Medicare Supplement Insurance Inflation
All costs go up including Medigap
It's scary. I've crossed some kind of generational boundary of sorts. I'm not doing what I would secretly make fun of my older relatives for doing when I was a younger person. They would occasionally fall into a conversation surrounding how much things costed when they were young with the emphasis on how much prices have increased. It's pretty typical to hear a, "I remember when gas was 30 cents a gallon and you could get a coffee for 10 cents. It sounds pretty funny when you're younger as you roll your eyes...the snarky young thing to do in such a situation. Then it happens. You catch yourself internally (or worse yet, out loud) denouncing the rise in costs and thinking back to the cost of a Big Gulp or something. It's official...you're old. What about inflation and Medicare supplemental insurance plans? What are we looking at going forward with Medigap plans? Let's try to see the future.
Aside from technology, everything goes up in price or looked at from the flip side, the value of money goes down. Either way, it's inflation and we can expect that Medicare supplement plans will also increase unless we completely change the way we look at health and/or have miracle cures for many age-related ailments which isn't completely out of the question. Barring amazing breakthroughs, let's guestimate what you can expect. As things currently stand, you can expect inflation on the Medicare supplement plans to run from a low of 3/4% to a high of 10% although most years have seen increases under 10% even in the bad years.
The increase or inflation in Medicare supplements results from a few different factors. On one hand, you have ebb and flow of claims. If claims increase than the cost of your Medicare supplement plan will reflect this in the next annual (typically annual) increase. Claims costs do not seem to ever decrease as the cost and sophistication of the underlying health care steadily goes up. Changes to what Medicare covers can also impact the cost of your Medigap plan. If benefits are changed or added, this ultimately hit the subscriber and we've seen quite a bit of change recently with Medicare (think preventative for example). We feel pretty comfortable with the expectation of around 7-8% per year for Medicare supplemental plan inflation. That's only one piece of the puzzle however.
All bets are off for Part D (part of Medicare that covers medication cost) as this is relatively newer program and the pricing has not been as stable as with Medigap plans. We expect it to settle down into a more predictable trend but ultimately, the underlying cost of medications continues to skyrocket with some medications running 10's of 1000's of dollars per year. Our expected range of increases could be anywhere from a few percent to 20 or 30. I know that doesn't help very much but there is much variation of plan options and pricing models that the dozens of carriers used. Some overestimated costs and some significantly under-estimated costs. It will probably take 5 to 8 years to clear out the extremes and find a more predictable middle.
These are the two core costs associated with Medicare but not including the actual core Medicare plan itself. You can expect to change as well not so much due to underlying health costs (although a significant factor) but also reflecting the need to shore up Medicare's financing. Although more cost-sharing based on income isn't inflation per se, you still have to pay it. Another factor for the actual Medicare supplement cost is the potential for legislative changes such as recent discussions of not making Medigap gap plans cover 1st dollar costs so as to disuade (no other way to really view it) the use of medical care. This might have the opposite affect on Medicare supplement inflation but you'll be paying those 1st dollar costs out of pocket so the effect is the same. We'll our eye on trends for Medicare supplement plan cost inflation so you can try to plan for the quite variable future of related costs.