Medicare Supplement Insurance Policies known as “Medigap” policies are health insurance policies sold by several private insurance companies to assist in the payment of costs not otherwise covered by Parts A and B of Medicare sometimes referred to as “Original Medicare.” Examples of coverage offered by Medigap insurance are coinsurance, copayments and deductibles; and, in some policies, medical care outside of the United States. When Original Medicare does not provide certain coverages, this creates what are known as “gaps.” It is important to know that Medigap policies do not cover an individual’s share of costs when the individual has a Medicare Advantage Plan, stand-alone Medicare Prescription Drug Plan, Medicaid, VA benefits, or Tricare. Generally, insurance companies cannot sell an individual a Medigap policy when the individual has coverage from Medicaid or a Medicare Advantage Plan.
In order to purchase a Medigap insurance policy, an individual must have Medicare Part A and Part B. Medicare Part A is known as “hospital insurance” and relates to inpatient care in a hospital, and for care in skilled nursing facilities, hospices, and home health care. Medicare Part B is known as “medical insurance” and relates to services for doctors and other health-care providers, hospital outpatient care, durable health equipment, and home health care. It also relates to preventive health services.
If an individual has both Medicare and a Medigap policy, Medicare will pay its share of Medicare-approved amounts of covered care costs. After that, the Medigap policy will pay its share. Please take note of the fact that the operative words are “its share.” This means that Medicare together with Medigap will not necessarily pay “all costs” but only their share of the costs. In other words, a Medigap policy only supplements its share of original Medicare costs which is why the actual name for such a policy is “Medicare Supplement Insurance.” Medicare does not pay for the cost of purchasing a Medigap policy.
In summary, here are some important rules to remember: A Medigap policy may only be purchased by a person participating on Medicare Parts A and B. A Medigap policy may not be purchased by anyone with a Medicare Medical Saving Account. A Medigap policy provides coverage for one person. Married individuals must buy two separate policies. Persons having Medicare Advantage Plans cannot purchase a Medigap policy. A Medigap policy does not cover prescription drugs. A Medigap policy is guaranteed renewable so long as the premium is paid. A Medigap policy does not cover long-term care, dental care, eye glasses or private care nursing.
This is the open enrollment period for Medicare 2020. For those who may be interested, the official website on this subject may be accessed at medicare.gov/pubs/pdf/02110.pdf. There is also another website sponsored by the National Council on Aging and the Aon Retiree Health Exchange. The website is mymedicarematters.org.
Banker Phares is a practicing attorney and founding member of the Estate Planning and Probate Law certification by the Texas Board of Legal Specialization. He is the John and Karen Mast Professor at SFA and teaches in the Department of Economics and Finance.