New Law to Prohibit Medigap from Covering Part B Deductible
- By BSTQ Staff
The Medicare Access and CHIP Reauthorization Act of 2015, which was enacted into law on April 16, will prohibit Medicare supplemental insurance (Medigap) policies from covering the Part B deductible for people who become eligible for Medicare on or after Jan. 1, 2020. The provision is designed to make future Medigap purchasers more price-sensitive when it comes to medical care, which could lead to a reduction in the use of health services and Medicare spending. The Congressional Budget Office estimates that the new law will reduce federal spending by about $400 million between 2020 and 2025.
The plans that currently cover Part B expenses, known as first-dollar coverage, include Medigap policy Plans C and F, Medicare Advantage plans, employer or union-sponsored retiree health plans and Medicaid for individuals with low incomes. The new law will restrict first-dollar coverage for Medigap policies but not other sources of supplemental coverage. However, between 2004 and 2010, the number and share of 65-year-old beneficiaries purchasing a Medigap policy steadily declined from 35 percent to 19 percent. About half of those enrollees had Plan C or F, which cover the Part B deductible. And, as Medigap enrollment declined, Medicare Advantage enrollment increased. If the restriction on first-dollar Part B coverage had been applied to all Medigap policyholders with Plan C or F in 2010, 12 percent of all Medicare beneficiaries would have been affected. Therefore, based on declining Medigap enrollment trends, a smaller share of new Medicare benefits is expected to be affected by the law.
