Medigap

Fee-for-service Medicare is estimated to cover just 50 percent of the health care costs incurred by beneficiaries, leaving many significant financial coverage gaps. Approximately nine out of ten Medicare beneficiaries obtain additional coverage to supplement their Medicare benefits and protect themselves from these substantial costs through the purchase of Medicare supplemental insurance policies, commonly called Medigap.

The Omnibus Budget Reconciliation Act of 1990 (OBRA 90) limits Medigap policies to ten standard plans labeled A through J. Each standard plan contains a core benefit package. Plan A consists of the core benefits alone; plans B-J contain additional benefits such as coverage of copayments for care in a skilled nursing facility, benefits for at-home help, coverage of physician charges in excess of Medicare's approved amount, and limited coverage for prescription drugs. All Medigap policies currently issued must conform to one of the ten standard plans, although beneficiaries may renew non-standard plans issued before July 1992. The Balanced Budget Act of 1997 authorized the offering of a high deductible F and J policy. Beneficiaries purchasing these plans must pay a deductible amount larger than traditional Plans F or J before the standard Medigap Plan F or J benefits begin.

The 2003 Medicare Prescription Drug Improvement and Modernization Act (MMA) created the Medicare Part D prescription drug benefit, and as a result made changes to the sale of Medigap policies containing outpatient prescription drug benefits (H, I, and J). Effective on or after January 1, 2006 Plans H, I, and J may still be issued, but may no longer include prescription drug coverage. The MMA also established two new standard plan types (K& L) with benefits specified in federal law. Both new plans have the same hospitalization benefits as the original standard plans and differ from plans A through J in that they provide less coverage for physician and other part B services.

NAIFA Health & Employee Benefits supports the preservation of Medicare beneficiaries' access to Medigap and other Medicare Supplemental offerings.