Friday, January 25, 2013

The Bipartisans Want Your Medigap

In all the various howlings about Medicare, most of the focus has been on raising the eligibility age (to match the future increase in the eligibility age for Social Security). But the aggressively bipartisan budgeteers have another proposal, that I think would draw as much shouting, if anybody would just pay attention to it. Let's let Senator Orrin Hatch (R) describe the idea:
We need to modernize the Medigap Program by limiting supplemental Medicare insurance plans from covering initial out-of-pocket expenses for Medicare beneficiaries.
What does that mean?   Essentially, the elderly would be prevented from buying a policy that pays Medicare's deductibles. Of course, there is a good technocratic reason for that:
Almost 30 percent of beneficiaries have so-called Medigap policies that provide first-dollar coverage. Multiple studies have found that this 30 percent--the ones with Medigap insurance policies--use about 25 percent more services than those without similar coverage. This overutilization of services leads directly to higher costs for all seniors on Medicare.
In other words, the folks who pay an insurance company in order to avoid paying a Medicare deductible shouldn't be allowed to do that, because those people go to the doctor too much, and use more Medicare. As the Senator tells us: "Limiting first-dollar coverage will encourage seniors to make better health care choices and ensure the highest quality outcome while lowering costs for the entire Medicare Program.":

Of course, since this idea is somewhat subtle, it garners bipartisan support:
This policy was supported by the Simpson-Bowles Commission, and it was part of the Biden-Cantor deficit reduction negotiations in 2011. In addition, the Democratic members of the House Ways and Means Committee included this idea as part of a set of cost-sharing reforms in their 2011 deficit reduction proposal. The President's own 2011 deficit reduction package included a similar proposal to reduce costs associated with Medigap insurance plans.
But the costs to seniors would be real. The idea of going to the doctor is a lot less attractive for that alarming but undefined pain, when you know it is going to cost you $100 or so -- and maybe more. And that's precisely the point. Medicare saves money -- and the adverse health outcomes aren't easy to quantify. But the shock, when seniors learn that something is about to be taken from them, will have ugly political results. Can't imagine those results really benefit the GOP.

There are two ways to go about Medicare reform. One is a direct way -- by raising eligibility ages that tracks improving life expectancies, and the way Tip O'Neal and Ronald Reagan dealt with Social Security. And the other is the sneaky, zero sum, cost-shifting approach that is the hallmark of so much of Obamacare. In this case, it is the senior who is being stiffed for the greater good.

This approach is sneaky. It is designed to make elders pay more, and is an interference in the little bit of the free market left to health insurers. So why are Republicans supporting it?

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