Medicare Program; Deductible Amount for Medigap High Deductible Policy Options for Calendar Year 2001

AGENCY:

Health Care Financing Administration (HCFA), HHS.

ACTION:

Notice.

SUMMARY:

This notice announces the annual deductible amount of $1,580 for the Medicare supplemental health insurance (Medigap) high deductible policy options for 2001. High deductible policy 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 (excluding premiums) that a beneficiary who chooses one of these options must pay before the policy begins paying benefits.

EFFECTIVE DATE:

January 1, 2001.

FOR FURTHER INFORMATION CONTACT:

Kathryn McCann, (410) 786-7623.

SUPPLEMENTARY INFORMATION:

I. Background

A. Medicare Supplemental Insurance

A Medicare supplemental, or Medigap, policy is the principal type of private health insurance that a beneficiary may purchase to cover certain costs that Medicare does not cover. The beneficiary is responsible for 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. A beneficiary must either pay the full cost of these services, or he or she 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 the Medicare program.

Section 1882 of the Social Security Act (the Act) establishes, among other things, minimum standards for Medigap policies. No Medigap policy may be issued in a State unless the policy meets one of the following criteria: (a) the Secretary has certified it as meeting Federal standards and requirements, 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 10 Medigap benefit packages, Plans “A” through “J,” be offered nationwide. Three States (Wisconsin, Minnesota, and Massachusetts) experimented with standardizing benefits before the enactment of Federal standards. These States were permitted to keep their alternative forms of Medigap standardization, and we refer to them as the “waivered States.”

Plan “A” is the basic benefit package. It covers Medicare Part A hospital coinsurance plus coverage for 365 additional days after Medicare benefits end, over the beneficiary's lifetime, Medicare Part B coinsurance (generally 20 percent of the Medicare-approved amount) or, in the case of hospital outpatient department services under a prospective payment system, the applicable copayment, 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.
• Medicare Part B excess charges protection.

B. High Deductible Medigap Standard Policies

Section 4032 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. In the three waivered States, high deductible versions of the plans that most closely approximate the benefits contained in Plans “F” and “J” are authorized by the Balanced Budget Act. Unlike the regular versions of Plans “F” and “J,” the high deductible versions of these policies do 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 in section 1882(p)(11)(C)(i) of the Act. For 2000, the high deductible amount was increased to $1,530, based on the percent increase in the Consumer Price Index (CPI) for all urban consumers for the 12-month period ending August 1999. For 2001, 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 August 2000. The percent increase in the CPI for all urban consumers (all items, U.S. city average) for the 12-month period ending in August 2000 was 3.35 percent, according to the Division of Labor Statistics, Department of Labor. A 3.35 percent increase in $1,530 is $1,581.26. (This figure can also be found by dividing the August 2000 CPI (172.7) by the August 1999 CPI (167.1), which equals 1.0335129. Multiplying this number by the 2000 deductible ($1,530) equals 1581.27 which, rounded to the nearest $10 multiple, is $1,580. Section 1882(p)(11)(C)(ii) of the Act stipulates that this amount ($1,581.26) be rounded to the nearest multiple of $10 to find the high deductible amount for the subsequent year. After rounding $1,581.26 to the nearest $10 multiple, the 2001 deductible for the Medigap high deductible options is $1,580. 2

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)