There is big Medicare-related news out of Washington today, as the Senate passed 
the so-called “Medicare doc fix” bill late last night by a resounding 92-8 majority. This bill was recently labeled as the MICRA – Medicare and CHIP Reauthorization Act. President Obama has already said he will sign the bill when it reaches his desk. So, what exactly does this mean for you, the Medicare beneficiary?
Let’s start from the beginning. First and foremost, this bill is in response to the April 1 expiration of the sustainable growth rate for physician payments. When this expired, a 21% cut went into effect for doctor reimbursement rates for Medicare patients. CMS – the government organization that administers Medicare – announced that it would essentially “hold” claims for 14 days until this bill could be passed and signed. Medicare patients should see no effects from this – or really, even know that it is going on behind the scenes – but it is interesting to know nonetheless.
Even more interesting and important is what is actually in the bill itself. Here is a bullet-point summary of what the bill entails (bolded sections of particular importance to Medigap policyholders):
- The bill repeals the sustainable growth rate of physician payments that had been in effect since 1997 – this is the so-called Medicare doc fix.
- It replaces that with a .5% increase for physician payments each year for the next five years.
- The bill created financial incentives for doctors to bill for quality care (“quality care” not defined at this point but will likely follow recent CMS directives).
- The bill provides 7.2 million over two years for Community Health Centers.
- It extends funding for nearly two dozen other programs – including federal abstinence programs and extra payments for rural hospitals.
- The Children’s Health Insurance Program (CHIP) will receive $5 billion for two years.
- It increases the Medicare Part B and Part D income-related adjustments for premiums for high-earners.
- In 2020, it requires Medicare Supplement policyholders to pay for the Medicare Part B deductible (currently $147/year) themselves. This eliminates “first dollar coverage”. And, this also means that the Medicare Supplement plan offerings (Medigap coverage chart) would also have to be revamped at some point to account for these changes. Plans F and C would likely be eliminated for new policyholders starting in 2020. If the past is any indication, current Medigap policyholders will be “grandfathered in” and allowed to keep their plans even if it includes first-dollar coverage. However, at that point (2020) or maybe before, there would likely be a considerable amount of rate pressure on people in first-dollar coverage plans, as there would be no “new” policyholders coming into those plans.
- The overall cost of the bill is approximately $210 billion, with two-thirds of that being added to the Federal deficit and the remaining $70 billion in cost being split between Medicare recipients and providers.
- Lastly, a previously scheduled hospital payment increase of 3.2 percent – scheduled for 2018 – will be delayed and spread over 6 years.
So, how will this, particularly the change in Medigap design, impact you? In 2010, the Medigap plans were revamped to include several new plans and remove several duplicate plan designs. When that happened, policyholders that had one of the “old” plans were allowed to keep their plan. It is very likely this would be the case with this plan design change as well; however, that will be something to keep an eye on. Obviously, the 2020 start date of this requirement gives plenty of time – even at Government pace – to revamp the coverage chart and implement the changes.
Also, the “doc fix”, which “permanently” replaces the sustainable growth rate should provide some stability to providers who accept Medicare patients and payments. This elimination of payment amount uncertainty is always, ultimately, a good thing for Medicare recipients. It is expected the President Obama will sign the bill into law within the next couple of days.
Garrett Ball is the owner of Secure Medicare Solutions, an independent Medicare insurance brokerage. If you have any questions about this or want additional information about current Medigap plans, please contact SMS at 877.506.3378 or online.
About Garrett Ball
Garrett:
This is an excellent bulletin written by you. Thank you for letting me know
there is a Medicare “fix” that eliminates annual Congressional action to make sure
that Medicare providers are justly compensated.
I do have two questions on matters discussed in your bulletin:
1. “By 2020, Medicare Supplement policyholders will have to pay for the Medicare Part B
deductible. ”
Question: I assume they are referring to Plan F which does not require
that payment. I have Plan G which DOES require that I pay the
current $147/year for the Medicare Part B deductible. Does that mean that
all Medigap plans will require that policyholders pay the Part B deductible by 2020?
2. “The previously scheduled hospital payment increase of 3.2% – scheduled for 2018 –
will be delayed spread over 6 years.”
Question: In my Plan G, I don’t pay ANYTHING out of pocket for hospitalization. Does
the above mean that all Medigap plans, including my plan, will require that
policy holders PAY a hospital payment if they are hospitalized and that
said hospital payment will rise from what it is now for some policyholders by 3.2%?
Comment: It almost sounds like there will be fewer Medigap plans to choose from
or even one singular plan available to all in the future. I suspect Congress
approved the Medifix to bring down the national expenditures for Medicare
and hopefully to make it more efficient in the future.
Thank you for finding the least expensive Plan G in North Carolina for me. It
makes a big difference financially to me.
Meiling Dai
mdai5199@gmail.com
Hi Meiling –
Thank you for your kind feedback and for being a client! To answer your questions…
1. Yes, as it is written now, it looks like Medigap plans (starting in 2020) will be prohibited from covering the Medicare Part B deductible. This change has been discussed for a while but appears to be finally coming to fruition. I believe this will make ‘G’ even more attractive in the future due to greater rate stability.
2. No, Medigap plans expand to fill the ‘gaps’ in Medicare. So, this just means that Medicare’s payment schedule to hospitals will increase (i.e. hospitals can charge more). Medicare will still pay their portion (generally, 80%), and the Medigap plans will still pay the remainder (generally, 20%). It will just be 80% and 20% of a slightly higher amount.
Overall, I think the changes are good for the Medigap market. As always, it’s important to stay on top of what you have. Let me know if you have other questions at any time!