New “Gap” Products Being Sold to Fill-in the Holes in Medicare

New “Gap” Products Being Sold to Fill-in the Holes in Medicare

Advantage Plans Deficiencies in Medicare Advantage Coverage Highlighted by Sale of These “Gap” Plans

Significant cost-sharing imposed by federally subsidized Medicare Advantage (MA) plans has led to the emergence of a new insurance product aimed at filling-in MA cost gaps, according to an issue brief released today by California Health Advocates. This issue brief, entitled: “There’s a Hole in the Bucket: New “Gap” Product Being Sold to Fill-in Medicare Advantage Deficiencies” is available online at: www.cahealthadvocates.org.

By reviewing a sample of advertisements soliciting insurance agents to sell “Advantage Plus” plans, the brief highlights how the insurance industry has exploited the deficiencies in Medicare Advantage plans to sell even more insurance products to unsuspecting Medicare beneficiaries, sometimes using scare tactics about the high cost of medical care.

“This is yet another example of the insurance industry taking advantage of a fragmented health system,” stated Clare Smith, President & CEO of California Health Advocates. “Medicare Advantage plans are overpaid in relation to what Medicare spends on someone in the Original program, yet holes in coverage have led to new insurance products that promise to fill the gaps in those plans.” Agents are being aggressively marketed to sell these supplemental products that promise to pay cash benefits when health care services are used.

The issue brief makes the following findings:

  • Deficiencies in Medicare Advantage coverage have led to a new type of product being sold to fill in or wrap around the gaps in these plans;
  • The growing number of MA and Part D plans with multiple and complex benefit designs, along with the sale of these new “gap” products, mirrors the chaotic Medigap marketplace before Medigap plans were standardized and consumer protections strengthened in 1990; and
  • As a matter of public policy, the presence of these gap products underscores the deficiencies in the benefits and coverage offered by many MA plans, at the same time MA plans are being overpaid in relation to reimbursement rates for Original Medicare.

The authors of the brief call upon Congress to take action that will better protect Medicare beneficiaries, in part, by creating a limited number of standard Medicare Advantage and Part D benefit packages which would eliminate the need for – and availability of – additional insurance products such as these new Medicare Advantage “gap” plans.

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California Health Advocates is dedicated to Medicare beneficiary advocacy and education efforts for Californians. (www.cahealthadvocates.org).

Karen Fletcher
Our blogger Karen J. Fletcher is CHA's publications consultant. She provides technical expertise, writing and research on Medicare, health disparities and other health care issues. With a Masters in Public Health from UC Berkeley, she serves in health advocacy as a trainer and consultant. See her current articles.