Medicare Program; Deductible Amount for Medigap High Deductible Options for Calendar Year 2000

AGENCY:

Health Care Financing Administration (HCFA), HHS.

ACTION:

Notice.

SUMMARY:

This notice announces the annual deductible amount of $1,530.00 for the Medicare supplemental health insurance (Medigap) high deductible options for 2000. High deductible options are those with benefit packages classified as F or J that have a high deductible feature. The deductible amount represents the annual out-of-pocket expenses (not including premiums) that a beneficiary who chooses one of these options must pay before the policy begins paying benefits.

EFFECTIVE DATE:

January 1, 2000.

FOR FURTHER INFORMATION CONTACT:

Kathryn McCann, (410) 786-7623.

SUPPLEMENTARY INFORMATION:

I. Background

Medicare Supplemental Insurance

A Medicare supplemental, or Medigap, policy is the principal type of private health insurance that a beneficiary may purchase to cover costs that Medicare does not cover. Medicare beneficiaries are responsible for certain deductibles and coinsurance amounts for both Part A (hospital insurance) and Part B (supplementary medical insurance) of the Medicare program. In addition, Medicare generally does not cover custodial nursing home care, eyeglasses, dental care, and most outpatient prescription drugs. Beneficiaries must either pay the full cost of these services themselves, or they may purchase additional private health insurance to help pay these costs. Medigap policies offer coverage for some or all of the deductibles and coinsurance amounts required by Medicare. Additionally, Medigap policies may provide coverage for some services that are not covered under Medicare.

Section 1882 of the Social Security Act (the Act) establishes, among other things, standards for Medigap policies. This section of the Act states that no Medigap policy may be issued in a State unless the policy meets the following criteria: (a) It has been approved by the Health Care Financing Administration as meeting federal standards, or (b) it complies with State laws established in accordance with section 1882(b)(1) of the Act.

The Omnibus Budget Reconciliation Act of 1990 (OBRA 90) amended the Act by standardizing Medigap benefits and requiring that no more than ten Medigap benefit packages, Plans A through J, be offered nationwide. Plan A is the basic benefit package. It includes Medicare Part A hospital coinsurance plus coverage for 365 additional days over the beneficiary's lifetime, Medicare Part B coinsurance (generally 20% of Medicare-approved expenses), and coverage for the first 3 pints of blood per year. Medigap Plans B through J contain this basic benefit package, as well as different combinations of coverage for some or all of the following benefits: Medicare Part A inpatient hospital deductibles, skilled-nursing facility coinsurance, foreign travel health emergencies, at home recovery, preventive care, some prescription drug coverage, and Medicare Part B excess charges protection.

B. High Deductible Medigap Standard Policies

Section 4031(c) of the Balanced Budget Act of 1997 (BBA) added high deductible versions of two of the standard Medigap policies, or their counterparts in the waivered states. Unlike the regular versions of Plans F and J, however, the high deductible versions of these policies will not begin paying benefits until the deductible amount is met. Amounts included in this deductible are the expenses that would ordinarily be paid by the regular version of the policy, including Medicare deductibles for Parts A and B. The Plan F deductible does not include the separate foreign travel emergency deductible of $250. The Plan J deductible does not include the plan's separate $250 prescription drug deductible or the plan's separate $250 deductible for foreign travel emergencies.

II. Provisions of This Notice

In 1998 and 1999, the high deductible amount was statutorily defined as $1,500.00 in section 1882(p)(11)(C)(i) of the Act. For 2000, the high deductible amount is increased by the percent increase in the Consumer Price Index (CPI) for all urban consumers (all items, U.S. city average) for the 12-month period ending with August of the preceding year. The percent increase in the CPI for all urban consumers (all items, U.S. city average) for the 12-month period ending in August 1999 was 2.26%, according to the Division of Labor Statistics, Department of Labor. A 2.26% increase in $1,500.00 is $1,533.90. Section 1882(p)(11)(C)(ii) of the Act stipulates that this amount ($1,533.90) be rounded to the nearest multiple of $10 to find the high deductible amount for the subsequent year. Rounding $1,533.90 to the nearest $10 multiple, the 2000 deductible for the Medigap high deductible options is $1,530.00.

This figure can also be found by dividing the August 1999 CPI (167.1) by the August 1998 CPI (163.4), which equals 1.022643819. Multiplying this number by the 1998/1999 deductible ($1,500.00) equals $1,533.97 which, rounded to the nearest $10 multiple, is $1,530.00.

III. Unfunded Mandates and Executive Orders

Section 202 of the Unfunded Mandates Reform Act of 1995 requires that agencies assess anticipated costs and benefits before issuing any rule that may result in an expenditure by State, local, or tribal governments, in the aggregate, or by the private sector, of $100 million in any one year. This notice will not have an effect on the governments mentioned, and the private sector costs will not be greater than the $100 threshold.

In accordance with the provisions of Executive Order 12866, this notice was reviewed by the Office of Management and Budget.

We have reviewed this notice under the threshold criteria of Executive Order 13132 of August 4, 1999, Federalism, published in the Federal Register on August 10, 1999 (64 FR 43255). The Executive Order is effective November 2, 1999, which is 90 days after the date of this Order. We have determined that the notice does not significantly affect the rights, roles, and responsibilities of States.

Authority: Section 1882 of the Social Security Act.

(Catalog of Federal Domestic Assistance Program No. 93.773, Medicare—Hospital Insurance, and Program No. 93.774, Medicare—Supplementary Medical Insurance Program)