Medicare is a health insurance program for individuals age 65 or older. Medicare is financed by a portion of the payroll taxes that workers and their employers pay. Individuals under age65 qualify for Medicare if they are insured (have earn enough credit) and considered medically disabled. Individuals who have permanent kidney failure or amyotrophic lateral sclerosis (Lou Gehrig’s disease) also qualify for Medicare.
Employment with the federal government is now considered covered employment for Social Security purposes, for all federal employees first hired on or after January 1, 1984. These federal employees become eligible for Disability Insurance on exactly the same terms and conditions as anyone else who has worked under covered employment.
Original Medicare includes Part (A) Hospital Insurance and Part (B) Medical Insurance. Original Medicare does not pay for all health-related services. However, you may purchase an insurance policy to cover the gaps that are not paid for by Medicare, such as copayments, coinsurance, and deductibles. These costs can result in numerous out-of-pocket expenses, especially if you are hospitalized or need skilled nursing home services.
Social Security does not offer Medigap policies to cover these gaps. Medigap policies are offered by private insurance companies. These policies are required to be clearly identified as Medicare Supplement Insurance. Also, each policy must follow Federal and state laws designed to protect consumers.
Each Medigap plan (A through L) offers a different benefit and the costs vary with the amount of coverage. In general, Plan A, which provides the fewest benefits has the lowest premiums. Medigap plans that offer more benefits, such as Plan J, usually have higher premiums. According to the Medicare Rights Center, the most popular Medigap plans are C and F, because they cover major benefits and are less expensive than many other plans.
Although Medicare defines what each Medigap plan offers, it does not regulate what the insurance company may charge. Private insurance companies often charge different premiums for exactly the same Medigap coverage.
Medigap plans A through J must include the following basic benefits:
- Inpatient Hospital Care: Covers the Medicare Part A coinsurance (but not the Part A annual deductible) plus coverage for an additional 365 days after Medicare coverage ends.
- Medical Costs: Covers the Medicare Part B coinsurance (but not the Part B annual deductible) or copayments for hospital outpatient services. The Part B coinsurance is generally 20% of the Medicare-approved amount for the service.
- Blood: Covers the first three pints of blood you need each year.
Depending on which Medigap plan you select, you may get coverage for additional expenses and benefits not covered by Medicare, including:
- Hospital annual deductible (plans B to L)
- Skilled nursing facility coinsurance (plans C to L)
- Part B annual deductible (plans C, F and J)
- Emergency care during foreign travel (plans C to J)
- At-home recovery care (plans D, G, I and J)
- Preventive care not covered by Medicare (plans E and J)
- Medicare Part B excess doctor charges (plans F, G, I and J) – Excess charges are the amounts above the Medicare-approved amounts that a doctor who does not participate in the Medicare programmay charge.