WASHINGTON — The dragon of medical inflation is breathing fire again, with millions of senior citizens facing hefty increases for their Medi-gap supplemental insurance this year.
United HealthCare Corp., the biggest single player in the market, is raising premium prices about 9%. In its Southern California region, which includes Los Angeles and Orange counties, the price hikes will range from 4.8% to 19%, depending on which of the 10 standard Medi-gap plans a customer has chosen.
The price increases are drastically higher than the overall rate of inflation faced by U.S. consumers, which is running at a negligible 1.5%. But Medi-gap, the private insurance meant to pay for what Medicare doesn't cover, is a highly sensitive barometer of actual health care costs. And the fast-moving insurance prices reflect the reality of caring for the nation's masses of elderly: They are healthy and long-lived, but it takes tremendous amounts of money to keep them that way.
The resurgence of medical inflation comes at a difficult political time, when a special bipartisan Medicare commission is grappling with ideas to assure the financial solvency of the massive program, which covers 40 million people 65 and older and the disabled of all ages. The soaring health costs mean that any solutions the commission fashions could be overwhelmed simply by the reality of demographics.
The fastest-growing group of Americans is people age 80 and above. Healthier than their counterparts in the rest of the world, they have access to new, less-intrusive surgical techniques that make it possible to replace a hip or a knee at a more advanced age than ever before.
For baby boomers and their aging parents, greater longevity is a fact of life. And the old will keep getting older. By the census of 2010, predicted Bill Beach, an economist at the conservative Heritage Foundation think tank, the fastest-growing group of Americans will be those ages 90 and above. "No one has anticipated what medical science would be able to do."
But the costs of longevity are also growing. Now an average of $15,000 a year is spent for the health care of those over 80. As they age and fall prey to a series of ailments and chronic conditions, many will need additional financial help, especially with prescription drugs, which are not covered by Medicare.
Millions of people already buy supplemental Medi-gap coverage because Medicare won't give them complete coverage for hospital and doctor bills. The supplemental insurance costs about $120 a month for the most basic coverage to nearly $250 a month for the most comprehensive.
The "high costs of Medi-gap coverage are straining the limited budgets of growing numbers of seniors," according to an article by economists Henry Aaron and Robert D. Reischauer of the Brookings Institution, a nonpartisan think tank in Washington.
And the price tag could escalate.
"Costs have been relatively flat over the last few years, but they are starting to rise again," warned Bob Hussey, vice president of retirement and senior services for United HealthCare, which is the exclusive Medi-gap supplier for the American Assn. of Retired Persons. The average age of buyers of his firm's Medi-gap coverage is 77, up from 75 a few years ago.
Unlike the majority of Americans with insurance through work--who are usually limited in their selection of doctors and hospitals--most Medicare enrollees are still living in a fee-for-service world. They select any doctor who participates in the Medicare system.
Although health maintenance organization participation is growing rapidly, notably where drug coverage is offered, an overwhelming 85% of Medicare beneficiaries remain in the traditional fee-for-service system.
Therefore, a significant Medi-gap price hike is a warning sign about the difficulties of paying for medical care in a steadily aging society.
"More is done for patients at all stages in the health care delivery system of 1999, compared with 1965 [when Medicare was created], and that is what is driving costs," said Karen Ignagni, president of the American Assn. of Health Plans, the HMO trade group.
The soaring demand for Viagra, the drug that enables impotent men to have erections, has set off an intense debate over what society can afford to do for the aging population. Individual consumers, medical experts, economists and ethicists have to figure out how to "draw the line between medical necessity and lifestyles," Ignagni said.
Viagra may be generating the headlines and spawning jokes on the Internet, but the debates over medical cost and efficacy go on every day in doctors' offices and hospitals and around kitchen tables.
A person can see with cataracts, but not well enough to drive at night unless he has the cataracts removed. A dedicated tennis player can walk readily but can't go back on the court until she has a hip replacement. Are the surgeries medical choices or lifestyle decisions?
