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THE SPECIAL YEARS : 50 AND BEYOND: THE TIME OF YOUR LIFE : The Insurance Gap : The Question for Many: Should I buy or Retain Supplemental Medicare Coverage?

May 04, 1989|BILL SING | Sing is a Times staff writer.

If you are among the nation's 32 million citizens eligible for Medicare, you can rest easier these days. Congress has expanded Medicare's coverage, starting this year, to better protect you and other beneficiaries from financial ruin due to catastrophic hospital, doctor and prescription drug bills.

But some notable gaps in Medicare coverage remain. Thus, the question for many seniors is: Should I buy or retain supplemental insurance to cover these gaps?

Your answer may well be yes, at least for this year. But, unfortunately, such insurance--generally considered to have been overpriced even before this year--has become even less of a good buy.

Medicare supplement insurance--known as Medigap--covers less now that Medicare covers more. Despite this reduced coverage, Medigap premiums are rising this year by as much as 30% to 40%, with many plans priced between $400 to $800 a year.

With further enhancements in Medicare coverage to begin in 1990, Medigap policies may become even less valuable next year.

"This year, most people should probably continue to buy it and eat the price increase, with the thought of dropping it next year if prices don't come down significantly," says J. Robert Hunter, president of the National Insurance Consumer Organization, a nonprofit group in Alexandria, Va.

Seniors also face another problem with Medigap coverage. Unscrupulous insurance companies and agents continue to use questionable--and in some cases illegal--sales tactics to hawk these policies to unwary people who may already be covered. As a result, many seniors are over-insured, with some having as many as five overlapping policies.

"It's such a complicated purchase," says Robin Talbert, senior program specialist in the consumer affairs division of the American Assn. of Retired Persons. "It's so easy to be misled or to misunderstand what information is provided to you,"

To get the best value and avoid being ripped off, you will need to be diligent in determining your true insurance needs, and then shop carefully.

First, become more familiar with what Medicare covers. Under its new comprehensive coverage, for example, you will be covered for unlimited days of reasonable and necessary hospital care, after you pay a single annual hospital deductible of $560. Previously, Medicare coverage for hospital stays was phased out after the first 60 days a year and terminated completely after 150 days.

Coverages will expand even more in 1990 and 1991. Starting in 1990, for example, Medicare will cover all Medicare-approved expenses (such as physician's services, inpatient and outpatient medical services and supplies, physical and speech therapy, and ambulance charges) once you have paid $1,370 a year to cover a $75 annual deductible and a 20% co-payment.

And beginning in 1991, Medicare will cover all approved prescription drug charges, after you pay a $600 annual deductible.

This expanded coverage, however, is not free. Premiums are higher. And if you are eligible for Medicare, you will be assessed a federal income tax surcharge if you pay at least $150 in federal income tax, starting with 1989 returns. That surcharge will be $22.50 for each $150 of your tax liability, up to a limit of $800 per person, for taxes you pay on 1989 income. Those amounts will rise in subsequent tax years. (Some members of Congress have proposed reducing the surtax, but the outcome of that effort remains uncertain.)

Covering Medicare's remaining deductibles and co-payments is where many Medigap policies try to fit in.

Voluntary standards established by the National Assn. of Insurance Commissioners require that any Medicare supplement policy must provide a minimal level of benefits at a reasonable cost. The policies also must be easy to understand and not duplicate Medicare coverage.

Under those standards, for example, Medigap policies must cover all or none of the $560 annual Medicare hospital deductible--nothing in between. Medigap policies also must cover the $25.50 per day you must pay under Medicare for the first eight days in a skilled nursing facility. (Most nursing homes in California are skilled nursing facilities, but most elsewhere in the country are not. Skilled nursing facilities primarily furnish skilled nursing and rehabilitative services and may be part of a hospital or a separate facility.)

Some Medigap policies may include other benefits not covered by Medicare, such as payment for hospitalization in a private room. They may also pay for charges above payment levels approved by Medicare.

However, there are some areas that neither Medicare nor Medigap covers. One such area is long-term nursing home care. For that you may need separate, long-term care insurance, although it, too, is regarded by many consumer advocates as a poor buy because of high premiums and limited coverages.

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