Cutting Medigap coverage could reduce hospital utilization, costs

Increasing co-payments and other out-of-pocket costs for Medigap plans could save the Medicare program as much as $4.6 billion a year, reports Reuters.

About 7 million Americans are enrolled in the supplemental plans and have no other coverage. Most cover Medicare co-payments from first dollar on. Although cutting coverage could reduce utilization, it may increase uncompensated care for hospitals.

A study from the Kaiser Family Foundation examined three potential scenarios wherein Medicare supplemental plans increase their out-of-pocket costs. Each one would save money by driving down utilization. They follow proposals made by members of Congress, including Sens. Joseph Lieberman (I-Conn.) and Tom Coburn (R-Okla.).

"If premium reductions were fully proportionate to the drop in (insurer) expenses, the savings for the average beneficiary would be sufficient to more than offset his or her new direct outlays for Medicare cost sharing," the study concluded.

However, the researchers cautioned that raising out-of-pocket costs among Medicare supplemental policyholders who are low income, in poor health, or use a disproportionate amount of inpatient care could have a negative impact on those enrollees.

For more information:
- read the study (.pdf)
- read the Reuters article