Medicare Modernization Caused Medicare Confusion
After Congress created Medicare and President Lyndon Johnson signed the Medicare program into law, insurance companies began designing and offering health plans to fill in the gaps in Medicare-covered services. Insurance companies started developing many Medigap policies to fill in Medicare Part A and Part B gaps. There were no federal guidelines or laws for Medigap policies at the time. Each state insurance department regulates the private plans within its own state. The growing number and complexity of the Medigap policies started to confuse consumers. Shopping and comparison among plans were difficult. Medicare needed the Medicare Modernization Act only a few years after the creation of Medicare.
The National Association of Insurance Commissioners (NAIC) develops rules for insurance regulation and coordinates those laws among the states. They devised rules for the new Medigap policies that eventually were widely accepted. In 1980, Congress established its own policy standards for Medigap plans that each state could adhere to voluntarily. Congress finally directed the NAIC to update the model regulations for Medigap plans, and Congress enacted mandatory federal Medigap standardization requirements in the Omnibus Budget Reconciliation Act of 1990 (OBRA). By 1992 state insurance commissioners standardized Medigap policies across the states. Congress prohibited insurance companies from selling Medigap policies that did not conform to the new standardized Medigap insurance regulations.
The initial standardization of Medigap policies in 1992 created ten different health plans, labeled Plan A through Plan J. Congress required each plan to provide the same benefits and provisions, regardless of the issuing insurance company. In effect, the plans were identical except for the price. The Medicare Modernization Act of 2003 enabled consumers to compare Medigap plans more easily. The plans were limited to a smaller number with the same features and benefits. The only variable was the price. By reducing the number and variations of Medigap plans, the standardization reduced confusion significantly.
The Medicare Modernization Act 2003 (MMA) added two new plans, K and L, to the lineup of standard plans bringing the total available for sale at that time to 12 Medigap plans. Congress added high-deductible options to two of the existing plans (F and J). The improvement and modernization act also included two significant changes.
Medicare Advantage Renamed & Medicare Part D Created
The Medicare Modernization Act modified Medicare + Choice and renamed it Medicare Advantage. They also added prescription drug coverage as a new and standalone plan. Skyrocketing drug costs devastated seniors, so the Bush administration spearheaded prescription drug plans to limit out-of-pocket costs. (For time’s sake, we will modify this discussion to only Medigap plans and discuss managed care in other blogs.)
Third Generation Medigap
The Medicare Improvements for Patients and Providers Act (MIPPA) of 2008 expressly authorized
the implementation of Medigap policy revisions adopted by the NAIC in 2008. Each state regulates all insurance within its borders. Federal authorities pressured state insurance commissioners to adopt the NAIC changes.
The 2008 Act also introduced the “third-generation” of Medigap standardized plans. Medicare insurance companies introduced new Medigap plans and eliminated others effectively on June 1, 2010. Plans M and N increased cost-sharing features. Medicare insurance companies stopped Plan E, H, I, and J to eliminate duplicative and outdated Medigap plans. Center for Medicare & Medicaid Services (CMS) required Medicare insurance companies to stop offering prescription drug plans in all Medigap policies. (Those currently enrolled in discontinued plans may keep them.) CMS’s changes meant that beginning June 1, 2010, the “third-generation” of standardized plans consisted of ten different Medigap plans. Only these Medigap plans were available to purchase for new customers from that point on—including two with high-deductible options.
Latest Medigap Policy Changes
Medicare’s next stage of development from the Medicare Modernization Act was the Medicare Access and CHIP Reauthorization Act MACRA of 2015. Congress created a Medicare Quality Payment Program intended to encourage medical providers to focus on value over patient volume. Medicare Access and CHIP Reauthorization Act also included a significant change to Medicare supplement insurance options. Effective January 1, 2020, the sale of Plan C and Plan F (including the Plan F high-deductible option) policies stopped for newly eligible. “Newly eligible” means anyone who attains age 65 on or after January 1, 2020.
Individuals who purchased Plans C or F policies sold before January 1, 2020, are grandfathered into those plans. Beneficiaries may keep their Plan C or F. Those eligible for Medicare before that date may also still purchase them going forward. The eligible includes individuals who were eligible for Medicare before January 1, 2020. Medigap insurers will continue to maintain existing C and F plan policies. Still, they may not sell a new C or F (including high-deductible F) plan to anyone who was not qualified for Medicare before January 1, 2020. In other words, they turned 65 after January 1, 2020.
Medicare Access and CHIP Reauthorization Act of 2015 change is significant because Plans C and F are the only plans that include coverage for the Medicare Part B deductible. These plans were very popular. Eliminating these plan options was difficult but necessary to reduce future Medicare costs by discouraging unnecessary medical services. Congress reasoned paying a small deductible, such as the Part B deductible, would prevent unnecessary medical treatment and consequently help curb waste and abuse.
Understanding Evolution and Changes Avoids Confusion
Understanding the history of the evolution of Medigap policies and the government regulations that mandated the changes is vital to avoid confusion. Medicare beneficiaries hear about Plan F, Plan J, Plan this or that. They don’t understand why they can’t get those plans. There are fears they may lose coverage. Medicare beneficiaries do not realize CMS grandfathered them into their Medigap F or C plans. Awareness of Medicare’s continual changes prevents people from making wrong or outdated choices about their health care.
Change is a constant. Since its inception, Medicare has changed. The Medicare Modernization Act and subsequent Congressional legislation have tried to keep up with the changes in healthcare, consumers’ needs, and a drive for more efficient and cost-effective healthcare systems. Congress and President Johnson could not have imagined that what they started would become the complex and colossal system that cares for so many Americans today.