Medigap: Plugging the Holes in Medicare

With all the deductibles, copayments and coverage exclusions,
Medicare pays for only about half of the medical costs of America's senior
citizens. Much of the balance not covered by Medicare can be covered by
purchasing a "Medigap" insurance policy.

Insurance companies may sell only Medigap policies that fall
into one of 10 standard benefit packages, ranging from basic coverage to the
most comprehensive coverage. The 10 available Medigap policy packages are
identified by the letters A, B, C, D, F, G, K, L, M, and N (see chart below).
Plans E, H, I, and J are no longer sold, but, if you already have one, you can
keep it. Each plan package offers a different combination of benefits, allowing
purchasers to choose the combination that is right for them. However, each plan
package is the same across insurance companies — thus, a C package from one
insurer will be identical to a C package offered by another. Of course, the
more Medigap coverage you purchase, the more you will have to pay in premiums.
All Medigap policies must provide at least the following core benefits:

  • The
    coinsurance for days 61 to 90 of a hospital stay
  • The
    coinsurance for days 91-150 of a hospital stay (lifetime reserve days)
  • All
    hospital-approved costs from day 151 through 365

In addition, plans A, B, C, D, F, and G also cover the
following:

  • The
    cost of the first three pints of blood not covered by Medicare
  • The
    20 percent coinsurance for Part B medical charges

Plan K offers the following benefits:

  • 50
    percent of the coinsurance for Part B medical services and 100 percent of
    preventative services
  • 50
    percent of the first three pints of blood
  • 50
    percent of hospice care cost sharing

Plan L offers the following benefits:

  • 75
    percent of the coinsurance for Part B medical services and 100 percent of
    preventative services
  • 75
    percent of the first three pints of blood
  • 75
    percent of hospice care cost sharing

The plans provide a combination of eight other areas of
coverage on top of the basic set. These areas of coverage include the
coinsurance for days 21 to 100 in a skilled nursing facility, the Part A and
Part B deductibles, foreign travel emergencies, and prescription drug coverage.

States may authorize the sale by insurance companies of the
basic plan package and any number of the other nine approved combinations of
benefits, so there may be fewer than 10 options to choose from in your state.
Also, if you live in Massachusetts, Minnesota or Wisconsin, different types of
standardized Medigap plans from the ones outlined below are sold.

A Medicare recipient cannot be denied a Medigap policy if he
or she applies for one within six months of enrolling in Medicare Part B. Otherwise,
claims relating to pre-existing conditions can be denied only during the first
six months that the policy is in effect. However, federal law does not require
that fee-for-service Medigap policies be offered to those who enroll in
Medicare Part B because they are disabled.

Medigap policies do not fill all the gaps in Medicare
coverage. The biggest gap they fail to bridge is for custodial care in a
nursing facility or for skilled care in a nursing home beyond the first 100
days. For coverage of this type of care, you must either purchase long-term
care insurance or qualify for Medicaid coverage.

Medigap also does not cover vision care, eyeglasses, hearing
aids or dental care unless such treatment or equipment is needed as the result
of an injury. In addition, Medigap plans do not cover prescription drugs.
Before January 1, 2006, prescription drugs were covered in three plan packages
(plans H, I and J). But under the Medicare Improvement Act, which created a
Medicare prescription drug program, Medigap policies offering prescription drug
coverage may no longer be sold.  However, existing Medigap policies may be
renewed. But be aware that if you keep your Medigap policy and later decide you
want to enroll in Medicare’s drug program, you may have to pay a premium
penalty, although you won't have to pay a penalty if your Medigap plan is
considered as good as the Medicare prescription drug plan. Medigap issuers
should have sent notice to let you know if your Medigap plan is as good as
Medicare prescription coverage.

It pays to shop around for a policy as premiums vary widely
not only from state to state, but within states as well.  To help you find
and compare Medigap programs available in your area, the Medicare program
offers a Web site called Medigap Compare. This
interactive tool gives contact information for insurance companies in your
state that sell Medigap policies, and offers basic information about the
policies of some (but by no means all) of these insurers, including which plans
they offer; if the plans are offered to persons at or over age 65, under 65
with disabilities and/or End-Stage Renal Disease (ESRD); how they price their
plans based on what rating method they use; and if you need to be a member of a
certain organization to buy one of their plans.

 Also, the Center for
Medicare Advocacy offers excellent online information about Medigap; click here.

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