HEARING - U.S. Senate Special Committee on Aging

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to repeat the scandals that continue to exist in the medigap
market -- affecting not only the medigap market segment, but
expanding the pattern of abuses into the "long-term care" market
as well; and (C) totally ignores several very sound options that
place less emphasis on the private market.
(A) Shortcomings of Private "MedigaP" Market
In the late 1970's abuses in the medicare supplement
insurance market were exposed by the House and <strong>Senate</strong> Select
<strong>Committee</strong>s on Aging, by the Federal Trade Commission, and by
several state insurance departments. In addition to marketing
abuses such as "loading up" (selling multiple overlapping
policies to vulnerable consumers), "twisting" (convincing a
client to switch policies, hence increasing exclusions for
pre-existing conditions), "clean sheeting" (where agents ignore
applicant's health problems on the application form, but leave
the client vulnerable to have claims rejected later), medicare
supplement policies very often had very low loss ratios
(percentage of premiums collected that are paid in benefits).
People eligible for medicare supplement insurance policies were
understandably confused about how to evaluate the available
policies; vety little information about the worth of the
policies existed.
In response to the abuses, the Congress passed Public Law
96-265, adding section 1882 to the Social Security Act.
Catastrophic Illness Expenses refers to this legislation (p.