Recent negotiations to cut the federal budget deficit have included a variety of proposals to reduce Medicare spending. Studies have demonstrated a link between having private supplemental insurance to Medicare—commonly known as “Medigap” –-and making greater use of health care services. The result is higher federal Medicare spending than would be the case if Medigap did not exist, or if it were less generous in paying for what Medicare does not.
One proposal that has been advanced to slow the rate of growth of Medicare spending is to put limits on Medigap coverage, so that such plans would cover less than they typically do now.
Proponents say such a change would lead to less use of health care services and lower overall Medicare spending, thereby helping to reduce the federal budget deficit. Critics contend such a change would hurt Medicare beneficiaries by making them pay more out-of-pocket. They add that this would be especially detrimental to people in poor health who genuinely need the services, and those with modest incomes who would have trouble absorbing the extra expense.
This Health Policy Brief explains how Medigap works, as well as the current debate in Washington for and against changing these coverage options, and was published online on September 21, 2011 in Health Affairs.