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Medigap: Covering the Gaps in Medicare

Medigap insurance helps fill the gaps in Medicare coverage.
About two-thirds of all Medicare recipients aged 65 or over buy medigap insurance — insurance designed to pay the health care bills not covered by Medicare. The term medigap comes from the notion that these insurance policies will cover the gaps in Medicare payments. Unfortunately, most medigap coverage is not nearly as complete as its advertising would lead you to believe.

Before you buy a medigap insurance policy, consider not only the services covered, but the amount of benefits and the monthly cost of the policy. Also pay attention to two other factors: how much premiums may rise in the years to come and, assuming you are willing to pay those premiums, whether you will be allowed to keep the policy.

Medicare Managed Care Plans
HMOs and other managed care plans, an alternative way to cover these gaps, typically provide broader coverage at slightly lower cost than most medigap policies. Yet there are downsides to these plans as well — many restrict the doctors and facilities available to you. And in recent years, many of these plans have dropped seniors in large numbers, adding an element of risk to the managed care option.

Premium Increases
It is one thing to find insurance coverage you can afford today. It may be quite another to find a policy that you can still afford in later years when your income and assets have decreased and the policy premium has increased — as it is sure to do. In choosing a medigap policy, consider the terms on which the policy premiums will rise over time. If the current premium will be a significant strain on your financial resources, you may want to consider a less expensive policy.

Eligibility and Enrollment
If you enroll in Medicare Part B (which pays part of basic doctor and laboratory costs, while Part A pays for part of hospital or nursing home stays) when you turn 65, for the next six months federal law forbids insurance companies from denying you eligibility for medigap policies. This six-month period is called the open enrollment period.

If you do not enroll in Medicare Part B when you turn 65, you can sign up for it later, during the yearly general enrollment period — January to March. You will then have a six-month open enrollment period for medigap policies beginning July 1 of that year.

If you did not sign up for Part B at age 65 because you were covered by an employment-related health insurance plan, you will have a six-month open enrollment period for medigap policies beginning the date your Part B coverage begins, regardless of when you sign up for it. (To learn more about Medicare Part A and Part B, read Nolo’s article Medicare FAQ.)