Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, April 16, 1990 TAG: 9004160074
SECTION: NATIONAL/INTERNATIONAL PAGE: A1 EDITION: METRO
SOURCE: The New York Times
DATELINE: LENGTH: Long
The monthly cost of many types of "medigap" insurance, which helps pay for the portion of hospital and doctor bills not covered by the federal Medicare program for the elderly and disabled, rose at least 20 percent this year.
Some medigap premiums increased more than 50 percent, according to industry surveys and the General Accounting Office.
Critics of the insurance industry in Congress and spokesmen for consumer advocacy groups say many of the increases in medigap rates were exorbitant. But private insurers say they had to raise the rates, in part to pay for catastrophic illnesses that had been covered under the 1988 law that was repealed in December.
The increased costs are also a result of the continuing surge in spending on health care, and in some cases, the failure of insurers to raise rates enough in 1989 to cover higher medical costs, industry spokesmen say.
But many of the elderly, a majority of whom depend primarily on Social Security, say they are hard pressed to pay the extra costs.
"It's outrageous," said Mary Enos, a 79-year-old widow in New Bedford, Mass., who lives on "a little over $500 a month." Her Blue Cross premium increased 84 percent to $71.30 a month, from $38.83. The $32.47 medigap increase buried the $18 cost-of-living increase in her Social Security check.
Medigap insurance is purchased by about 22 million of the 29 million Americans 65 years old or older.
Among the costs that medigap covers and Medicare does not are the first day in a hospital and all or part of the deductible that patients pay to doctors before Medicare insurance begins paying. Some medigap policies also cover prescription drugs, added charges by doctors and the cost of a hospital stay that extends beyond the Medicare limit.
Of the 7 million elderly people who do not have medigap insurance, about 3.2 million of them with low incomes are eligible for state Medicaid benefits, but nearly 4 million rely on Medicare alone.
Because the 1988 law covering catastrophic illnesses was repealed, at least 17 million elderly "will be doing worse," said Thomas Rice, a health economist at the University of North Carolina. They will have to pay higher premiums for medigap insurance, if they can afford it, or go without coverage for catastrophic illnesses and prescription drugs.
On the other hand, about 1.7 million elderly Americans with incomes of $37,000 or more, who would have had to pay an extra $800 with their federal taxes under the catastrophic-care law, are faring better now that the law has been repealed.
But even people with medigap policies often must pay part of their doctor, hospital and prescription-drug charges, which have been increasing faster than the overall inflation rate.
The Blue Cross and Blue Shield Association, whose plans have 8.5 million medigap policyholders, said premiums were up 24 percent on average for 1990 after increasing 8 percent in 1989.
The Prudential Insurance Company of America, which sells medigap insurance to 3 million members of the American Association of Retired Persons, raised its medigap rates by 40 percent on average in 1989 and plans a 17 percent increase in July. Blue Cross-Blue Shield and Prudential are by far the largest medigap insurers.
The General Accounting Office, a research arm of Congress, said the average monthly cost to elderly policyholders is now $69.96, or about $840 a year, compared with $58.52, or about $702, in 1989, an increase of almost 20 percent.
One of the steepest increases was in Massachusetts, where Blue Cross and Blue Shield raised monthly premiums 67 percent to $85.87 for its most widely purchased medigap policy. (Mary Enos' $71.30 policy provides fewer benefits.)
In Wisconsin, Frances Hels, 74, is also struggling with a medigap increase. "I was very shocked at the first of the year to get a raise of about $20 a month to $90.33," she said. Hels lives on "a very small pension and mainly Social Security."
The General Accounting Office said about half the added medigap charges could be attributed to the repeal of the catastrophic-care law.
Advocates for the elderly and consumers and their supporters in Congress criticized the increases.
Gail Shearer, manager of policy analysis for Consumers Union, a group that advocates more federal regulation, said: "Medigap prices seem to go up whether Medicare benefits expand or contract. Consumers are confused."
Most states are already revising laws and procedures regulating medigap insurance. Congress is expected to take up several bills this session that would increase federal supervision of medigap insurance.
Among the bills being prepared or already introduced are ones that would require public hearings and a review before states approve medigap increases. The bills would also raise the percentages of revenues that must be paid out in benefits and standardize descriptions of competing medigap policies so purchasers can better compare them.
by CNB