Now that Medigap can’t cover drug costs, why exclude younger beneficiaries?

Although 31 states require Medigap insurers to provide at least one policy to Medicare beneficiaries under 65 with disabilities, only 2 percent of these beneficiaries have such a policy. The Kaiser Family Foundation (KFF) noted that insurers’ original concerns about paying high prescription drug costs for younger beneficiaries are now moot, and questioned the justification of excluding younger adults with beneficiaries from buying Medigap policies.

Medigap

Medigap serves as supplemental insurance to help Medicare beneficiaries cover out-of-pocket expenses, which can be significant due to how the program is structured. About 20 percent of the 57 million Medicare beneficiaries have such a policy. In 1990, the federal government required insurers to allow new senior beneficiaries to buy a Medigap policy. At that time, when many Medigap plans covered some drug costs, insurers did not want to cover the high drug spending of those under 65 with disabilities.

Although the vast majority of beneficiaries are seniors, about 9 million people under 65 with disabilities have Medicare. Usually, those under 65 must become eligible for disability benefits, and then wait for 24 months until Medicare coverage becomes active. The KFF noted that younger Medicare beneficiaries generally have poorer self-reported health status than seniors and are operating with lower incomes. They also report more difficulty in accessing the care they need, sometimes due to costs.

Drug coverage

 Although Medigap plans could originally cover drug costs, the government now prohibits drug coverage due to the Part D benefit. Although Medicare per capita spending on prescription drugs is much higher for younger beneficiaries than for seniors (about $3100 more in 2014), Medigap insurers no longer have to worry about this cost. Excluding Part D expenditures, average spending per capita for younger beneficiaries is about $400 more than for seniors.