Medigap premiums and Medicare HMO enrollment

OBJECTIVE: Markets for Medicare HMOs (health maintenance organizations) and supplemental Medicare coverage are often treated separately in existing literature. Yet because managed care plans and Medigap plans both cover services not covered by basic Medicare, these markets are clearly interrelated. We examine the extent to which Medigap premiums affect the likelihood of the elderly joining managed care plans. DATA SOURCES: The analysis is based on a sample of Medicare beneficiaries drawn from the 1996-1997 Community Tracking Study (CTS) Household Survey by the Center for Studying Health System Change. Respondents span 56 different CTS sites from 30 different states. Measures of premiums for privately-purchased Medigap policies were collected from a survey of large insurers serving this market. Data for individual, market, and HMO characteristics were collected from the CTS, InterStudy, and HCFA (Health Care Financing Administration). STUDY DESIGN: Our analysis uses a reduced-form logit model to estimate the probability of Medicare HMO participation as a function of Medigap premiums controlling for other market- and individual-level characteristics. The logit coefficients were then used to simulate changes in Medicare participation in response to changes in Medigap premiums. PRINCIPAL FINDINGS: We found that Medigap premiums vary considerably among the geographic markets included in our sample. Measures of premiums from different insurers and for different types of Medigap policies were generally highly correlated across markets. Our models consistently indicate a strong positive relationship between Medigap premiums and HMO participation. This result is robust across several specifications. Simulations suggest that a one standard deviation increase in Medigap premiums would increase HMO participation by more than 8 percentage points. CONCLUSIONS: This research provides strong evidence that Medigap premiums have a significant effect on seniors' participation in Medicare HMOs. Policy initiatives aimed at lowering Medigap premiums will likely discourage enrollment in Medicare HMOs, holding other factors constant. Although the Medigap premiums are just one factor affecting the future penetration rate of Medicare HMOs, they are an important driver of HMO enrollment and should be considered carefully when creating policy related to seniors' supplemental coverage. Similarly, our results imply that reforms to the Medicare HMO market would influence the demand for Medigap policies.     

Estimation of a hedonic pricing model for Medigap insurance

OBJECTIVE: This paper uses a unique database to examine premiums paid by beneficiaries for Medigap supplemental coverage. Average premiums charged by insurers are reported, as well as premiums by enrollee age and gender, and additional policy characteristics. Marginal prices for Medigap benefits are estimated using hedonic price regressions. In addition, the paper considers how additional policy characteristics and geographic differences in the use and cost of medical care affect premiums. DATA SOURCES/STUDY SETTING: A comprehensive database on premiums paid by beneficiaries for newly issued Medigap policies in the year 2000 along with state-level characteristics. STUDY DESIGN: Hedonic pricing equations are used to estimate implicit prices for Medigap benefits. DATA COLLECTION/EXTRACTION METHODS: The Centers for Medicare & Medicaid Services contracted for the creation of a detailed database on Medigap premiums. Data were collected in three stages. First, letters were sent directly to insurers requesting premium data. Second, letters were directly to state insurance commissioner's offices requesting premium data. Last, each state insurance commissioner's office was visited to collect missing data. PRINCIPAL FINDINGS: With the exceptions of the part B deductible and drug benefit, Medigap supplemental insurance is priced consistent with the actuarial value of benefits offered under the standardized plans. Premiums vary substantially based on rating method, whether the policy is guaranteed issue, Medigap Select, or explicitly for smokers. Premiums increase with enrollee age, but do not vary between men and women. The relationship between premiums and enrollee age varies across rating methods. Attained-age policies show the strongest relationship between age and premiums, while community-rated premiums, by definition, do not vary with age. Medigap supplemental insurance premiums are higher in states with poorer health, greater utilization, and greater managed care penetration. CONCLUSIONS: Despite the high cost, Medigap plans are generally priced in accordance with the actuarial value of benefits. The primary exception is the drug benefit, which appears to be subject to substantial adverse selection. Benefits such as the part B deductible and at-home recovery benefit offer little value to consumers. Several states require insurers to community rate premiums. Such regulation has important implications for premiums, and research needs to consider the impact of such regulation on the Medigap market.     

Who Switches from Medigap to Medicare HMOs?

OBJECTIVE: To determine the factors affecting whether Medigap owners switch to Medicare managed care plans. DATA SOURCES: The primary data were the 1993-1996 Medicare Current Beneficiary Survey (MCBS) Cost and Use Files. These were supplemented by data available from the Centers for Medicare & Medicaid Services (CMS) website. STUDY DESIGN: Individuals on the MCBS files with Medigap coverage in the period 1993-1996 were included in the study. The person-year was the unit of analysis. We used multivariate logistic regression analysis to determine whether or not a Medigap owner switched to a Medicare-managed care plan during a particular year. Independent variables included measures of affordability, need for services, health insurance benefits, sociodemographics, and supply of managed care plans. PRINCIPAL FINDINGS: We did not detect strong evidence that beneficiaries in poorer health were more likely than others to switch from Medigap coverage to Medicare-managed care. In addition, higher Medigap premiums did not appear to induce beneficiaries to switch into managed care. CONCLUSIONS: We examined selection bias in joining managed care plans among the subset of Medicare beneficiaries who have Medigap policies. No strong evidence of selection bias was found in this population. We conclude that there was no evidence that the Medigap market is becoming prohibitively expensive as a result of unfavorable selection.     

Medigap coverage and Medicare spending: a second look

Medicare supplemental insurance (Medigap) provides important financial protections for many low- and moderate-income beneficiaries in Medicare's traditional fee-for-service program. However, conventional wisdom among policymakers holds that Medigap coverage substantially raises Medicare claims costs. This report uses detailed diagnosis data provided by three large Medigap insurers, information from the Medicare Current Beneficiary Survey, and the Medicare 5 percent sample file to reexamine the impact of Medigap coverage on Medicare spending. We conclude that previous studies might have overestimated the impact of Medigap coverage on Medicare costs and that past projections of potential Medicare cost savings from restrictions on Medigap coverage probably are overstated.     

Insurance Coverage of Prescription Drugs and the Rural Elderly

CONTEXT: Rural impacts of a Medicare drug benefit will ultimately depend on the number of elderly who are currently without drug coverage, new demand by those currently without coverage, the nature of the new benefit relative to current benefits, and benefit design. PURPOSE: To enhance understanding of drug coverage among rural elderly Medicare beneficiaries and their expenditures for pharmaceuticals. METHODS: Estimates of the extent of coverage, expenditures, and sources of drugs were obtained using data are from the 1997 Medicare Current Beneficiary Survey and the Pharmacy Verification and Household Components of the 1996 Medical Expenditure Panel Survey. FINDINGS: Three-quarters of the urban elderly had some type of drug coverage in 1997 versus 59% of the elderly in rural areas. Urban residents were more likely to have obtained their drug coverage from an employer-sponsored supplemental plan, and rural residents were more likely to have self-purchased Medigap drug coverage. Expenditures and use of drugs by Medicare beneficiaries are greater for those with than without coverage, and differences are invariant with respect to geographic location. Coverage under self-purchased supplemental plans appears less generous than under employer-sponsored plans in both rural and urban areas. Rural and urban elderly are more than twice as likely to receive at least 1 prescribed medication through the mail than the general population. CONCLUSION: A well-designed Medicare drug benefit would be especially beneficial to the rural elderly because relatively more rural elderly currently lack coverage or have less generous coverage than urban beneficiaries. Mail-order distribution may help contain future program expenditures.     

Medicare beneficiaries less likely to experience cost- and access-related problems than adults with private coverage

The experiences of people covered by Medicare and those with private employer insurance can help inform policy debates over the federal budget deficit, Medicare's affordability, and the expansion of private health insurance under the Affordable Care Act. This article provides evidence that people with employer-sponsored coverage were more likely than Medicare beneficiaries to forgo needed care, experience access problems due to cost, encounter medical bill problems, and be less satisfied with their coverage. Within the subset of beneficiaries who are age sixty-five or older, those enrolled in the private Medicare Advantage program were less likely than those in traditional Medicare to have premiums and out-of-pocket costs exceed 10?percent of their income. But they were also more likely than those in traditional Medicare to rate their insurance poorly and to report cost-related access problems. These results suggest that policy options to shift Medicare beneficiaries into private insurance would need to be attentive to potentially negative insurance experiences, problems obtaining needed care, and difficulties paying medical bills.     

Older Women's Health and Financial Vulnerability

Elderly women and men have different patterns of disease and utilize health services differently. This essay examines the extent to which Medicare covers the specific conditions and services associated with women and men. Elderly women experience higher rates of poverty than elderly men; consequently, elderly women are especially likely to be unable to pay high out-of-pocket costs for health care. Using a new method for simulating out-of pocket costs, the Illness Episode Approach, the essay shows that Medicare provides better coverage for illnesses which predominate among men than for those which predominate among women. In addition, women on Medicare who supplement their basic coverage by purchasing a typical private insurance "Medigap" policy do not receive as much of an advantage from their purchases as do men. The calculations also show that the Medicare Catastrophic Coverage Act would have had little impact on the gender gap in financial vulnerability.     

Does supplemental private insurance affect care of Medicare recipients hospitalized for myocardial infarction?

OBJECTIVES: We sought to determine whether supplemental private insurance coverage among Medicare recipients alters patterns of health care or outcomes associated with acute myocardial infarction. METHODS: Medicare patients hospitalized after a myocardial infarction were identified from New York City hospitalization records. Patients who had only Medicare coverage were compared with those who had supplemental private or public insurance coverage. RESULTS: Patients with supplemental private insurance exhibited increased rates of revascularization and decreased rates of in-hospital mortality relative to patients with either Medicare only or Medicare and public insurance. Moreover, Blacks and women were less likely to undergo revascularization and exhibited higher in-hospital mortality rates. CONCLUSIONS: Despite Medicare, private insurance coverage appears to influence the likelihood of coronary revascularization among older patients hospitalized for acute myocardial infarction.     

Disparities in major joint replacement surgery among adults with Medicare supplement insurance

The objective of this study was to determine if disparities in hip and knee replacement surgery exist among osteoarthritis patients with AARP-branded Medicare supplement plan (ie, Medigap) coverage provided by UnitedHealthcare. Patients were selected into the study if they had 1 or more medical claims with a diagnosis of osteoarthritis from July 1, 2006 to June 30, 2007. Logistic regression analyses tested for age-, sex-, race-, or income-related differences in the likelihood of receiving a hip or knee replacement surgery. The regression models controlled for socioeconomics, health status, type of supplement plan, and residential location. Of the 2.2 million Medigap insureds eligible for this study, 529,652 (24%) had osteoarthritis. Of these, 32,527 (6.1%) received a hip or knee replacement. Males were 6% (P < 0.001) more likely than females to have a replacement surgery. Patients living in minority or lower income neighborhoods were less likely to receive a hip or knee replacement. Supplement plan type was not a strong predictor of the likelihood of hip or knee replacement. Disparities were much greater by comorbid condition and residential location. Disparities in hip and knee replacement surgery existed by age, sex, race, and income levels. Larger disparities were found by residential location and comorbid condition. Interventions are being considered to address these disparities.     

A slow start: Use of preventive services among seniors following the Affordable Care Act's enhancement of Medicare benefits in the U.S.

ObjectiveBeginning January 1st, 2011 in the United States the Affordable Care Act enhanced Medicare coverage for preventive services by eliminating patient cost-sharing under Part B and by introducing an “Annual Wellness Visit,” also free-of-charge. We evaluated the early effects of these reforms on utilization of preventive services.MethodWe analyzed nationally representative data on 15,044 Medicare seniors from the 2008–2010, and 2012 Medical Expenditure Panel Survey, and examined self-reported cholesterol test, blood pressure check, flu vaccination, endoscopy, fecal occult blood test, prostate specific antigen test, breast examination, and mammography.ResultsEnhanced Medicare benefits had no effects on preventive service utilization among Medicare seniors in 2012, including those with traditional Medicare and no other supplemental insurance, who stood to benefit the most from Part B enhancements.ConclusionThe muted overall response can be partly attributed to the fact that most seniors already held insurance that fully covered preventive services. While insurance enhancements can sometimes raise utilization, in the case of preventive services there are other fundamental barriers that require attention. Educating and incentivizing physicians about the need to refer/recommend screenings, and enhancing knowledge among seniors about the importance of preventive care are two steps that would likely go a long way towards increasing utilization.     

Consumer information and biased selection in the demand for coverage supplementing Medicare.

This study examines how the relationship between health insurance knowledge and the health status of health insurance consumers influences their decisions to purchase insurance coverage. Data from the federal Medicare health insurance program for the elderly in the United States are used. The basic Medicare program provides a limited amount of coverage for health care services obtained from any provider in the private fee-for-service (FFS) market. Beneficiaries of this program may choose to supplement the basic coverage which they receive by two mechanisms: either they may purchase private insurance designed to fill some of the gaps left by the federal program ('Medigap' policies), thereby remaining in the FFS market and preserving their choice of provider, or they may enroll in health maintenance organizations (HMOs), thereby leaving the FFS market and agreeing to use only those providers affiliated with the HMO, and in return receiving broader coverage at little additional out-of-pocket cost. The study was made possible by a unique data set which combines measures of beneficiary knowledge of Medicare coverage with measures of perceived health status, socio-economic characteristics, and insurance coverage choices for a sample of Medicare beneficiaries who participated in an educational workshop about their insurance coverage options. These data were used to estimate a multinomial logistic model of the determinants of insurance choices, where the options included the two listed above and a basic Medicare option. The study explicitly recognizes the interaction between insurance information and health status in health plan choice. These results show that knowledge of coverage does have a differential impact on the decision to purchase health insurance depending on health status. With a high level of knowledge, sicker beneficiaries are less likely to have basic Medicare alone, compared with HMOs or Medigap policies, while healthier beneficiaries are less likely to be enrolled in HMOs, compared with Medigap policies. This finding has important implications for the use of health status measures to adjust capitated payment formulas when knowledgable consumers have the option to enroll in HMOs or remain in the FFS environment. In the absence of health status adjusters for the HMO capitation payments, high levels of coverage knowledge may exacerbate inherent selection bias among these coverage options by healthier and sicker consumers of health insurance.     

The Medicare mix: efficient and inefficient combinations of social and private health insurance for U.S. elderly

This paper explores two theories about the reason why the United States provides mixed public (Medicare) and private (Medigap) insurance for the elderly: that this represents an efficient combination of financing methods for a public good, or that it represents public provision of a private good for distributional reasons. It is argued that the first theory has more support than the second, but that the current configuration of Medicare and Medigap is not optimal. Two main problems are identified: the absence of coordination between public and private insurers, and the provision of overly generous coverage to the well off. Recent Medicare reforms have helped with the first problem, but the second remains to be solved.     

Stability and change in health insurance among older Mexican Americans: longitudinal evidence from the Hispanic established populations for epidemiologic study of the elderly

OBJECTIVES: This study examined the association between health insurance coverage, medical care use, limitations in activities of daily living, and mortality among older Mexican-origin individuals. METHODS: We analyzed longitudinal data from the Hispanic Established Populations for Epidemiologic Study of the Elderly (H-EPESE). RESULTS: The uninsured tend to be younger, female, poor, and foreign born. They report fewer health care visits, are less likely to have a usual source of care, and more often receive care in Mexico. Conversely, those with private health insurance are economically better off and use more health care services. Over time, the data reveal substantial changes in type of insurance coverage. CONCLUSIONS: The data reveal serious vulnerabilities among older Mexican Americans that result from a lack of private Medigap supplemental coverage.     

Visits to specialists under Medicare: socioeconomic advantage and access to care

This study examines the relationship between socioeconomic advantage and the likelihood of receiving specialty care in a nationally representative sample of older Americans participating in fee-for-service Medicare. In 1992, 62.9 percent of Americans aged 65 and older visited a specialist physician at least once. Being white, having more education, and having a higher income were each independently associated with a higher likelihood of visiting a specialist. Having insurance to supplement basic Medicare coverage was also independently associated with an increased likelihood of visiting a specialist; disadvantaged elders are less likely to have such supplemental insurance. Therefore, based both upon socioeconomic disadvantage and a lack of insurance to supplement the basic Medicare benefit, black, less educated and low-income elders are less likely to receive specialty services under fee-for-service Medicare. As the program evolves, it will be important to continue to monitor access to specialty care in vulnerable, socioeconomically disadvantaged populations.     

Medicare: past, present and future

The history of the Medicare program, including changes that have been enacted over the years in an effort to control spiraling costs, is reviewed. Medigap insurance and preventive medical care for the elderly are examined, as is the impact of Medicare coverage for the terminally ill. Trends indicate that the Medicare system as presently structured is not financially viable. The question is: what will replace it?