HEARING - U.S. Senate Special Committee on Aging

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standards for voluntary certification of Medigap policies. Forty-six states have
enacted statutes adopting the Baucus Amendment and, thereby, require that certified
Medigap programs cover all Medicare hospital coinsurance. Approved programs also
must cover at least 90 percent of the cost of at least 365 days of acute hospitalization
after Medicare benefits have been exhausted. Medigap policies also must cover at least
$5,000 annually in Part B cost-sharing liability, once a $200 deductible Is paid. The
four states that have not enacted standards pursuant to the Baucus Amendment have
adopted their own standards that differ only slightly from the model established by the
Baucus provision.
We would point out that the Baucus Amendment requires a more comprehensive - and
therefore a more expensive - level of protection than that recently proposed by HHS
Secretary Bowen. In addition, most Medigap subscribers have coverage that exceeds
standards under the Baucus Amendment.
Blue Cross and Blue Shield Plan Medicare supplemental programs meet or exceed
applicable requirements, as confirmed by recent studies of the U.S. General Accounting
Office (GAO) and the House Aging Subcommittee on Health. The GAO study also
reviewed loss ratios from a sample of Blue Cross/Blue Shield and commercial policies,
and concluded the the Blue Cross/Blue Shield products had a substantially higher
aggregate loss ratio than did the commercial products.
Moreover, when we review all Blue Cross and Blue Shield Plans' Medigap products, we
find loss ratios higher than those calculated by GAO In Its sample of Plans. The Blue
Cross and Blue Shield organization's aggregate 1979-1984 loss ratio on Medicare
supplemental products was 90.8 percent, and many Plans Incurred annual loss ratios
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