Below is a letter that Bonnie Burns, our Training and Policy Specialist sent to the National Association of Insurance Commissioners (NAIC) voicing CHA’s opposition to a proposal for adding a copayment under Medigap Plans C and F for Part B physician office visits. Burns is part of an NAIC subgroup that has been given the task of adding nominal copays to Medigap Plans C and F as a way to encourage “appropriate use” of physician services.
Deputy Commissioner Michelle Robleto,
Chair, NAIC PPACA Subgroup
Florida Office of Insurance Regulation
200 E. Gaines Street, Suite 121
Tallahassee, FL 32399-0326
Jane Sung, NAIC Senior Health Policy Analyst and Counsel
444 North Capitol Street, N.W., Suite 701
Washington, DC 20001
Dear Deputy Commissioner Robleto:
California Health Advocates (CHA) is an independent, non-profit consumer group that provides education and advocacy on behalf of California’s Medicare beneficiaries. I represent CHA as a funded consumer representative to the NAIC and am an appointed consumer group member of the Medigap PPACA (B) Subgroup.
The subgroup has been discussing adding ways to add nominal cost sharing to Medigap plans C and F that will encourage the “appropriate use” of physician services under Part B of Medicare as specified in the Patient Protection and Affordable Care Act (PPACA). Adding a copayment for office visits under Part B is one option the subgroup has discussed, and one that I have consistently opposed.
Cost sharing puts a financial barrier between the sickest beneficiaries and their doctor
Our organization firmly believes that applying copayments to office visits is a blunt instrument affecting sick people to a far greater degree than those who are not yet sick. Copayments create a financial barrier likely to cause Medicare beneficiaries to delay or go without necessary care from their physicians. Cost sharing by definition shifts cost to beneficiaries who use medical services, and clearly imposes the highest costs on people with chronic illnesses who use the most services. This effect is well known in Medicaid where certain populations like infants are protected from cost sharing mechanisms to ensure that vulnerable populations receive medical and preventive care without restriction.
Cost Sharing Cannot “Encourage Appropriate Use” of Physician Services
The subgroup has not seen any studies that support copayments as a means of encouraging or discouraging the use of appropriate medical services. In fact, some studies have shown that cost sharing methodology that reduces costs in one sector of health care is likely to increase costs in another. Examples of that dynamic include people “pill splitting” or reducing their daily dosage of expensive medications leading to other health care costs later, or cost sharing that reduces outpatient use and later results in higher inpatient costs. 
The subgroup has also heard from CMS and others of the impossibility of applying various amounts of cost sharing to particular types of office visits or other physician ordered medical services due to the complex nature of Medicare coding and reimbursement methods used to pay for these services.
Medicare beneficiaries already pay high out-of-pocket costs
It’s important to understand that Medicare beneficiaries pay Medicare Part B and D premiums, the cost of additional coverage such as retiree benefits, Medigap or Medicare Advantage, cost sharing for prescription drugs, and other expenses that are not covered by Medicare at all such as dental, vision, hearing, and long-term care.
Half of all beneficiaries with annual incomes of about $22,000 spent at least $3,138 in out-of-pocket costs for their health care expenses. About 10 percent of all beneficiaries spent as much as $7,861 on their health care. Additional front end costs in the form of copayments for office visits will add yet another amount to the costs beneficiaries already pay from fixed incomes.
Existing cost sharing Medigap plans
Only one Medigap benefit package, Plan F, eliminates all cost sharing. The remaining standardized plans all impose some amount of cost sharing that Medicare beneficiaries over the years have largely shunned in an effort to protect themselves from large, unpredictable and unlimited amounts of medical costs.
Medigap Plan F, and Plan C that doesn’t cover excess charges, are the two most preferred Medigap plans by beneficiaries precisely because those plans provide predictable coverage for their Medicare covered expenses. Both plans also provide a predictable cost each month that can be budgeted against existing income. Most Medicare beneficiaries cannot afford large unpredictable medical expenses. When those unpredictable costs occur it frequently means tapping existing assets to pay for them, and that in turn may reduce any earning capacity of those assets.
The NAIC has been asked to perform a nearly impossible feat, i.e., to determine an amount of nominal cost sharing based on peer reviewed studies that can be added to Medigap Plans C and F that will in turn result in more appropriate use of physician services. The impetus for this task is based on a viewpoint that the mere fact of owning a retiree or Medigap plan causes over utilization of Medicare outpatient services. No study yet presented to the subgroup has been able to connect higher utilization of Medicare covered services with care that was not medically necessary. As one study notes, the effect of supplemental insurance cannot be clearly distinguished from unobserved personal characteristics associated with higher medical spending.
We disagree with the contention that the mere presence of supplemental benefits whether those are retiree, Medigap, or TriCARE for Life benefits, causes the inappropriate use of Medicare covered outpatient services. We continue to oppose adding cost sharing to office visits, and to question whether it is even possible to meet the specific set of tasks the legislation requires.
We appreciate the opportunity to add our comments to this important discussion.
Bonnie Burns, NAIC Consumer Representative
California Health Advocates
 Leighton and Wachino, “The Effect of Increased Cost-Sharing in Medicaid” Center on Budget and Policy Priorities, July 7, 2005
 Chandra A, Gruber J, McKnight R. “Patient Cost-Sharing and Hospitalization Offsets in the Elderly.” American Economic Review, vol. 100, no. 1, 2010.
 Wong et al.; American Journal of Public Health, November 2001, Vol. 91, No. 11, Increased Ambulatory Care Copayments and Hospitalizations among the Elderly.
 Lind, Keith D., JD, MS; Setting the Record Straight about Medicare, AARP Public Policy Institute.
 Cost sharing effects on spending and outcomes, Schwartz, Katherine, Ph.D., Robert Wood Johnson Research Synthesis Report No. 20, December 2010