Fisher, 86, a cancer survivor from Gaithersburg who has had two hip replacements, says that strategy could backfire.
“Some people might really need to go to the doctor and they couldn’t afford it,” she said. “That would be the kicker.”
Medigap insurance is popular because it protects beneficiaries from Medicare’s out-of-pocket expenses that have no cap. During an extended or serious illness, that can run into thousands of dollars. These expenses could include a $1,132 deductible for each hospital stay in 2011 and 20 percent co-payments for outpatient services such as doctor’s visits.
But some budget experts say Medigap may make it too easy for seniors to decide to seek medical care they may not need. The thinking goes that, for example, instead of waiting to see if their condition gets better or if a nonprescription medicine might help, seniors with Medigap policies tend to use more Medicare services than those without such coverage. Getting seniors to delay or forgo some care or find cheaper alternatives could save the government billions of dollars — as much as $53 billion over 10 years, according to the Congressional Budget Office.
For that reason, Medigap has been, and will continue to be, a focus of attention for those seeking to cut the federal deficit.
Here’s a look at some of the issues involved.
What is Medigap?
More than 8 million people — about one in five Medicare beneficiaries — rely on Medigap policies. The plans are sold by companies that can offer up to 10 standard benefit packages set by the federal government. This means that benefits for, say, a Medigap Plan F policy will be the same no matter which company sells the plan, although the costs can vary depending on location and insurers.
More than half of the people who buy Medigap coverage choose one of the two most generous plans. Called C and F policies, they have much higher premiums than the others but pay nearly all of the beneficiaries’ costs. For example, an F plan in Maryland can cost $2,400 in 2011 for a non-smoking 65-year-old, while skimpier plans would be half that.
Why go after Medigap?
Medigap has been targeted because studies have shown that Medicare spends 25 percent more for beneficiaries who have these policies.
Advocates of shifting more costs to seniors suggest that Medicare beneficiaries who are responsible for picking up a portion of the costs will choose the most economical option. For example, a 70-year-old woman with a Medigap plan that doesn’t cover all her costs might take some over-the-counter heartburn medication for stomach pain before seeing a doctor. If that works, she would have saved the federal government money because it would not have paid Medicare’s share of the doctor visit. But if her condition gets worse, Medicare may spend more for her treatment.
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