The Supreme Court just upheld the main tenants of Health Care Reform and elements of the original bill that dealt with Medicare were largely left unchanged and intact. Putting aside the intense political vitriol surrounding the bill, our goal is to help Medicare eligible people, especially those looking at supplementing coverage with a Medigap policy, understand how the recent ruling will affect their options and the out of pocket expenses. Let\’s jump into the parts of Health Reform that deal with Medicare supplements.

Advantage plans versus Medigap

One aspect of the original bill dealt with the competitiveness of Medicare supplements versus Advantage plans. Advantage plans are essentially Medicare HMO plans where the private carrier has taken over responsiblity and liability for members from traditional Medicare instead of just complementing traditional Medicare A and B as Medigap plans do. From the beginning of the Health Reform process, Advantage plans had a target on their backs and indeed, funding has been changed which will make Advantage plans more expensive or less rich depending on how the carriers offset the funding. Advantage plans were priced better (sometimes with no premium) or had a richer suite of benefits beyond what traditional Medicare covers. This was the core reason for people to go that direction since there was a resulting loss of flexibility inherent in all HMO plans. The net result is that Medigap plans will improve in price competitiveness relative to the Advantage plans. Ultimately, most experiments with HMO type plans have ended poorly as they eventually get priced out of the market and we expect the same for Advantage plans but we\’re unsure of the timetable. The much heralded ACO (Accountable Care Organizations) are just a repackaging of the old HMO model and will likely meet the same fate…eventually.

Health Reform and Part D

This is where there\’s a pretty big impact from Health Reform and the Supreme Court ruling on Medicare and Medigap coverage. Part D is the part of Medicare that deals with prescription drug cost for Medicare eligible individuals. The original Part D law established a \”donut hole\” in the design. Essentially, you would receive some benefit up front until you hit a certain amount and then you would have to pay 100% of the expenses until you hit another higher number out of pocket…the catastrophic level benefit. To sweeten the original Health Reform bill, the donut hole was scheduled to be phased out by 2020 which means that this lapse in coverage would disappear. Of course, the premium of Part D plans will reflect the extra exposure but this obviously can affect your out of pocket expense if you have higher medication costs. The amounts paid for drugs in the current donut hole are discounted by an increasing amount until total phase out by 2020.

Preventative Benefits

Cost sharing for Medicare covered preventative benefits have been removed so you should have very little out of pocket for these eligible services and the Supreme Court hearing left this benefit intact. We provide more information on preventative benefits covered under the Health Reform changes. This was a small offering towards the concept of health issues and treating them earlier before they become more serious (and more costly).

Medicare Cost and Financial Health

Health Reform\’s claims on this front is a little more suspect. Ultimately, a large focus of Health Reform dealt with access to health care and universality. There are minor programs for addressing cost but they will likely have a limited impact on the underlying growth in health care cost. You can almost track the rise in obesity and diabetes to health care costs (i.e. employment in the dialysis industry) for a clearer indication of where health care costs are going. We\’ll give you one hint…it\’s up. The more limited programs in Health Reform to address cost inflation will likely face the tide of larger health trends and still result in increasing costs and financial instability. Hopefully we\’re wrong…but we\’re probably not.

Dennis Jarvis is a licensed insurance agent concentrating on medicare supplement insurance.