Most Americans are automatically signed
up for Medicare when they turn 65.
Created in 1965, Medicare is a federal government program that is
intended to provide medical coverage for those who would not otherwise be able
to afford it. Money for Medicare comes
from payroll deductions.
Original Medicare (as it existed prior
to Balanced Budget Act of 1997) had two parts, A and B. Part A covers hospitalization and related costs,
and Part B pays for services not covered in Part A, primarily outpatient and
doctor services. Medicare reduces costs
for these services (and increases availability) by effectively turning the
over-65 population into one giant insurance pool, in order to spread costs and
risks more widely.
However, Medicare does not pay for all
medical services. It does not cover
copayments, deductibles, and coinsurance.
Nor does it cover long-term care, routine eye and ear services, or
hearing aids or eyeglasses. So there are
always costs associated with medical care, even for those on fixed incomes and
therefore less able to afford them.
This is where medigap plans comes in. Simply put, a medigap policy is an insurance
policy that is intended to cover what Medicare doesn’t – to fill in the gaps in
coverage; hence the name. Unlike
Medicare, medigap policies are sold by private insurance companies. However, they are strictly regulated by state
and federal law and must clearly be labeled as “Medicare Supplement Insurance”
on the front.
There are several medigap plans
available, and in most states, insurance companies sell offer ten different
plans, identified by letter. Some states
offer what is called Medicare SELECT.
This is a medigap policy which limits coverage to certain physicians and
health care facilities specified by the policy.
As a result, Medicare SELECT policies generally cost less than most
standard medigap policies.
Since medigap policies are offered by
many private insurance companies, the wise buyer will shop around to get the
best coverage for the best price. The
medigap policies offered vary in the amount of coverage they offer. The customer should look at the coverage offered
by each and determine his or her needs before buying.
