The  never-ending discussions on reducing government spending are targeting Medicare. Seniors must pay more for their medical care, or they will use the health care system too much. Several plans have been proposed to force seniors to pay more and rely less on Medicare supplement insurance (a.k.a. “Medigap”).

About 50% of people on Medicare have some form of Medicare supplement insurance, through an employer retirement plan (31%) or an individual Medicare supplement policy (19%).  Another 21% of Medicare beneficiaries are enrolled in Medicare Advantage. These figures are based on 2008 data from Medicare.

Medicare supplement policies fill the gaps in Medicare and pay some or all of the co-insurance and deductibles that are built into Medicare.  The most popular Medigap plans are plan F, which fills all the gaps, and Plan C, which covers everything but the excess charges.  So seniors with these plans pay their monthly Medicare premium and their Medigap premium, and don’t have to worry about medical bills when they get sick.  New rules being proposed for Medigap plans would not allow this kind of  “first dollar coverage”.

Apparently, some actuary has determined that seniors should expect to pay out between $3,000 and $5,000 per year in medical costs.  So they should not be allowed to protect themselves from those costs with insurance. For example, a person who pays $150 per month for a Plan F Medigap can figure that $150 x 12 months = $1,800 per year to cover their medical expenses. This is a lot less than $4,000 or $5,000 that is part of several proposals being considered in Washington.

As an insurance agent, I recommend a Plan F Medigap, but I guess I am part of the Medicare budget-busting problem.  Some of my clients live in gated communities and can certainly afford their Medigap premium, or an extra $5,000 each year for medical expenses.  But most of my Medigap clients  live very modestly, and I don’t know if they can afford to put out $5,000 every year for medical bills.

I recently read that about half of Americans who are over 65 have less than $50,000 in savings.  The millionaires who serve in Congress think these seniors with very limited savings will be able to find extra money for their medical care. I guess they should know.  These ideas on deductibles and higher co-pays slowing down the use of the health care system are straight from the for-profit insurance industry. It is called “consumer-driven heath care”. What it means is that the government doesn’t ration the care people get – seniors will ration their own care based on how much they are willing or able to pay. What a system!

An article in the Los Angeles Times looks at the question of making changes to Medicare that would require seniors to pay more of their medical costs. The article, “Raising Medicare Costs May Be Gaining Traction”, quotes various experts who study Medicare, and they answered my questions from yesterday’s blog post.

Yesterday I posed the following questions:

What are the chances a senior will put off care because he has to pay 100% of the cost until he meets his deductible?

Is it a good idea for seniors to put off care because they can’t afford it – or are too cheap to pay co-pays and deductibles?

Is this good public health policy, or will it lead to sicker seniors and bigger medical bills for seniors and Medicare?

Experts who were interviewed for the LA Times article provided the following comments:

[Tricia Neuman, director of the Medicare Policy Project at the Kaiser Family Foundation] and others also warn that increasing co-pays and deductibles may discourage seniors from seeking medical care they need.

Brown University researchers, for example, found that seniors went to the doctor less frequently after their Medicare-managed plans raised co-pays for outpatient visits. At the same time, they ended up spending more time in the hospital.

Because hospital care is so much more expensive, that probably ended up costing Medicare more than the program saved by paying for fewer doctor visits, while also leaving seniors sicker, said Dr. Amal Trivedi, the lead author of the study.

Not everyone on Medicare is over 65. Since 1972, Medicare has provided health insurance to non-elderly adults with permanent disabilities who have received Social Security Disability Insurance (SSDI) payments for at least twenty-four months.

A Kaiser Family Foundation study surveyed nearly 2,300 Medicare beneficiaries between the ages of 18 and 64 and found that they face many challenges as they try to live on very limited income.  Most people I have met who are getting SSDI live on less than $1,700 per month – and many live on much less.

From the Kaiser report:

Compared to Medicare beneficiaries who are over 65, a larger share of non-elderly disabled beneficiaries are non-white, in fair or poor health, and have low incomes and fewer years of education.

Half of the non-elderly disabled beneficiaries reported having five or more chronic conditions. About 25% of people over 65 have chronic health conditions.

Non-elderly disabled beneficiaries were more likely than the elderly to report having both physical and mental health conditions.

Nearly one in four non-elderly disabled beneficiaries lacks supplemental coverage — twice the proportion in the elderly group.

Medicaid is the primary source of supplemental coverage for non-elderly disabled beneficiaries. This finding can be explained by the greater share of non-elderly disabled beneficiaries who have incomes low enough to qualify them for Medicaid.  Note:  In Arizona people qualify for Medicaid (AHCCCS) if their income is less than $920 per month and they meet certain asset limits.

Just 6 % of Medicare beneficiaries overall reported having difficulty finding a doctor who accepts Medicare. However, three times as many non-elderly disabled  reported this problem.

Compared to less than 20% of the elderly, roughly half of non-elderly disabled Medicare beneficiaries reported problems paying for health care services, and put off or did not get care because of cost concerns.

More than half of non-elderly disabled beneficiaries who delayed or did not get care due to costs said that going without it resulted in a significant amount of pain, compared to 26% of the elderly.

Before a person on Social Security Disability Insurance (SSDI) can enroll in Medicare, there is a 24 month waiting period.  This waiting period usually begins on the date the person first applied for disability benefits.  As the approval process can take years, with applicants being turned down multiple times, I have met people whose Medicare coverage began as soon as they got their SSDI approval.

From the Kaiser report:

Prior to getting Medicare coverage, non-elderly adults with disabilities who lack employer-sponsored health insurance or Medicaid are likely to have great difficulty finding affordable health insurance in the current individual market. The waiting period for Medicare poses a potentially major access barrier to health care for uninsured disabled adults who—by definition—have serious, preexisting conditions that require ongoing medical attention.

The report speaks briefly about Medicare Advantage and says non-elderly Medicare beneficiaries have a difficult time with co-pays that are part of Medicare Advantage plans.

This is to be expected when a person who lives on $1,500 per month has to pay $40 per physical therapy session and is prescribed 3 sessions per week for 3 weeks.  $40 x 3 = $120 x 3= $360.  This person is probably going to forego the physical therapy, which can lead to a worsening condition. And if this person ends up in the hospital for a week, he will have a $1,400 (or more) co-pay.  Many people on limited incomes don’t have this kind of money in their bank account.

The study looked at people under 65 who are enrolled in Medicare and struggling to live on very limited incomes.  The survey results would be similar if they had talked to people over 65 who are living on their Social Security and have no other income or savings.  People who qualify for AHCCCS (Medicaid) are taken care of and have no medical co-pays.

I think there should be Medicare Advantage plans that would serve people who live on more than $920 but less than $1,500 per month for an individual or $2,300 for a couple.  (Well, there is one in Tucson for people with less than $1,220 per month or $1,600 for a couple). Medicare Advantage co-pays for doctor visits and hospital stays keep going up and many seniors I work with just can’t afford them.