(Washington, DC) According to a new survey by The Senior Citizens League (TSCL), premiums for Medicare supplemental insurance, known as Medigap, grew more than twice as fast as Social Security cost – of – living -adjustments (COLA) in the past year. About 41 percent of survey participants who are covered by a Medigap policy report robust premium increases in the past 12 months of at least 6 percent or more, particularly for individuals who were covered by a policy for more than two years. “The Social Security COLA for 2019 is 2.8 percent, far lower than the rate that Medigap policies appear to be growing,” says Mary Johnson, a Social Security and Medicare policy analyst for The Senior Citizens League.
In addition to rapidly growing Medigap premiums, retirees also must pay for premiums for Medicare Part B and their drug plans. The combination takes a bigger bite out of Social Security benefits and other retirement resources when COLAs fail to keep pace. “The financial drain on benefits is difficult to anticipate, and many retirees don’t have adequate savings to begin with,” Johnson says.
The disparity between growth in the COLA and Medigap premiums is likely to be worse in 2020. “Inflation is lower this year, and we are estimating that the COLA is likely to be around 1.7 percent,” Johnson says. “Nevertheless, we anticipate that Medigap premiums will continue to grow several times faster for a number of reasons,” Johnson adds.
Two of the most popular Medigap plans, “F” and “C,” will no longer be offered for sale in 2020. “While individuals enrolled in these plans may keep their plans, we are concerned that premiums for these plans could rise significantly without younger and healthier new enrollees to spread the costs in those plans,” Johnson says.
In 2019, there are a total of ten different Medigap plans, “A” through “N.” Congress closed Plans “F” and “C” because they cover the Medicare Part B deductible. The thinking is that deductibles prevent “over utilization” of Medicare benefits. The Part B deductible is $135.50 this year and it rises at the same pace as the Part B premium. According to research by Johnson, Part B premiums have increased about 10 percent per year since 2000, making it one of the fastest growing costs in retirement. “Requiring retirees to pay deductibles, or higher deductibles, has the biggest financial and health impact on middle-income Medicare beneficiaries with modest means,” says Johnson. “Many put off medically necessary care if they can’t afford the deductible, and their health can get worse when they do,” she says.
About one quarter of all Medicare beneficiaries are covered by Medigap polices. Out-of-pocket costs under Medicare are considerable, and most beneficiaries supplement their coverage either by purchasing a Medigap policy or joining a Medicare Advantage plan. Unlike Medicare Advantage, however, Medigap enrollees in most states are not able to switch to another Medigap policy during fall open enrollment, because insurers are not required to cover pre-existing conditions outside of the individual’s initial enrollment period. Seventy-two percent of survey participants support extending guaranteed coverage for pre-existing conditions to Medigap, allowing Medigap enrollees greater freedom to switch to other, less costly, Medigap plans.
The Senior Citizens League supports legislation that protects Medicare benefits and lowers out-of-pocket costs for beneficiaries. To learn how to get involved, visit www.SeniorsLeague.org.
With 1.2 million supporters, The Senior Citizens League is one of the nation’s largest nonpartisan seniors’ groups. Its mission is to promote and assist members and supporters, to educate and alert senior citizens about their rights and freedoms as U.S. Citizens, and to protect and defend the benefits senior citizens have earned and paid for. The Senior Citizens League is a proud affiliate of The Retired Enlisted Association. Visit www.SeniorsLeague.org for more information.