A Medigap policy is health insurance sold by private insurance companies to fill the "gaps" in Original Medicare Plan coverage. Medigap policies help pay some of the health care costs that the Original Medicare Plan doesn't cover. If you are in the Original Medicare Plan and have a Medigap policy, then Medicare and your Medigap policy will pay both their shares of covered health care costs.
Insurance companies can only sell you a "standardized" Medigap policy. These Medigap policies must all have specific benefits so you can compare them easily. You may be able to choose up to 12 different standardized Medigap policies (Medigap Plans A through L). Medigap policies must follow Federal and State laws. These laws protect you. A Medigap policy must be clearly identified on the cover as "Medicare Supplement Insurance." Each plan, A through L, has a different set of basic and extra benefits.
It's important to compare Medicare Supplement policies because costs can vary. The benefits in any Medigap Plan A through L are the same for any insurance company. Each insurance company decides which Medigap 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 Medigap insurance company. You and your spouse must each buy separate Medigap policies. Your Medigap policy won't cover any health care costs for your spouse.
Medicare is a health insurance program for:
people age 65 or older,
people under age 65 with certain disabilities, and
people of all ages with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a kidney transplant).
Part A: Hospital Insurance - helps cover the Medicare holder's costs of inpatient care while in the hospital. Coverage includes critical access hospitals and skilled nursing facilities. It also helps cover hospice care and some home health care expenses. Part A does not include custodial or long-term care. Beneficiaries must meet certain conditions to receive these benefits.
Cost: For those eligible, a monthly payment, called a premium, is rarely paid for Part A because they or a spouse have already paid Medicare taxes while working. If a beneficiary does not have premium-free Part A Hospital Insurance, they may have the option to buy Part A if they or their spouse are not entitled to Social Security, for reasons such as, they did not pay enough Medicare taxes while working, are age 65 or older, or are disabled but no longer receive free Part A because they have returned to work.
Part B: Medical Insurance - covers doctors' costs as well as outpatient care expenses. Part B also insures medical services that Part A does not cover, such as some services performed by physical and occupational therapists, as well as some home health care. Part B helps finance these covered services and supplies when they are medically necessary.
Cost: A monthly payment of the Medicare Part B premium. In some cases, this amount may be higher if the beneficiary did not enroll for Part B when they first became eligible.
Caution: The cost of Part B for unsigned eligible beneficiaries will go up 10% for each 12-month period after they first become eligible for Part B. Once they are enrolled, they will have to pay this penalty for as long as they have Part B.
Beneficiaries also pay a Part B deductible each year before Medicare starts to pay its share. The beneficiary may receive aid from their state to pay this premium and deductible.
Medicare deductible and premium rates may change at the beginning of each year.
Prescription Drug Coverage - Most people will pay a monthly premium for this insurance coverage. Since January 1, 2006, private companies have made Medicare Prescription Drug Coverage available to every Medicare beneficiary. Coverage may help lower prescription drug costs and help protect against higher costs in the future. Beneficiaries may choose their desired drug plan accordingly. If a beneficiary does not enroll in a drug plan when they are first eligible, they may pay a penalty if they choose to join later.