Medicare is the federal government’s health care insurance program for people age 65 and over, and for people under age 65 who have certain disabilities. The Medicare program consists of four basic parts:

  • Medicare Part A: Hospital, skilled nursing, home health care and hospice coverage
  • Medicare Part B: Coverage for medical care, durable medical equipment, outpatient and certain home health services
  • Medicare Part C: Medicare Advantage Plans for financing health services, similar to an HMO/PPO; and
  • Medicare Part D: Medicare prescription drug coverage.

Unlike Medicare Parts A and B, Medicare Parts C and D are run by private insurance companies under contract with Medicare. Medicare Part C is optional coverage available to beneficiaries who are enrolled in both Medicare Parts A and B, which is a plan designed to pass cost savings resulting from the administration of the plan to the beneficiaries, in the form of additional benefits (including a reduced Part B premium).

According to the U.S. Department of Health and Human Services, Medicare “helps” cover various medical services. According to another source, this “help” may be illusory: although the Medicare program originally was conceived as a health care program to relieve the financial burden of health care on older adults, Medicare beneficiaries “now pay a greater percentage of their incomes for out-of-pocket health care expenses than they did before Medicare was enacted in 1965.” As a result of deductibles, copayments, and exclusions, it is estimated that the original Medicare program only pays approximately half the cost of the nation’s senior citizens’ medical care. Medigap (Medicare Supplemental Insurance) policies are designed to supplement the coverage provided under Medicare, and to cover the gaps in coverage that exist under that program.

Medigap policies are sold by private insurance companies. They must comply with applicable federal and state laws, and policies must be standardized and identified by letters (in New Jersey, there had been 12 plans, identified as Plans A through L), with each plan providing a different combination of benefits. Although the plans are standardized, it is important to note that insurance companies are permitted to charge different premiums for exactly the same Medigap plan policy. The official U.S. government site for Medicare,, provides an interactive tool to find and compare Medigap policies and the companies that offer those policies.

However, beginning June 1, 2010, the plans and coverages of Medigap policies are changing, as a result of the July 2008 Medicare Improvements for Patients and Providers Act (“Medicare Supplement Modernization”). Effective June 1, 2010, two new plans (Plan M and Plan N) will be offered, and Plans E, H, I and J will be discontinued.

These changes resulted, in part, by the more recent adoption of Medicare Part D prescription drug plan, after which insurance companies were no longer permitted to sell new Medigap policies containing prescription drug coverage. As a result, several Medigap plans were no longer necessary, and have now been discontinued.

The new Medigap coverage has discontinued the preventative care benefit (previously available on all Plans) and the at-home recovery benefit (previously available for Plans D and G as well as the now-discontinued Plans I and J), but has added a hospice and respite benefit to all new policies.

Prior to June 2010, hospice and respite benefits were only offered with the high-deductible Plans K and L, and the benefit covered 50% (for Plan K) and 75% (for Plan L) of the cost sharing amounts. Plans K and L will still offer these limited hospice and respite coverages after June 2010.

Also as of June 2010, Plan G coverage of the Part B excess will be increased, from 80% of the Part B excess to 100% of the part B excess. Keep in mind that, if you now hold a Plan G policy, you can retain the pre-June 2010 coverage (with only 80% coverage of the Part B excess, but with at-home recovery coverage) or accept a new Plan G (with 100% Part B excess but no at-home recovery coverage).

The two new plans, Plans M and N, are considered the lower-cost options. Plan M will cover 50% of the Part A in-hospital deductible (currently $1,100); if you are readmitted to the hospital after you have left for 60 days or more, that deductible must be met again; Plan M does not cover the Part B deductible. Plan N includes co-payment of $20 for doctor’s visits, and  up to $50 for visits to the emergency room; it does not cover the Part B deductible.

The June 2010 Medigap changes are seen as representing a movement toward policies that are less expensive, but which require increased cost sharing from policyholders. If you already have a Medigap policy that suits your needs, you are not required to change your coverage, assuming that the plan is still being offered by your insurer. The bottom line is that you should carefully review these new changes to see if a revised Plan is advantageous, given your individual needs. Keep in mind that, once you change plans, you will not be permitted to return to a previous plan if it is no longer available to new insureds.