NCPA - National Center for Policy Analysis

Medigap Limits Could Save Medicare Money

July 28, 2011

Federal deficit-reduction proposals that would limit Medicare supplemental insurance plans could save money but raise costs for some elderly beneficiaries, according to a new study, reports Reuters.

  • A study sponsored by the Kaiser Family Foundation said restricting coverage of deductibles by Medigap plans could save anywhere from $1.5 billion to $4.6 billion a year, depending on how much out-of-pocket expenses elderly beneficiaries would be required to pay.
  • Higher deductibles and copayments would reduce the demand for care and most likely lower supplemental insurance premiums because of reduced expenses for insurers, the study says.

But the study also warned that the proposal could discourage people from seeking necessary care that can prevent more costly treatments.

Medigap plans are popular because they pay most or all expenses not covered by Medicare, which has high deductibles and no cap on out-of-pocket expenses.  

  • Budget hawks argue that limiting the amount of coverage by these supplemental insurance plans will discourage unnecessary trips to the doctor as well as elective care and some types of tests.
  • But about one in five Medigap enrollees would pay more, the study says.

Source: Donna Smith, "Medigap Limits Could Save Medicare Money," Reuters, July 20, 2011.  "Medigap Reforms: Potential Effects of Benefit Restrictions on Medicare Spending and Beneficiary Costs," Kaiser Family Foundation, July 2011.

For text:

For study:


Browse more articles on Health Issues