More Medicare enrollees are choosing supplement plans, data shows

Photo: Halfpoint Images/Getty Images

The share of fee-for-service Medicare enrollees choosing a Medicare Supplement plan rose to 41.4% in 2022, increasing for the fifth consecutive year, according to findings from a new AHIP report.

The new report describes the various types of Medicare Supplement plans, the demographics of those who enroll, the fastest growing plans and how enrollment breaks down by state.

More than half (57%) of all fee-for-service Medicare enrollees without any additional coverage chose a Medicare Supplement plan in 2021, the data showed. 

Fee-for-service Medicare enrollees without a Medicare Supplement were three times more likely to have problems paying medical bills compared to enrollees with Medicare Supplemental policies. Two percent of enrollees with Medicare Supplemental coverage reported having difficulty paying medical bills in the last 12 months, compared to 6% of fee-for-service Medicare enrollees without such coverage. 

A majority of Medicare Supplement (56%) policyholders are women, while 41% are 75 years old or older. At the same time, a significant percentage of Medicare Supplement enrollees are people with lower incomes. For example, 21% have incomes below $30,000.

WHAT'S THE IMPACT?

Medicare Supplement plans – also called Medigap plans – are a type of private health insurance coverage that seniors may choose to help them pay for the costs that traditional Medicare doesn't cover. Seniors purchase Medicare Supplement coverage to protect themselves from high out-of-pocket costs not covered by traditional Medicare, to budget for medical expenses and to avoid the confusion and inconvenience of handling complex bills from healthcare providers.

Medicare Supplement policies are guaranteed renewable, meaning seniors won't lose access to their coverage or lose benefits year-to-year. There are several standardized Medicare Supplement plan designs from which Medicare beneficiaries may choose. In 2022, Plan F and Plan G were the most popular, with 39% and 35% of all Medicare Supplement enrollees.

Overall, Medicare Supplement enrollees value their coverage, with 93% of seniors saying they're satisfied with their plan, and 80% saying they're "very" or "extremely" satisfied. Ninety-one percent said they would be concerned about losing their financial security if they didn't have Medicare Supplement coverage, and 90% would be concerned about paying co-pays and/or co-insurance.

Meanwhile, 96% of seniors said they agree that Medicare Supplement coverage allows them to see doctors and specialists they know and trust without worrying too much about out-of-pocket costs, and 83% rated the value of their Medicare Supplement coverage as excellent or good.

In 2022, Medicare Supplement insurance coverage continued to grow, and reached a record 41.4% of all Medicare fee-for-service enrollees, although as enrollment in traditional, FFS Medicare has decreased (shrinking by more than a million enrollees in 2021-2022 alone), national Medicare Supplement enrollment also fell by 1.9% in 2022.

Nationwide, Medicare Current Beneficiary Survey estimates show that 57% of all non-institutionalized FFS Medicare enrollees without any additional coverage (i.e., Medicaid, Veterans Affairs coverage, employer-provided insurance, retiree drug-subsidy plan, self-purchased specialty plan, etc.) chose Medicare Supplement policies in 2021.

As recently as 2020, a slight majority, 56%, of Medicare Supplement enrollees were women. Enrollees also tended to skew older: 41% of policyholders were 75 years old or older, compared with 37% for all Medicare enrollees.

A significant number of Medicare Supplement policyholders had lower incomes: 8% had annual household incomes below $20,000 and 21% had incomes below $30,000. This pattern was more significant in rural areas, where 12% of policyholders had incomes below $20,000.

In terms of geography, 24% of Medicare Supplement policyholders lived in rural, non-metropolitan areas in 2021 – which, for the purpose of the report, includes any area with an urban cluster of less than 50,000 people. And rural policyholders had substantially fewer financial resources than urban policyholders: Only 23% of rural Medicare Supplement policyholders had household incomes of $80,000 or more, compared to 40% for urban policyholders.

THE LARGER TREND

In 2022, the original Medicare program had a $1,556 deductible per benefit period for inpatient hospital care (Part A) and coinsurance beginning with day 61 of hospitalization. Part B required 20% coinsurance for outpatient and physician care after an annual deductible of $233. The original Medicare program does not have a limit on enrollees' potential out-of-pocket costs.

Over the last 30 years, Medicare Supplement plans have undergone major changes to benefit designs. First, the provisions of the Omnibus Budget Reconciliation Act of 1990 required that policies sold after July 1992 conform to one of 10 uniform benefit packages, known among Medicare Supplemental plans as Plans A through J. 

Then in 2003, the Medicare Modernization Act required the elimination of prescription drug benefits from Medicare Supplement coverage, authorized two new plans (Plans K and L) with cost-sharing features, and encouraged the development of standardized benefit designs with additional cost-sharing features.

Further changes to standardized plans occurred in 2008 with the passage of the Medicare Improvements for Patients and Providers Act (MIPPA). 

In April 2015, Congress passed the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). This new law provided that beginning on January 1, 2020, Medicare Supplement insurance carriers can no longer sell Medicare Supplement plans covering the Part B deductible to individuals who are "newly eligible" for Medicare. 

People who attained age 65 before January 1, 2020, and those who were eligible for Medicare due to disability before that date continued to have access to Plans C and F, which are the only standardized plans currently available for sale that cover the Part B deductible.
 

Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.