Original Source
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 Centers for Medicare & Medicaid Services (CMS)

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ANNOUNCEMENT
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Deductible Amount for Medigap High Deductible Options for Calendar Year 2003

SUMMARY:

The annual deductible amount for the Medicare supplemental health insurance (Medigap) high deductible options for 2003 is $1,650.00. 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. The $1,650.00 high deductible amount is effective January 1, 2003.
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SUPPLEMENTARY INFORMATION:
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I. Background
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A. Medicare Supplemental Insurance

A Medicare supplemental, or Medigap, policy is private health insurance that a beneficiary may purchase to cover certain expenses that Medicare does not cover. For example, 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 outpatient prescription drugs, custodial nursing home care, or preventive care. 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, such as outpatient prescription
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Centers for Medicare & Medicaid Services

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drugs and preventive care that are not covered under the Medicare program. Section 1882 of the Social Security Act (the Act) establishes that no Medigap policy may be issued in a State unless the policy complies with the standards and requirements described in that section.
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The Omnibus Budget Reconciliation Act of 1990 (OBRA '90) amended the Act by requiring that Medigap benefits be standardized, and that no more than 10 Medigap benefit packages 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 are referred to as the "waivered States."
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There are ten benefit packages, designated as plans "A" through "J". Plan "A" is the basic benefit package. It covers Medicare Part A hospital coinsurance, plus coverage for 365 additional days of inpatient hospital care after Medicare hospital benefits are exhausted; 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 additional benefits.
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Plans "F" and "J" provide coverage for: Centers for Medicare & Medicaid Services

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In addition, Plan "J" includes coverage for: ..
B. High Deductible Medigap Policies
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Section 4032 of the Balanced Budget Act of 1997 (BBA) authorized high deductible versions of Plans "F" and "J" and their closest counterparts in the waivered States. 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. Out-of-pocket expenses that can be applied toward this deductible are expenses that would ordinarily be paid by the policy, including Medicare coinsurance and deductibles for Parts A and B, emergency foreign travel expenses, and, in the case of the high deductible version of Plan J, outpatient prescription drug costs. However, even though foreign travel emergency expenses and prescription drug expenses may be applied toward meeting a high deductible plan's overall deductible, these types of expenses will only be paid after a separate $250 deductible for each benefit has been met.


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II. Calculation of the High Deductible Amount
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The high deductible amount is determined in accordance with section 1882(p)(11)(C)(i) of the Act. That provision prescribed a deductible of $1500 for 1998 and 1999, and directed that the amount increase each subsequent year by the percent increase in the Consumer Price Index for all urban consumers (CPI-U), all items, U.S.


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Centers for Medicare & Medicaid Services

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city average. For 2002, the high deductible amount was $1,620. For 2003, the high deductible amount is increased by the percent increase in the CPI-U for the 12-month period ending August 2002. As reported by the Bureau of Labor Statistics, Department of Labor, the CPI-U index was 177.5 in August 2001 and 180.7 in August 2002, resulting in a 1.80 percent increase from the 12-month period ending August 2002. A 1.80 percent increase in $1,620.00 is $1,649.21. Section 1882(p)(11)(C)(ii) of the Act stipulates that this amount be rounded to the nearest multiple of $10. After rounding $1,649.21 to the nearest $10 multiple, the 2003 deductible for the Medigap high deductible options is $1,650.
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FOR FURTHER INFORMATION CONTACT: Kathryn McCann, (410) 786-7623.

Centers for Medicare & Medicaid Services