends to protect their incomes. Whether patients get what they need is another matter.

The health reform law calls for the insurance regulator group to recommend ways to eliminate some of the current coverage offered by Medigap plans F and C, nearly identical plans that cover medical and hospital deductibles, coinsurance, and nursing home copays. (The difference between them: Plan F pays for the difference between Medicare’s allowable charge and what the doctor and other medical services charge; Plan C does not). These two are the most popular Medigap policies because they cover virtually all of a patient’s remaining costs after Medicare pays. Most seniors who choose them are on fixed incomes and want few uncovered bills when they get sick. About two-thirds of Medigap purchasers buy these plans, and that’s been true for 20 years, since Congress standardized the Medigap plans to make shopping easier and eliminate rampant fraudulent and deceptive sales practices.

The NAIC often favors insurers when it deliberates, but this time it put consumers’ interests above those of insurance carriers. There was consensus among the regulators, consumer groups, and insurors on this issue, and the commissioners sent a pre-Christmas letter to Kathleen Sebelius, Health and Human Services Secretary, recommending that there be no cost-sharing added to these plans. She will make the final decision later in the year.

The commissioners told the secretary: “We were unable to find evidence in peer-reviewed studies or managed care practices that would be the basis for nominal cost sharing to encourage the use of appropriate physicians’ services.” In other words, they addressed the underlying assumption that consumers use more services when the expenses are paid fully—and were unable to find evidence for the assumption.

In the process they took some of the wind out of the general argument from politicians and others who want to make consumers responsible for controlling costs by making them pay more of the cost.

We do not agree with the assertion being made by some parties that Medigap is the driver of unnecessary medical care by Medicare beneficiaries. Medigap plans pay only after Medicare has determined the services are medically necessary and has paid benefits. Medigap cannot alter Medicare’s coverage determination and the assertion that Medigap coverage causes overuse of Medicare services fails to recognize that Medigap coverage is secondary.

Bonnie Burns, a consumer representative on the NAIC’s senior task force, said that while the group did look at some studies that showed consumers do use more services when everything is paid for, “we can’t tell if the services were necessary or unnecessary. You can’t tell why they got them,” she said. “We are saying we want you to go to the doctor, but if that triggers these high deductibles and copays, you’ll think twice about it,” Burns said. “It’s schizophrenic. You can’t regulate the consumption of medical care like you do other products.”

But some in Congress are trying to do exactly that, which is reason enough for the press to pay close attention to the insurance regulators’ report.

Journalists covering Medicare in the coming debates over entitlements will hear that seniors must have more “skin-in-the-game,” to help the government balance its budget. Tennessee Republican Senator Bob Corker has introduced a bill that would do just that. The NAIC’s report is a starting point for asking Corker and others advocating this approach some tough questions about the underlying assumptions behind it.

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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. Tags: , , , ,