Medigap increases pose new collection woes

The premiums senior citizens pay for Medigap insurance — which pays for items regular Medicare does not — are rising, which could force more seniors to drop the coverage, meaning hospitals may have to struggle more to collect funds from elderly patients.

When seniors carry Medigap, the coinsurance deductible is automatically piggy-backed to their Medigap insurer. If that policy is dropped, however, hospitals have to collect from patients before service, or bill and collect afterward. That would carry substantial costs, including administrative, collection, and patient relationship hassles now that Medigap premiums have begun to soar.

Close to 75% of senior citizens now carry Medigap insurance policies to cover items such as deductibles or prescription drugs, says Ron Pollack, executive director of Families USA, a senior advocacy group in Washington, DC. But the ranks of those who can continue to carry it will likely decline, he predicts.

In California, for example, the annual premium for Prudential’s basic Medigap plan rose 37% in 1996, to $774. For its more generous Medigap plan, premiums increased by 39% to $1,614. With the average monthly Social Security benefits for a single person totaling $724, the new premium costs more than two months of Social Security checks.

In other states, Prudential’s increases ranged from 40% in Hawaii to 26% in South Carolina.

This comes as the elderly adjust to higher Medicare deductibles. Medicare Part A deductibles covering hospital stays rose by $24, from $736 in 1996 to $760 in 1997. Monthly Medicare Part B premiums were scheduled to rise by $1.30, or 3%, up to $43.80, effective Jan. 1. Seniors pay 25% of this premium.

These increases do not include any additional financial burdens placed on the elderly by congressional action to keep the Medicare fund from insolvency. (See story on p. 34 for President Clinton’s proposed Medicare revamping.)