State Curbs Urged on Medicare Supplements

Testimony that thousands of elderly people are being “shamelessly victimized” by excesses in the sale of Medicare supplemental insurance marked the first of eight hearings by the state Insurance Department on Monday into charges that the sales are rife with improprieties.

A stream of witnesses, some of them elderly, others advisers to the elderly, told a panel here headed by Insurance Commissioner Roxani Gillespie that the state should move to close down or at least stringently regulate the sales operations.

Elderly people purchase Medicare supplemental insurance to cover bills that are not paid by Medicare.

Gillespie said she is particularly interested in direct testimony from elderly people. But she also said eight of the alleged offending companies are being subpoenaed to appear at the final hearing in San Francisco on Jan. 28.

Many Based in Texas

Since October, the Insurance Department has prohibited 25 individuals, companies or groups doing business under fictitious names from selling Medicare supplemental policies in California. Most of them are Texas-based and most have failed to show up for hearings to challenge the order. Fewer than 25 entities are involved, because some of the fictitious names represent the same parties.

Two of the main witnesses Monday--Bonnie Burns of Santa Cruz, consultant to Senior Network Services Inc., and Carl Oshiro of San Francisco, director of special projects for the Consumers Union--singled out celebrities who have allowed their names to be used in alleged misleading advertising for particular criticism.

They charged that James Roosevelt’s National Committee to Preserve Social Security is a leading purveyor of mail advertising designed to scare elderly citizens into buying supplemental policies that in many cases they do not need.

Oshiro said that one direct mailing featuring Roosevelt, son of the late President Franklin D. Roosevelt, prominently makes the claim that seniors could pay more than $40,000 in their own money above and beyond what Medicare pays if they were hospitalized for 515 days.

‘Better Chance’ in Lottery

“The ad fails to tell seniors that the average stay is only 7.5 days and there is less than a 1 in 500,000 chance that a stay will be more than 120 days,” the Consumers Union official said. “A senior has a better chance of hitting a $5,000 jackpot in the California lottery.”

Roosevelt could not be reached for comment. His company has not been prohibited from doing business in the state.

Burns said that a favorite technique in Medicare supplemental sales is to advertise 100% coverage, with an asterisk beside the 100%. She said the asterisk is explained in such complex language that the average layman cannot understand it.

But it often turns out that what is covered is up to 100% of what Medicare approves as the basis for an 80% payment, minus what Medicare does pay and a $200 deductible. When the elderly buyer goes to collect, she said, he discovers that a doctor may bill $2,000, will actually get a $1,500 approval from Medicare, $1,200 in Medicare payments and then only $100 from the supplemental insurer. The consumer finds to his surprise that he must pay $700.

Urge State Action

Two of the elderly persons who testified recommended broad state action to bring some uniformity to the field and to make the policies understandable.

Ted Ellsworth, a Los Angeles health plan consultant, urged the Legislature to mandate a single standard policy, easily explained, that would be offered by all companies to elderly buyers.

Warren Shaw of Arcadia urged that all sellers be required by law to give notice to consumers that there usually isn’t any need to have several policies in force at once. He said that unscrupulous insurance agents often sell a new policy to unwary persons every few months. Shaw also said the state should issue a checklist that would allow the elderly to rationally compare policies.

The insurance commissioner, Gillespie, responded that her department will shortly issue a buyer’s guide to Medicare supplemental policies and Burns is being asked to review it before it is prepared.