Medicare supplement insurance policies have been around for about 45 years now and, as

one might imagine, they have changed throughout the years. Up to this point the changes

have all been beneficial to Medicare recipients; however, that may not be the case going

forward.



The Medicare program was established on July 30, 1965 when it was signed into law by then

President Lyndon B Johnson and was enacted, as a part of Social Security, to help older

Americans aged 65 and older cover hospital and medical expenses. The program would cover

about up to 80% of the Medicare recipients expenses leaving them exposed to the other 20%

plus.



To address this issue there was a part of the Medicare legislation that allowed for

supplemental policies to be sold by private insurance companies to help Medicare

recipients cover the gaps left by Medicare including deductibles, coinsurance, copays,

and excess charges. These plans were descriptively called Medicare supplement insurance

plans or Medigap because the plan covered the “gaps” in Medicare.

The intent of the Medicare supplement policy is to allow Medicare recipients to purchase

coverage that would, along with regular Medicare, reduce or eliminate their financial

exposure to medical bills. The first Medicare supplement plans had very little

standardization and many companies offered widely varying plans with differences not only

in coverage but also in limitations and exclusions. This was the norm for the first 25

years of Medicare supplement offerings and made it awfully difficult for Medicare

recipients to shop for the best coverage and rates.



In 1992, after several complaints over the past quarter century from Medicare recipients

about the confusion of shopping for a good Medicare supplement insurance policy, Medicare

decided to require that all insurance companies that wanted to offer this type of plan be

required to offer plans in a standardized format in which certain benefits would be

grouped and indicated with a plan letter. Medicare also began to automate claims-filing

in which the Medicare recipient did not have to go through the very manual process of

filing their claims with the Medicare supplement companies. The claim would go to

Medicare from the medical office and Medicare would decide if they would cover the

medical bill or not. If Medicare decided to cover the medical bill then Medicare would

file with the Medicare supplement insurance company used by the Medicare recipient for

payment of the difference owed to the medical office.



This level of standardization allowed Medicare recipients, for the first time, to feel

comfortable that if they looked at a particular plan from one insurance company, like a

plan F, that the plan would work identically from any other insurer that offered a plan

F. The benefits would be the same. The doctor’s network would be the same as it is the

Medicare network of doctor’s. And claims-filing would be automated and work the same way.

Because Medicare made the decision on whether a claims should be paid the Medicare

recipient did not have to worry about whether one insurer was better at paying claims

than another.



So, shopping for a Medicare supplement plan has really become as easy as determining

which standardized Medicare supplement plan the Medicare recipient wants, getting pricing

from different providers of that plan and going with whichever company has the best rate.



Although the standardization of Medicare supplement plans are sure to continue going

forward and the plans being offered may change over the years, the ability of Medicare

recipients to have “first dollar” medical coverage with Medicare and a supplement is

likely to end within the next few years. Several legislators have jumped on a study,

that many claim to be flawed data, that indicates that Medicare could be saved by having

Medicare recipients have “more skin in the game” by being responsible for deductibles and

coinsurance. There are several proposals to not allow Medicare supplement insurance

cover the deductibles associated with Medicare and to possibly not include coinsurance

coverage. This could mean that Medicare recipients could be on the hook for up to

thousands in medical expenses in any given year.



Medicare’s come a long way in its 46 years and the benefits have been undeniably good

especially when coupled with a Medicare supplement plan. Although the early years were a

little tough with Medicare supplements not being standardized there have been tremendous

improvements in coverage over the years. It’s possible that we’re, for the first time

since Medicare’s inception, about to see reductions in benefits available.



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Medicare supplement insurance policies have been around for about 45 years now and, as one might imagine, they have changed throughout the years. Up to this point the changes have all been beneficial to Medicare recipients; however, that may not be the case going forward.

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