Medigap Insurance Reform Bill Likely to Pass Congress This Fall

Legislation aims to save older Americans money by reducing duplicate policy coverage

THIS fall Congress is likely to approve a new plan designed to help older Americans meet their medical expenses. Unlike most government social plans, this one will hardly cost taxpayers a cent. The plan would fine-tune the existing, 10-year-old law that regulates the privately sold health insurance that Americans over 65 buy from to supplement the coverage of the government's Medicare program. The idea is to standardize the benefits in these insurance programs, usually called Medigap plans, and simplify their wording.

In addition, in an effort to help hold down premium costs Congress may require these Medigap programs to be more financially efficient - paying out as benefits a greater percentage of the premiums they collect.

Although it is late in the legislative year for Congress to enact such a law as separate legislation, this year, ``there is a will on Capitol Hill to get it done,'' says a longtime observer of the issue.

Thus proponents of the measure are expected to try to obtain approval by using a favorite tactic of recent years: Append the proposal to the catchall money measure, called the Reconciliation Bill, at the end of the congressional session.

Principal congressional players in this issue are Rep. Ron Wyden (D) of Oregon, Sen. Tom Daschle (D) of South Dakota, and Rep. Pete Stark (D) of California, all of whom have introduced proposals on the subject.

The ultimate intent of the congressional proposal is to reduce the duplicate insurance coverage held by an unknown percentage of older Americans, and thus decrease the amount of money they pay out of their own pockets for private health insurance.

The influential American Association of Retired Persons is ``very strongly supportive of federal legislation ... that gives consumers a better idea of what their choices are,'' says Tricia Smith, an AARP legislative representative.

The 25-year-old Medicare program pays a high percentage of the medical costs of Americans over 65. But it requires them to pay out of their own pockets an initial deductible amount on the bills of hospitals ($592) and physicians ($75), and a 20 percent share of physician and outpatient bills. Most Medigap plans would pay many of these costs.

But the biggest reason older Americans are purchasing Medigap policies probably is that Medicare requires them to pay an increasing percentage of their hospital costs after they have been hospitalized for two months. This has the potential of being a huge and unaffordable cost to many elderly Americans, with the daily cost of hospital rooms alone averaging over $250 in some large cities, not including the cost of medical treatment. Thus older Americans seek protection against it from private insurance.

Ironically, two years ago Congress thought it made Medigap insurance obsolete when it passed a bill to provide some federal financing of long-term care expenses. However, the next year year it repealed the measure following protests from many more affluent older Americans.

Reenter Medigap. And reenter previous complaints against Medigap - that it was too expensive, hard to understand, and in some cases duplicative.

Earlier this year three committees of a concerned Congress held hearings on the issue. Among other things they heard testimony from the government's General Accounting Office (GAO) that premiums of private insurer's Medigap insurance had risen after repeal of the federal long-term-care law, just as representatives of some organizations of older Americans had forecast.

The GAO surveyed 20 private insurance companies and found an average rate increase of about 20 percent. That is ``probably a little higher than the normal'' increase, says Tom Bowdal, assistant director of the GAO's Human Resources Division.

Although the GAO did not look specifically at private insurer's justifications for the rate hike, Mr. Bowdal says in all probability ``there are a number of reasons,'' including dealing with past losses and insurers' decisions to restore benefits trimmed from their plans when the long-term-care law was passed.

Nonetheless, the GAO's report that Medigap policies were costing buyers more brought forth a renewal of past complaints against these policies and the insurers who sell them, ranging from lack of standardization of benefits to obtuse wording to duplication of policies.

One of the most vociferous of past complaints was that some unscrupulous insurance salesmen were taking advantage of the confusion of some older Americans to sell them several policies that were merely expensive duplicates of each other.

Industry officials hold that these problems have been largely solved. ``There really is very little hard data'' now on duplication, admits one observer who in the past has been critical of the insurance industry. ``But primarily that duplication is between Medigap and insurance provided by employers,'' which many retired Americans retain.

Some proposals in Congress would prevent Medigap from offering older Americans an insurance policy that duplicates other policies they already hold. But this is raising serious questions among some liberals who normally would be considered as likely to support such a ban. They note that some employer-based insurance policies have been trying to hold down costs by decreasing coverage. They question whether it is therefore in the best interests of older Americans for Congress to forbid them from purchasing Medigap plans that duplicate portions of their employer-provided plan.