Raising the out-of-pocket costs for Medicare beneficiaries with Medigap policies not likely to be favorable for medical laboratories
If federal officials have their way, Medicare beneficiaries with comprehensive Medigap polices are likely to pay a greater share of the cost of their medical care. The goal is to reduce use of unnecessary medical services and save Medicare money.
For clinical laboratories and anatomic pathology groups, this may not be a welcome development. That’s because any requirement for labs to collect more money directly from Medicare beneficiaries will raise the cost of billing and collections—even as medical laboratories also see a rise in bad debt from Medicare beneficiaries, who are not accustomed to paying any money out-of-pocket for most of their medical laboratory tests.
May Be Some Good News for Pathologists
However, there is some good news for pathologists and clinical laboratory managers in this story. A credible source has warned the federal government that increasing the Medicare beneficiary’s costs will not reduce unnecessary utilization of healthcare services. Nor will it save the Medicare program any money. In fact, such actions may have the opposite effect!
The government is considering requiring higher out-of-pocket cost sharing from the 9 million seniors with Medigap policies to cut down on use of unnecessary medical services. The National Association of Insurance Commissioners contend, however, that this would raise Medicare costs over time. (Graphic by Kaiser Health News)
After more than a year of research and discussion, the National Association of Insurance Commissioners (NAIC), the insurance industry’s most credible and authoritative organization, concluded that the Medicare program would not see savings from its proposed actions. This information was in a report from Kaiser Health News.
The NAIC was required by the Accountable Care Act to recommend to Kathleen Sebelius, Secretary of Health and Human Services (HHS), specific cost-sharing opportunities that could reduce Medicare spending for unnecessary treatments. This recommendation was to be based on peer-reviewed studies or successful managed-care practices, noted the Kaiser Health News article. The NAIC Seniors’ Task Force and Health Insurance Committee, in fact, determined that this idea could have the reverse effect, raising Medicare costs over time.
Increased Cost Sharing Does Not Deter Patients From Seeking Care
“Everything we’ve looked at has shown that increasing cost sharing does stop people from seeking medical care,” said Bonnie Burns, training and policy specialist at California Health Advocates. “The problem is they [would] stop using both necessary and unnecessary care.” Burns served on the NAIC committee charged with studying this matter and was quoted in the Kaiser report.
A draft letter to Secretary Sebelius was approved unanimously by NAIC’s Senior Issues Task Force and Health Insurance Committee. This letter explained that seniors would likely put off necessary medical care and eventually end using more emergency room visits and in-hospital stays than they now do.
“None of the studies provided a basis for the design of nominal cost sharing that would encourage the use of appropriate physicians’ services,” the letter stated. “Many of the studies caution that added cost sharing would result in delayed treatments that could increase Medicare program costs later and result in adverse health outcomes for vulnerable populations.”
About 9 million Medicare beneficiaries—or one in five—bought a Medigap policy in 2010, noted a story published by the Washington Post. Two-thirds of them purchased the most comprehensive plans, which offer “first dollar” coverage to pay all or nearly all of costs not covered by Medicare.
Medigap Insurance Policies Are Popular with Medicare Patients
These policies are popular among seniors because they cap out-of-pocket expenses and protect against unexpectedly high medical expenses. The most generous plans—C and F—pay 100% of Medicare Part A and B deductibles. However, premiums for these insurance plans can be as high as $200 per month. The overall monthly premium for Medigap policies nationwide was $178 in 2010.
“People are buying Medigap because they need the [medical] treatment,” observed Dotti Outland, in the Washington Post article. “And they are paying something out of their pocket now. They are paying premiums,” she added. Outland is director of Regulatory Affairs for UnitedHealthcare and a member of the Medigap subgroup.
The Post article pointed out that the idea to increase cost sharing for those insured by Medigap policies emerged after the Congressional Budget Office estimated that this could save the Medicare program up to $53 billion over 10 years. The Obama administration and congressional leaders are considering implementing this and similar proposals to reduce Medicare spending.
Dichotomy in Healthcare Goals of Federal Government
Noting that two thirds of seniors have annual incomes of less than $40,000, the Washington Post article suggested that the push to collect more from seniors illustrates the dichotomy facing the administration and federal health policymakers. Emphasizing the need to make Medicare beneficiaries pay more of their own money for healthcare makes it obvious that lack of public funding trumps all, regardless of policy.
On one hand, the Obama administration wants to raise out-of-pocket costs for seniors to discourage overutilization of services. On the other hand, seniors are among the very group the government is targeting to buy adequate health insurance. This includes those with incomes under the national median household income, which according to the U.S. Census Bureau is $52,762.
Might a 20% Co-Pay for Medical Laboratory Tests Be in the Package?
By the way, it is not known whether federal health policymakers and researchers looked at requiring a 20% co-pay for Medicare Part B Clinical Laboratory Tests as part of this initiative. Such a 20% co-pay would be most unwelcome, since it would require most medical laboratories to spend substantial amounts of money to collect thousands of patient bills that would be under $5 and $10.
It would be smart to stay tuned to further developments with this story. Every clinical laboratory and pathology group should keep a watchful eye on the ideas being tossed around by federal health administrators as they attempt to deal with the ever-widening budget gap.
—By Patricia Kirk
Related Information:
Insurance officials say co-pays won’t reduce Medicare costs
Insurance Commissioners Reject Calls To Limit Seniors’ Medigap Policies
National Association Insurance Commissioner Letter
THE DARK REPORT: In Medicare Bull’s Eye: Lab Test Reimbursement
