How to Avoid Getting Stung on ‘Medigap’ Policy

Senior citizens and their loved ones nationwide are beginning to realize the down side to last year’s repeal of catastrophic Medicare coverage.

Premiums for health insurance to supplement Medicare--otherwise known as “medigap” insurance--are rising sharply, with hikes averaging about 20% but in some cases jumping as much as 50%. This has squeezed and alarmed many seniors living on fixed incomes. And unscrupulous marketers are trying to capitalize on the confusion by persuading seniors to buy new medigap policies unnecessarily or to take unneeded second policies.

“We’re seeing a real step up in high-pressure marketing tactics,” says James P. Firman, president of United Seniors Health Cooperative, a nonprofit organization based in Washington.

The premium hikes--to an average of about $840 a year, according to the General Accounting Office--stem largely from higher medical costs and from the fact that medigap policies now must cover what they did in 1988, before Congress passed the Medicare Catastrophic Coverage Act of 1988. Thus, medigap must again cover long-term hospitalization costs, increased nursing home benefits and other expenses that catastrophic Medicare began to cover last year or would have covered had it not been repealed by Congress under pressure from angry seniors.

But consumer advocates and others note that medigap insurers are rate-hike happy, having boosted prices sharply even in 1989 when catastrophic Medicare began to take effect and medigap policies needed to cover less.

“They get you coming and going,” says J. Robert Hunter, president of the National Insurance Consumer Organization in Alexandria, Va.

Consequently, calls for increased regulation are growing louder in state houses and in Congress. Minnesota, Wisconsin and Massachusetts have passed legislation to standardize medigap policies to make comparison shopping easier, and numerous other states are expected to follow suit. Minnesota has gone a step further by publishing a cost-comparison guide that lets consumers see the wide variation in prices.

Meanwhile, Congress may consider several bills this year that would standardize medigap plans, crack down on sales abuses or enact other reforms.

And the National Assn. of Insurance Commissioners, the powerful group representing state regulators, has proposed minimum standards for medigap policies that must be met or exceeded by all states. The NAIC rules also crack down on advertising, marketing and sales abuses.

But tighter regulations are only part of the solution. Ultimately, you must be more knowledgeable about your insurance options when you re-evaluate your current coverage or buy new coverage.

Here are some tips and reminders to guide you or your loved ones:

* Decide whether you really need medigap. If you’re a low-income person eligible for Medicaid or Medi-Cal, you may not need supplemental insurance, says Gail Shearer, manager for policy analysis at Consumers Union in Washington. Seek counseling, she advises.

* Find out what medigap covers. Based on your own medical history and expenses, you should decide what gaps in Medicare you want a supplemental policy to cover. Then you can pick the right policy that meets your needs.

* Don’t buy a second policy. Many seniors are convinced that they need multiple policies to cover gaps in their current policy. But second policies simply are unnecessary; they will overlap with your first one, resulting in your paying more than you need to. If your current policy is inadequate, “get rid of it and get a new one,” Hunter says. But be wary that new policies will impose exclusions or waiting periods for pre-existing conditions covered by your current policy.

* Explore ways to save on premiums. For example, consider getting a policy that doesn’t pay the $592 deductible for the first day of hospital stays required under Medicare. Another way to save is by getting a plan that requires treatment from so-called preferred provider organizations or health maintenance organizations, says Firman of the United Seniors Health Cooperative.

* Seek objective advice. California offers one of the nation’s best health insurance counseling programs, and it’s free. The state-funded Health Insurance Counseling and Advocacy Program also provides legal assistance in certain circumstances involving claims or payments. For referrals, contact the state Insurance Department’s consumer hot line at (800) 233-9045.

Numerous brochures and publications are also available. You can call the state hot line for some. Also there is “Managing Your Health Care Finances: Getting the Most Out of Medicare and Medigap Insurance,” available for $7.95 from the United Seniors Health Cooperative, 1334 G St. NW, Washington, D.C. 20005.

* Don’t expect medigap to cover long-term nursing home care. You will need a separate long-term care policy, but don’t expect much. Most policies carry restrictions and charge high premiums that make them of limited usefulness, Hunter says.

* Be wary of so-called hospital indemnity or dreaded-disease programs. The former pays you a set amount each day you’re in a hospital; the latter covers such maladies as cancer. Both are of dubious value, consumer advocates agree. Insurers pay out only a small fraction of their premiums in benefits.

* Complain. The state Insurance Department’s consumer hot line at (800) 233-9045 handles complaints about abusive sales tactics, claims or other problems.

‘MEDIGAP’ POLICIES AT A GLANCE

PART A:

Type of Expense:* Hospital Charges

Major Gaps in Medicare in 1990: A $592 deductible for each hospital stay (separated by 60 days)*

What a Standard Medigap Policy Will Cover in 1990: $592 deductible for each hospital stay (separated by 60 days)*

Remaining Out-of-Pocket Expenses With a Standard Medigap Policy in 1990: All costs after 150 days (all costs after 90 days if you have used your Lifetime Reserve)**

Major Gaps in Medicare in 1990: $148 per day for the 61st through the 90th day

What a Standard Medigap Policy Will Cover in 1990: $148 per day for the 61st through the 90th day

Remaining Out-of-Pocket Expenses With a Standard Medigap Policy in 1990: Incidental and optional hospital charges such as a private room, a private nurse, etc.

Major Gaps in Medicare in 1990: ($296 per day for the 91st through the 150th day. Lifetime Reserve can be used only once.)

What a Standard Medigap Policy Will Cover in 1990: ($296 per day for the 91st through the 150th day. Lifetime Reserve can be used only once.)

Remaining Out-of-Pocket Expenses With a Standard Medigap Policy in 1990:

Type of Expense: * Nursing Home Care

Major Gaps in Medicare in 1990: For skilled-level care only, co-payments of $74 per day from the 21st through the 100th day of confinement for a total of up to $5,920.

What a Standard Medigap Policy Will Cover in 1990: For skilled-level care only, co-payments of $74 per day from the 21st through the 100th day of confinement for a total of up to $5,920.

Remaining Out-of-Pocket Expenses With a Standard Medigap Policy in 1990: Skilled-level care in excess of 100 days. All nursing home care that is intermediate or custodial-level care (i.e. 98% of all care).**

PART B:

Type of Expense: * Physician and Out-Patient Charges

Major Gaps in Medicare in 1990: $75 annual deductible; 20% co-payment on Medicare allowable charges with no maximum limit

What a Standard Medigap Policy Will Cover in 1990: $75 annual deductible; 20% co-payment on Medicare allowable charges with no maximum limit

Remaining Out-of-Pocket Expenses With a Standard Medigap Policy in 1990: All physician and the amounts approved by Medicare**

Type of Expense: * Out-Patient Prescription Drugs

Major Gaps in Medicare in 1990: All out-patient prescription drug costs

What a Standard Medigap Policy Will Cover in 1990: Most private plans cover nothing

Remaining Out-of-Pocket Expenses With a Standard Medigap Policy in 1990: All out-patient prescription drug costs**

* NAIC Guidelines permit offering plans which do not cover the hospital deductible.

** Some Medigap policies offer additional coverage for this gap.

Source: United Seniors Health Cooperative