Medigap and the Medicare Rx Drug BenefiT

Fact Sheet

Medicare beneficiaries can currently sign up for MediGap coverage that provides cost sharing protections and, in some cases, for benefits that Medicare does not currently cover such as prescription drug coverage. In 2006, when the Medicare prescription drug benefit is offered, the MediGap policy choices will change.

MediGap policies that do not include prescription drugs:
Medicare beneficiaries that are enrolled in MediGap policies that do not include prescription drugs can stay enrolled in those policies with no change and new Medicare beneficiaries can continue to enroll in these policies as well.

MediGap policies that do include prescription drugs:
Medicare beneficiaries that are enrolled in MediGap policies that include prescription drugs when the Medicare Part D benefit begins can do one of two things:

1. The beneficiary can remain enrolled in his or her MediGap policy and not sign up for the Medicare prescription drug benefit. If the beneficiary chooses this option and stays in his or her MediGap policy with drugs, and then later decides to switch over to the Medicare prescription drug benefit, that beneficiary will have to pay a late enrollment penalty in the form of an increased premium. Their premium will be increased by one percent of the base beneficiary premium for each month the beneficiary remained in his or her MediGap policy. If, however, the drug coverage in the Medigap policy is equivalent to that offered in the Medicare prescription drug benefit, the beneficiary will not pay a penalty.

2. The beneficiary can switch to a MediGap policy without prescription drugs if one is offered by their current Medigap plan, and sign up for the new Medicare prescription drug benefit.

Note also that no Medicare beneficiaries will be permitted to enroll in existing MediGap policies with prescription drug coverage after 2006, when the Medicare prescription drug coverage begins. New beneficiaries will only have the option of enrolling in the Medicare prescription drug benefit.