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Medigap policies getting attention from Congress

Nothing gets the attention of Congress faster than unhappy senior citizens. In 1989, a surtax of up to $800 per year for Medicare catastrophic coverage got the over-65 crowd so upset Congress finally repealed it.

In 1990, the resulting premium increases for private insurance to supplement Medicare may prompt a similar outcry. That possibility is focusing congressional attention on lingering problems of fraud and abuse in the so-called Medigap market.

Addressing those problems won't be easy. Any legislation must overcome the vehement objections of the insurance industry, which more than one congressional staffer has described as an "800-pound gorilla."

But in an election year, the political climate may be right for action. If the fight comes down to the senior citizens' lobby vs. the insurance industry, "the seniors win, hands down," says Pete Stark, D-Calif., chairman of the House Ways and Means Subcommittee on Health.

The insurance industry has long been regulated primarily by the states. Congress made its first foray into Medigap regulation in 1980, when it set out minimum standards for Medigap policies. But 10 years and dozens of investigations later, a growing number of policy-makers have concluded that not much has changed.

Renewed congressional interest in the issue was predictable. Medigap prices began rising as soon as Congress repealed the 1988 Medicare Catastrophic Coverage Act, which had subsumed much of the supplemental insurance market by dramatically increasing Medicare's coverage of hospital, physician and prescription-drug costs.

According to a General Accounting Office (GAO) survey presented at the Feb. 2 hearing, 1990 Medigap premiums will increase by an average of 19.5 percent over 1989. As a result, many policyholders will be paying more than they would have under the catastrophic-costs law.

Medigap policies are designed to cover the gaps in Medicare coverage _ primarily by paying the required hospital and physician-bill deductibles ($592 and $75, respectively, in 1990) and required coinsurance (20 percent of physician and outpatient bills, plus an increasing percentage for hospital stays longer than 60 days).

Much of the current debate centers on the Medigap premium increases in the wake of repeal of the catastrophic-costs law. About half of the average jump is directly attributable to insurers' having to pick up coverage that Medicare provided under that law and to administrative costs associated with changing policies and notifying policyholders, according to the GAO survey. The other half, insurers told GAO, comes from increased use of medical services, general inflation in health-care costs and "higher than expected claims experience in prior years."

The problems with Medigap go well beyond premium increases, however.

Marketing abuses abound _ sales of duplicative policies, misleading direct-mail solicitations and "twisting," the practice of persuading people to change policies, which generates new commissions for the insurance salesman. But interested parties differ over whether the lack is in adequate rules or in adequate enforcement.

"The state regulators just aren't doing their job," says Stark.

The National Association of Insurance Commissioners, made up of state regulators, in December adopted new model standards for Medigap policies that address many of the abuses. Insurers say Congress should stay out of the field.

Stark disagrees. "The insurance industry really doesn't have a leg to stand on," he says. "They have a lot of bad apples and they just aren't weeding them out."