Medigap - Drug Coverage

Drug Coverage

Some Medigap policies sold before January 1, 2006 may include prescription drug coverage, but after that date no new Medigap policies could be sold with drug coverage. This time frame coincides with the introduction of the Medicare Part D benefit.

Medicare beneficiaries who enroll in a Standalone Part D plan may not retain the drug coverage portion of their Medigap policy. People with Medigap polices that include drug coverage who enrolled in Medicare Part D by May 15, 2006 had a guaranteed right to switch to another Medigap policy that has no prescription drug coverage. Beneficiaries choosing to retain a Medigap policy with drug coverage after that date have no such right; in that case the opportunity to switch to a Medigap policy without drug coverage is solely at the discretion of the private insurance company issuing the replacement policy, but the beneficiary may choose to remove drug coverage from their current Medigap policy and retain all other benefits.

The vast majority of Medicare beneficiaries who hold a Medigap policy with drug coverage and then enroll in a Part D Plan after May 15, 2006 will have to pay a late enrollment penalty. The only exception is for the few beneficiaries holding a Medigap policy with a drug benefit that is considered "creditable coverage" (i.e. that it meets four criteria defined by the Centers for Medicare and Medicaid Services); a Medigap policy with prescription drug coverage bought before mid-1992 may pay out as much as or more than a Medicare Part D plan. Medigap policies sold in Massachusetts, Minnesota, and Wisconsin with prescription coverage may also pay out as much as or more than Part D.

Thus individuals who qualify for the Qualified Medicare Beneficiary (QMB) program generally also do not need, and should not pay for, Medicare Supplement Insurance. Some employers offer health insurance coverage to their retirees. Retirees who are covered by such group plans may not need to purchase an individual policy. While a retiree may choose to switch to an individual plan, this may not be a good choice because group retiree plans usually do not cost anything to the individual and the group coverage is often as good or better than most individual Medigap policies. Thus the individual should compare his company's policy costs and coverage with the ten Medigap policies. The retiree should also consider the stability of his company. If it is conceivable that the company will falter, that his costs will rise, or that coverage will diminish, the individual may wish to purchase an independent policy. Remember, however, that if a new policy is purchased the old policy must be dropped. More information at http://cms.org, http://medicare.gov, http://ssa.gov