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Medicare works better when Medigap benefits are added

June 21, 2019

Topics: Quote of the Day

By Philip Armour and Claire O’Hanlon
National Bureau of Economic Research, February 2019


A substantial portion of the costs associated with, and the value to beneficiaries of, Social Security Disability Insurance is Medicare eligibility. However, the benefits of this eligibility can vary due to differences in state policies on supplemental Medicare coverage, also known as Medigap. Although Medigap policies are federally regulated to be issued to 65-and-over Medicare beneficiaries with specific restrictions over underwriting, these policies are left to states to regulate with regard to the under-65 SSDI population, generating substantial cross-state and temporal variation. This paper documents the variation in availability and generosity of under-65 Medigap eligibility for the SSDI population. Furthermore, it exploits this variation to provide initial estimates of how this eligibility affects the health status of non-Medicaid-eligible SSDI recipients. Our main finding is that requiring Medigap plans be offered for under-65 SSDI recipients substantially improves self-reported health of this population, with suggestive evidence that this improvement is stronger as underwriting restrictions increase and among SSDI beneficiaries with mental health conditions. The estimated effect is highly robust to alternative scaling or categorizations of self-reported health, choice of data set, inclusion of fixed effects, controls for local Medicare Advantage penetration, and falsification tests. This effect is nearly three times the size of the estimated increase in self-reported health in the Oregon Medicaid expansion.

From the Conclusion

Overall, the size and robustness of the estimated effect indicates that the SSDI Medicare population’s health is very sensitive to even supplemental coverage; that is, the policy variation in question is over the remaining 20% coinsurance and insurance products that limit this cost sharing. The size of the impact on changes in health indicates that state-level Medigap policy has not just a comparable, but a substantially larger effect on health for under-65 Medicare beneficiaries than Medicaid expansion on the marginal Oregon Medicaid entrant.



By Don McCanne, M.D.

The conclusion of this study is quite intuitive. Individuals under 65 with long term disabilities who qualify for Medicare – people who could benefit from health care – have substantial improvement in their self-reported health (a valid indicator of health) when they receive additional coverage through a Medigap plan.

It is not unreasonable to conclude that those over 65 with disabling medical conditions would also benefit if Medigap benefits were added to the traditional Medicare program. Further, if we had a single payer Medicare for All program covering everyone, essentially everyone with significant medical needs would benefit. So why is Congress catering to the private Medicare Advantage plans by enabling them to offer more generous benefits, at taxpayer expense, while neglecting the traditional Medicare program?

Better benefits equate to not only better health outcomes but also greater financial security in the face of medical need. So why is there so much stubborn resistance to enacting and implementing single payer Medicare for All when it would greatly benefit those who need it now and those who may need it in the future?

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About the Commentator, Don McCanne

Don McCanne is a retired family practitioner who dedicated the 2nd phase of his career to speaking and writing extensively on single payer and related issues. He served as Physicians for a National Health Program president in 2002 and 2003, then as Senior Health Policy Fellow. For two decades, Don wrote "Quote of the Day", a daily health policy update which inspired HJM.

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