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Private Insurance for the Elderly

by Amal Trivedi, MD, MPH

Medigap

About 87% of beneficiaries enrolled in fee-for-service Medicare programs have Medicare supplemental insurance policies (most are a form of Medigap insurance), which pay for some or all of Medicare deductibles and co-payments, typically in Parts A and B. People must be enrolled in Parts A and B to be eligible to purchase Medigap insurance. People enrolled in the Medicare Advantage plan (Part C—see Medicare : Part C (Medicare Advantage Plans)) cannot purchase a Medigap policy unless they leave the Medicare Advantage plan and return to original Medicare. Most Medigap insurance is purchased individually from private insurers, although employers may provide it to retirees.

There are 14 different types of Medigap insurance available, labeled A through N. Benefits are the same for all plans with the same letter, regardless of insurance carrier. No plan may duplicate Medicare benefits. The basic plan (Plan A) covers

  • Hospital co-payments

  • 100% of expenses eligible for coverage by Medicare Part A after Medicare hospital benefits are exhausted

  • Part B co-payments

The other plans, which have higher premiums than Plan A, may provide additional coverage in a skilled nursing facility and may cover Part A and Part B deductibles, preventive medical services, and short-term home-based help with activities of daily living (ADLs) during recovery from an illness, injury, or surgery. Some of these plans, if purchased before Medicare Part D took effect, covered a percentage of the cost of outpatient prescribed drugs.

The Medigap open enrollment period begins the month people turn 65 and lasts 6 mo. During this period, people who have preexisting conditions cannot be denied coverage or charged more; however, they may be made to wait up to 6 mo before preexisting conditions are covered.

Long-term care insurance

Very few private medical insurance policies cover services such as long-term home health care or long-term nursing home care. However, some private insurers offer long-term care insurance. Such plans are useful for people who want to preserve their assets and who can afford to pay the premiums until care is needed, possibly for an extended period of time. This insurance is not recommended for people with few assets and may not be worthwhile for people who can easily pay for long-term care.

Benefits usually begin when a person can no longer do a certain number of ADLs.

Some plans, called tax-qualified plans, offer tax advantages (eg, deduction of premiums from taxable income as medical expenses).

For all long-term care services, private insurance pays for only 9%, and people pay for 22% out-of-pocket. A large proportion of out-of-pocket spending occurs as the elderly spend down to qualify for Medicaid.

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