When you qualify for Medicare, policy choices abound. Will you be choosing Original Medicare or a Medicare Advantage Plan? Will you need Part D prescription coverage?

If you enroll in Original Medicare, Part A pays for care in a hospital or skilled nursing facility, as well as for home health and hospice care. Medicare Part B pays for treatment by physicians, outpatient hospital care and other medical services. But Medicare does not pay every medical charge or service. (See See Understanding Medicare for more.) Depending on your health situation, you could be open to a variety of out-of-pocket medical expenses.

The federal government has authorized 12 standardized Medigap policies

Enter Medicare Supplemental Insurance — also known as Medigap policies — to plug the gaps left in Original Medicare. (Those with Medicare Advantage Plans are not eligible for Medigap policies.) Medigap policies are private insurance policies that cover Medicare coinsurance, co-payments and deductibles that you'd otherwise have to pay yourself. Some Medigap policies also pay for costs not covered by Original Medicare.

The 12 letters of Medigap

The federal government has authorized 12 standardized Medigap policies: Plans A through L. Depending on where you live, all 12 of these standard policies — or only a few — may be offered. If an insurance company wants to sell Medigap policies, it must sell at least Plan A.

To purchase a Medigap policy that's right for your situation, you need to review the choices annually to make sure your Medigap plan still fits your needs. Plan A offers a very basic supplement to Medicare coverage. Plan J offers much more coverage but is also more expensive. Plans K and J, the newest additions, offer payment of 50 or 75 percent on certain co-payments, coinsurance and deductibles. Don't confuse the Medigap policy designations with Medicare Parts A and B.

Each plan letter's coverage is the same from insurance company to insurance company. For example, no matter which company is selling the policy, Plan C will contain the same coverage. (However, insurers in Massachusetts, Minnesota and Wisconsin are permitted to sell somewhat different combinations of benefits.)

Medigap policies will generally pay most or all of the Medicare coinsurance amounts and Medicare's deductibles. Certain plans will also pay for preventive care and emergency medical care in a foreign country. (See chart below.) No plan will cover prescription drugs; for that you need to sign on with a Medicare prescription plan.

Also, your Medigap plan will not cover your spouse; you'll each need your own policy.

Continue on to Page 2