Panel Considers Limits on Supplemental Medicare Plans

Supplemental Medicare health plans could become the victim of budget cuts, according to sources who have been following deliberations of the special deficit-reduction panel of the U.S. Congress. The panel is responsible for making cuts where needed to reduce the national debt and may have to cut specific Medicare plans to meet their goal.

Medigap Plans Could Be Cut

A lobbyist who has been following “super committee” deliberations told Reuters that so-called Medigap insurance plans could be on the chopping block as panel members look for ways to trim federal budget deficits by at least $1.2 trillion over 10 years.

Medigap plans were created to shield the elderly from costly deductibles and other expenses that aren’t covered by the traditional fee-for-service Medicare program.

Even though seniors purchase their own Medigap plans, studies show their use encourages greater use of medical services under Medicare, which boosts Medicare costs for the government. As a result, lawmakers have proposed to limit the plans to cut costs over the next decade.

Medigap Budget Cuts Depend on Other Political Issues

Some Democrats on the super committee are not in favor placing significant limits on the Medicare plans. However, sources say they are willing to do so only if Republicans are willing to embrace tax increases for the wealthy.

President Barack Obama has pushed for wealthy to pay higher taxes when the Bush tax cuts expire so that more revenue is available to reduce the deficit and fund government programs.

In his own attempt to place a limit on Medigap plans, Obama proposed a 30-percent surcharge on premiums for new Medicare beneficiaries who buy low-deductible Medigap plans starting in 2017, something that, according to the Congressional Budget Office, would save an estimated $2.5 billion over 10 years.

Other proposals submitted by committee members could affect current holders of low-deductible plans but could save as much as $93 billion over 10 years.

The six Democrats and six Republicans on the super committee have until Nov. 23 to develop a deficit-reduction plan. If they are unable to get the job done, a similar amount of across-the board spending cuts would be automatically triggered beginning in 2013.