Closing the Medicare “GAP”
A Medicare Supplement or Medigap policy is health insurance sold by private insurance companies to fill the “gaps” in original Medicare plan coverage. Medicare Supplements help pay some of the health care costs that the original Medicare plan does not cover. If you are in the original Medicare plan and have a Supplemental policy, then Medicare and your Supplemental policy will pay both their shares of covered health care costs.
Insurance companies can only sell you a “standardized” Medicare Supplement policy. These Supplement policies must all have specific benefits so you can compare them easily.
You may be able to choose from up to 12 different standardized Medicare policies (Medicare plans A through L). Medicare policies must follow Federal and State laws. These laws protect the insured. A Medicare Supplement policy must be clearly identified on the cover as “Medicare Supplement Insurance.”
Each plan, A through N, has a different set of basic and extra benefits.
NOTE: Plans E, H, I, and J are no longer marketed. However plans M and N have been added.
It’s important to compare Medicare Supplement policies because costs can vary. The benefits in any Medigap Plan A through N are the same for any insurance company. Each insurance company decides which Medicare Supplement policies it wants to sell.
Generally, when you buy a Medicare Supplement policy you must have Medicare Part A and Part B. You will have to pay the monthly Medicare Part B premium. In addition, you will have to pay a premium to the Medicare Supplement insurance company.
You and your spouse must each buy separate Medicare Supplement policies. Your Medicare Supplement policy won’t cover any health care costs for your spouse.
A person must be enrolled in part A and B of Medicare before they can enroll in a Medicare Supplement plan. During the open enrollment period which begins within 6 months of turning 65 or enrolling in Medicare Part B at 65 or older, a person may obtain a Medicare Supplement plan on a guaranteed issue basis (i.e. no medical screening required).
Outside of open enrollment, the issuing insurance company may require medical screening and may obtain an attending physician’s statement if necessary. Medicare Supplement insurance is not compatible with other forms of private Medicare coverage, such as a Medicare Advantage plan.
Medicare Supplement offerings have been standardized by the Centers for Medicare and Medicaid Services (CMS) into plans which offer a different combination of benefits. The coverage provided is roughly proportional to the premium paid. However, many older Medicare Supplement plans offering minimal benefits will cost more than current plans offering full benefits.
The reason behind this is that older plans have an older average age per person enrolled in the plan, causing more claims within the group and raising the premium for all members within the group.
Since Medicare Supplements are a private insurance and not government sponsored, the rules governing the sale and offerings of a Medicare Supplement insurance policy can vary from state to state.
Some states such as Massachusetts, Minnesota, and Wisconsin require Medicare Supplement insurance to provide additional coverage than which is defined in the standardized Medicare Supplement plans.
Medicare Supplement insurance has been standardized since 1992, some seniors who had Medicare Supplement plans prior to 1992 are still on non-standard plans. Those plans are no longer eligible for new policies.
Some Medicare Supplement policies sold before January 1, 2006 may include prescription drug coverage, but after that date no new Medicare Supplement policies could be sold with drug coverage. This time frame coincides with the introduction of the Medicare Part D benefit.
People with Medicare Supplement polices that include drug coverage who enrolled in Medicare Part D by May 15, 2006 had a guaranteed right to switch to another Medicare Supplement policy that has no prescription drug coverage.
Beneficiaries choosing to retain a Medicare Supplement policy with drug coverage after that date have no such right; in that case the opportunity to switch to a Medicare Supplement policy without drug coverage is solely at the discretion of the private insurance company issuing the replacement policy, but the beneficiary may choose to remove drug coverage from their current Medicare Supplement policy and retain all other benefits.
The only exception is for the few beneficiaries holding a Medicare Supplement policy with a drug benefit that is considered “creditable coverage” (i.e. that it meets four criteria defined by the Centers for Medicare and Medicaid Services); a Medicare Supplement policy with prescription drug coverage bought before mid-1992 may pay out as much as or more than a Medicare Part D plan. Medicare Supplement policies sold in Massachusetts, Minnesota, and Wisconsin with prescription coverage may also pay out as much as or more than Part D.