Ask Ms. Medicare: Medigap Covers Some of Medicare’s Out-of-Pocket Costs

Q. What is medigap insurance? Do I need it?

A. Medicare supplemental insurance is not part of the Medicare program. It is private insurance you can purchase separately, for an additional premium, to cover some of your out-of-pocket costs in Medicare. That’s why it’s often called “medigap.”

You can buy one of 12 standardized medigap policies. Each policy is labeled with a letter of the alphabet—A through L—and offers a different range of benefits from the others. For example, plan J (which has the most benefits) pays the full cost of the Medicare Part A hospital deductible and copayments, the Part B deductible and copays for doctors and other outpatient services, plus all or part of the costs of a few services that Medicare doesn’t cover. The greater the number of benefits, the more expensive the plan usually is.

Each of these policies is sold by many insurance companies at widely varying premiums. The premium amount depends on where you live, the type of policy and the insurer you choose. Over time, it also depends on how your policy is “rated” in regard to your age.

• Community-Rated (or No Age-Rated) policies: The premium for each type of policy is the same for everyone, regardless of age, and does not increase as you grow older. (But it may go up due to other factors, such as inflation.)

• Issue Age-Rated policies: The premium is based on your age when you first buy the policy and does not increase as you grow older. (But it may go up because of inflation or other factors.)

• Attained-Age-Rated policies: The premium amount increases as you grow older. (This is in addition to increases related to other factors, such as inflation.)

Your right to purchase a medigap policy is guaranteed by federal law, provided that you buy it within six months of enrolling in Medicare Part B. You can buy medigap plan A, B, C, F, K or L from any insurer that sells it in your state. An insurer cannot turn you down or charge a higher premium because of your current or past health and must cover preexisting conditions. (However, an insurer may delay coverage of treatment for a preexisting condition for a period, typically six months, after enrollment. Some state laws give additional consumer protections in this regard.)

Things to remember when considering medigap insurance:

• You pay a premium for medigap in addition to your Medicare Part B premium—medigap doesn’t cover the premium.

• You can use medigap only to cover out-of-pocket costs in the traditional Medicare program. You can’t use it if you are enrolled in a private Medicare health plan. (The differences between these programs are explained here.)

• You can’t use medigap to cover out-of-pocket costs for outpatient prescription drugs, unless you’re still using an H, I or J policy that dates from before 2006. (The law prohibited insurers from selling new medigap policies that cover prescription drugs after the Medicare Part D drug benefit became available.)

• You can generally use medigap to cover the out-of-pocket costs specified in your policy when obtaining Medicare services from any doctor, hospital or other provider anywhere in the country. However, if you buy a type of policy called “Medigap SELECT”—which typically has a lower premium than most Medigap policies—it covers your bills only when you go to providers in its network, except in an emergency.

For more information see the publication “2009—Choosing a Medigap Policy”. To compare benefits of all medigap policies in your area, go to the Medicare Options Compare section of the Medicare website. Click on the medigap policy plan type to see details of each policy. Then click on “View All Companies” on the right side of that page to see which insurers in your area offer this policy and which rating system it uses. There are links to the companies’ websites, which provide additional details.

Patricia Barry is a senior editor on AARP Bulletin staff.