Thursday, October 1, 2015

IBM OneExchange Medicare - the "Doc fix" law and Medigaps

I embedded this topic as a sidebar in another post but realized yesterday when I was working with some Medicare counselors to help people figure out their Medicare options that even they did not know what Congress did when they passed the "Doc Fee Fix" law at the end of March 2015 so I decided to make it a separate topic.
In case you don't understand the basis of this law, here's some background.  Skip this paragraph if you know about the 2003 law.  In 2003, a law was passed to implement a Medicare fee formula that would reduce a doctor fee for services a little bit each year to "reduce" Medicare costs. Each year, doctors would threaten to opt out of treating Medicare patients and each year Congress would temporarily postponed the implementation of the law.  By 2015, doctor fees would have been reduced by 21%. This got the attention of many doctors who were seriously going to opt out of Medicare - hardly a good thing for a senior population that is rapidly increasing as boomers age.

Finally, in March 2015 Congress permanently eliminated that formula by repealing the 2003 law. However, there was, of course, a lot of horse trading among congressional constituents to make it happen. There were other things embedded in the new bill (H.R.2) to appease various factions.  For example, legislators included a provision to eliminate Medicare Supplemental plans (medigaps) that are "first dollar payer" plans beginning 2020. One medigap plan that does first dollar pay is the "F" plan. It carries a hefty premium but if you have original Medicare and an "F" plan you never have to pay a bill if a procedure is covered by Medicare. 
Congressional representatives believe people who have such plans "go to the doctor more" and thereby cost Medicare more money.  While it is probably true a small percentage of people who have such plans go to the doctor more, the root cause is likely because they are sicker.  Maybe that's why they buy those plans which, as I said,  are the most expensive plans.  But no one in Congress is doing root cause analysis nor reading position papers to find out if their hypothesis is correct.  Our legislators just decided those plans cater to people who are hypochondriacs.  There probably are some.  But the notion that a large number of people buy "first dollar pay" plans to be able to frivolously use doctor services is not true.  Who wants to go to the doctor?  As a sample of one, I sure don't. 
More interesting still, Congress did this to individual Medicare Supplement plans but did not make the same demands on companies that provide secondary group insurance to Medicare eligible retirees (as IBM once did) nor did they make the same demands on Medicare Advantage insurance  providers.  If first dollar pay plans are bad, why aren't they bad across the board?  It makes no sense. But then, it is Congress. Here's a thought - do they really just want  to privatize Medicare?  I'll leave it to you to figure out who the "they" are.
How does this impact you?  If you think you want a medigap "first dollar pay" plan then buy the insurance plan before 2020.  There are no guarantees, but typically when Congress eliminates a Medicare supplement plan type (as they did for J plans) they grandfather people who already have it so they can keep the plan. It is possible the insurance companies will decide to terminate those plans and then you're out of luck.  But, my bet is, they will just keep increasing the premiums until the plans are no longer worth having.  Once again, I think the only recourse we have  to stop Congress from mucking with Medicare is to work through organizations like AARP to create as strong a lobby as possible to influence Congress to treat seniors better.  Of course, if congressional representatives were forced to use Medicare just like the rest of us, none of this would happen at all.  
Update 10/29/15: Congress continues play with Doctor fees in the latest budget bill.  As usual, it is a "small negative item" in a big budget agreement that has a lot of pluses for Medicare and Social Security in particular and a great deal of good for the functioning of government overall.  It's the small negative that is irksome and unlikely to get a lot of attention.  Unfortunately, it is another reason doctors will decide to "opt out" of treating Medicare patients.  I've written before about the 2011 "sequestration" cuts that affected almost every government budget including Medicare that was part of a 2011 budget bill.  The cut for Medicare was a 2% fee reduction for medical services that was applied to the part of payment Medicare makes to providers.  What happened after that bill passed is easiest explained by way of example.  If the Medicare approved fee for a particular service was $100, Medicare would pay $80 and the patient would pay $20.  The 2011 bill provision cut the Medicare part by 2%, meaning Medicare paid the doctor $78.40.  However, the patient still has to pay the $20. 
The sequestration cut was supposed to expire in 2021, but Congress kept extending the expiration date such that it was pushed to 2024. Who even knew they were doing those extensions!  This new bill pushes the expiration of Medicare sequestration to 2025.  It's no wonder doctors want to stop treating Medicare patients.  What they are more likely to do is shift more cost to the patient.  As a remedy, the doctors can  charge a fee above the Medicare approved amount.  They can charge up to 15% more than the Medicare approved amount.  The 15% is called a limiting fee or an excess fee.  Guess who gets to pay that "excess"?  The Medicare patient, unless they have a secondary insurance policy that will cover it.  Not many of the medigap policy types  cover it - a few expensive policies do.  Sometimes, retiree secondary insurance will cover it.  Meanwhile, the fee schedule for procedures has not increased in years so even if sequestration expires and doctors start charging the limiting fee maximum, they will either do more factory style treatment or will walk away from treating seniors. Slowly, gradually, Medicare insurance is less and less a wonderful benefit for elders in our "Great Society". 

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