Previous studies have asserted that Medigap policyholders incur as much as 25 percent more Medicare expenditures than beneficiaries with fee-for-service (FFS) Medicare only because Medigap generally provides coverage on a first-dollar basis. However, a new study by America’s Health Insurance Plans (AHIP), published in the March-April issue of Health Affairs, shows that nearly half of this apparent increase in Medicare expenditures can be explained by controlling for the use of services received through the Veterans Administration (VA) or at military facilities. Thirteen percent of FFS-only beneficiaries relied on the VA or military facilities as their primary source of care, compared with just 1 percent of Medigap purchasers. These services are not billed to Medicare, causing Medicare costs for FFS-only beneficiaries to appear artificially low compared with beneficiaries with Medigap coverage.
Further, beneficiaries’ health status may explain much of the remaining difference in health costs between these two groups. Previous studies argued that Medigap policyholders were healthier than FFS-only beneficiaries, but those studies relied on beneficiaries’ self-reported health status. AHIP conducted a detailed analysis of Medicare beneficiaries’ expenditures for the most costly health conditions and found that, for each condition and across age groups, the incidence of illness was actually higher among Medigap policyholders than among all Medicare beneficiaries. Read the abstract.
