Medigap Insurance

Medigap is the term that applies to private health-care insurance policies designed to cover the “gaps,” or out-of-pocket expenses, that Original Medicare does not pay for. Also known as Medicare supplement insurance, Medigap covers the many deductibles, coinsurance amounts, co-pays, and other limitations and services that Medicare does not pay. For example, a Medigap policy might cover Part B excess charges and emergency health care while the beneficiary is traveling outside the United States.

Clearly, Medigap policies are purchased because Medicare does not pay for total health care. And while a Medigap policy will cover some of these gaps, it doesn’t pay for all. A Medigap policy can help lower out-of-pocket costs and expand coverage.

A Medigap policy only works in conjunction with the Original Medicare plan. So, if an individual decides to join a Medicare Advantage plan, Medigap coverage is unnecessary. The Medigap policy will not pay deductibles, co-pays, or other cost sharing for anyone enrolled in an Advantage plan. Medicare beneficiaries generally drop their Medigap policies when they enroll in a Part C plan. Those who enroll in Original Medicare may benefit by purchasing a Medigap policy.

Standardized Medigap Policies

A Medigap policy must meet the statutory definition of a Medicare supplement policy as contained in Section 1882(g)(1) of Title XVIII of the Social Security Act. Since 1992, Medigap policies have been standardized. Each plan design provides for a specified set of benefits and is titled simply as a letter of the alphabet. For each plan design, the benefits are the same among all insurers. Before June 1, 2010, there were 14 standard plan options; as of June 1, 2010, the plans were revamped to reflect changes in the Medicare market. The 2010 changes included the addition of two plans (M and N) and the elimination of four others (E, H, I, and J). Plans sold after June 1, 2010, must conform to these new changes; plans that were purchased before this date will continue in force.

Standardized Plan Benefits

Every Medigap policy must provide for a minimum level of “basic” or “core” benefits. These are represented by Plan A. Every other plan must include these basic benefits and adds additional benefits.

Basic (core) benefits:

• Medicare A and B coinsurance—Covers the coinsurance cost incurred during a hospital stay under Medicare Part A and the coinsurance on Medicare Part B services once the deductible is met.
• 365 days extra hospital stay—Covers the full cost of 365 extra days of a hospital stay after all Medicare hospital benefits are exhausted.
• three pints of blood—Covers the cost of three pints of blood per year.
• hospice care—Covers all cost-sharing billed to the Medicare beneficiary for hospice care (including respite care) under Medicare Part A.

Other benefits:

• Part A deductible—Covers the deductible on Medigap Part A, which varies from year to year.
• foreign travel emergency—Covers 80 percent of emergency care administered outside the country during the first 60 days of any trip. A deductible and lifetime maximum apply.
• skilled nursing facility (SNF) coinsurance—Covers up to a stated charge per day toward the cost of a stay in a skilled nursing facility during days 21 through 100. (Medicare pays 100 percent of SNF care for only the first 20 days.)
• Medicare Part B deductible—Covers the annual deductible on Medicare Part B, which varies from year to year.
• Medicare Part B excess charges—Helps cover the additional cost of services by doctors who do not accept Medicare assignment, meaning they do not accept Medicare’s reimbursement as payment in full.
• Part B preventive care—Covers all cost-sharing billed to the Medicare beneficiary for preventive care services under Medicare Part B.