Medicare And Medigap Insurance Policies: Maximizing The Benefits

by David Goldfarb Goldfarb Abrandt & Salzman LLP

Additional information on the Medicare Prescription Drug Benefit

Copayment and premium amounts for 2020:

Part B premium: $144.60 per month on average. If your income is above $85,000 (single) or $170,000 (married couple), then your Medicare Part B premium may be higher.


  • Inpatient hospital deductible: $1,408.
  • Inpatient hospital copay for days 61 – 90: $352 per day.
  • Hospital co-payment for days 91-150 (lifetime reserve days): $704 per day.
  • All costs for each day beyond 150 days
  • Skilled nursing facility co-payment for days 21 – 100:$167.50 per day.

The above changes took effect January 1, 2020.

See Official U.S. Government Web Site for Medicare Information (

The Medicare program is the first level safety-net for America’s elderly and disabled.

Medicare is a health insurance program for the elderly and the disabled who are in receipt of Social Security Retirement benefits and are 65 years of age or older or have end stage renal failure or have been in receipt of Social Security Disability Benefits for at least 25 months. The program has no income or asset eligibility criteria.[2]


Enrollment is the process of applying for and obtaining Medicare coverage. There are two basic parts of Medicare coverage (A and B) which are described in more detail in the sections below on Part A, Part B, Nursing Home and Home Care coverage.

Enrollment in Part A is automatic for persons who file for Social Security Retirement Benefits or Railroad Retirement.[3] Enrollment is also automatic for Part B unless persons “opt-out.” Automatic enrollees do not pay Part A premiums, but do pay Part B premiums.[4] Certain other persons may voluntarily enroll in Part A and B, if they are over 65 but not covered by Social Security. They will pay premiums for both Part A and B.[5]

A penalty is imposed for delayed enrollment in Part B. Premiums are increased by 10% for each year that a person could have enrolled and did not. A person enrolled in Part A, over 65, working and covered by an employee health plan can postpone enrollment without penalty. They will have a special enrollment period of seven months after retirement.

The initial enrollment period is seven months, beginning three months before the beneficiary’s 65th birthday. Coverage may not take effect immediately. There is also a general enrollment period from January 1 to March 31 each year. If you enroll in a general enrollment period coverage takes effect July 1 of that year.

Primary Vs. Secondary Coverage

For beneficiaries or their spouses who continue to work after age 65 and accept an employer’s health plan, Medicare will be the secondary payer.[6] Medicare is primary for retired employees covered by an employer’s retiree benefit plan. In general, for nonworking disabled beneficiaries who choose coverage under an employer’s large group health plan (100 or more employees), Medicare is the primary payer. Medicare is the secondary payer for (1) disabled individuals who have large group health plan (LGHP) coverage based on their own current employment status or (2) disabled individuals who have LGHP coverage based on the current employment status of a family member.[7]

It may be particularly significant to your health care coverage whether Medicare is primary or secondary if there are dollar caps to certain types of coverage under your employer’s plan.

Part A – Hospital Benefits, Deductibles And Co-Payments

Medicare has a first day deductible of $1,408 for hospitalization. The first 60 days of a hospital stay are otherwise covered without deductible. Days 61 through 90 are covered with a $352 per day co-payment.[8]

There are also 60 lifetime reserve days available with a daily co-payment of $704 in 2020.[9]

Part B – Coverage

Part B beneficiaries must meet a $198 annual deductible. Medicare Part B covers the following services: doctors’ services; physical, occupational, speech therapy; pathology; clinical social worker; clinical psychologist; outpatient hospital services; rural health clinic services; outpatient rehabilitation facility services; limited ambulance services; x-ray treatment; radiation treatment; prosthesis; braces; medical equipment; supplies; home health services; certain mammography screening; and certain limited injectable drugs.

Medicare reimburses 80% of its allowed charges. Beneficiaries must pay the other 20% and any difference in charges between the provider’s charges and the Medicare allowed charges. But see below for allowed charges and accepting assignment.

Medicare Part B has fixed fees or allowable or approved charges. The amount is often substantially less than the physicians actual charges.

Doctors who “accept assignment” agree to accept payment at Medicare’s allowed rate. Providers who do not accept assignment are still reimbursed at 80% of the allowed rate. However, in 1993 and afterward their total fee is limited to 115% of the Medicare rate. The amount over the Medicare reimbursement is known as the balance bill.[10]

Nursing Home Care

Nursing home care is limited to 100 days per spell of illness[11] 20 days are covered in full; 80 days are covered with an $176 per day co-payment. Coverage is provided only if the patient requires daily skilled nursing care[12] or physical, occupational or speech therapy on a daily basis.[13] Skilled nursing care must be provided after a hospital stay of at least 3 days. [14]

The Jimmo v. Sebelius Settlement Agreement (January 2013),  clarified that the Medicare program covers skilled nursing care and skilled therapy services under Medicare’s skilled nursing facility, home health, and outpatient therapy benefits when a beneficiary needs skilled care in order to maintain function or to prevent or slow decline or deterioration (provided all other coverage criteria are met).  Specifically, the Jimmo Settlement Agreement required manual revisions to restate a “maintenance coverage standard” for both skilled nursing and therapy services. See CMS’s message “Important Message about Jimmo Settlement“.

An aggregate of unskilled care in a skilled nursing facility suffices to establish coverage in cases involving skilled observation or management of complicated or unstable conditions.[15]

Observation Status

Medicare will only cover care you get in a nursing home if you first have a “qualifying hospital stay.” A qualifying hospital stay means you’ve been a hospital inpatient for at least three days in a row (counting the day you were admitted as an inpatient, but not counting the day of your discharge). 42 CFR § 409.30(a).

New York law requires a hospital, when a patient is placed on observation status, to give the patient oral and written notice within 24 hours of such placement that the patient is not admitted to the hospital and is under observation status. It must be signed and acknowledged by the patient or the patient’s representative and include a statement that observation status may affect the patient’s Medicare, Medicaid, and/or private insurance coverage for the current hospital services, as well as coverage for any subsequent discharge to a skilled nursing facility or home and community based care; and that the patient should contact his or her insurance plan to better understand the implications of being placed in observation status. NY Pub. Health Law § 2805-w. Regulations regarding Observation Services are at 10 NYCRR § 405.32.

The federal government also regulates observation status. Notice of Observation Treatment and Implication for Care Eligibility Act, Pub. L. 114-42, 42 U.S.C. § 1395cc(a)(1)(Y). Hospitals are required to give patients both oral and written notice when they are outpatients and not admitted as inpatients. Hospitals must use the written notice developed by the Centers for Medicare & Medicaid Services (CMS), which is called the Medicare Outpatient Observation Notice (MOON). See

Home Care

There were significant changes in the Home Care benefit under 1997 legislation, the Balanced Budget ACt of 1997 (PL 105-33). These changes created a home care benefit under both Part A and Part B of Medicare. Home Health Care benefits under Part A are defined as benefits instituted after a hospital stay of at least 3 days and which is initiated within 14 days of discharge or home care benefits provided to recipients who were in a skilled level bursing facility for at least 14 days after a discharge from a hospital. This Part A benefit is limited to 100 visits per spell of illness. A visit is defined as one visit by a nurse; or a visit by a physical,occupational or speech therapist; or a four hour visit by a home health aide. A Spell of Illness is defined as beginning on the first day on which a beneficiary receives post-institutional home care services and which occurs in a month in which the beneficiary was entitled to Part A benefits. A Spell of Illness ends with the close of the first 60 consecutive days thereafter in which the beneficiary is not an inpatient of a hospital, skilled level nursing home, or receiving home health services. All other Home Health Care not within this definition are classified as Part B home care.

For many elderly and disabled persons remaining in their home will depend on the availability of supportive services. Medicare has a home health care services component is too frequently overlooked. Although limited to a maximum of 28 hours per week of skilled nursing and home health aide services or 35 per week, if approved by the administrator of the plan, the provision of the service can be indefinite in duration and without cost to the recipient. To be eligible for the coverage the beneficiary must meet the following requirements: (a) the beneficiary must require and receive intermittent skilled nursing, or physical, occupational or speech therapy; (b) the beneficiary must be home-bound (essentially this means the person cannot leave home without assistance); (c) the services must be ordered under a physician’s plan of care; and (d) the services must be provided through an agency approved by Medicare.[16] A typical Medicare covered claim could include two weekly visits by a nurse or physical therapist, plus four hours of a home health aide care five days a week. Agencies may still misunderstand the requirement and attempt to terminate services after a fixed period of time. However, Medicare has been ordered to cover these claims. See Duggan v. Bowen, 691 F. Supp. 1487 (D.D.C. 1988). The guidelines are in the Medicare Home Health Agency Manual known as HIM-11.

Limitation On Patient’s Liability

There are various limits on a beneficiaries liability for hospital and other payments aside from the cap on Part B payments previously discussed. Hospitals may not charge for services for which payment is made by Medicare, even if the hospitals costs are greater than under the Medicare reimbursement system.[17] The permitted payments for a covered stay (that is, a stay that includes at least one covered day are the applicable deductible and co-insurance amounts.) See 42 C.F.R. 412.42.

In addition if a Medicare claim is disallowed because the services are determined to have not been reasonable or necessary or to have constituted custodial care, then a beneficiary may be entitled to a waiver of liability if he or she did not know the services were excluded from coverage.

Nursing homes are now precluded from requesting deposits from Medicare covered admissions. Many still request deposits in the amount of the day 20 through 100 co-payment.

Medicare Advantage Plans (Medicare Part C)

A type of Medicare health plan offered by a private company that contracts with Medicare. Medicare Advantage Plans provide all of your Part A and Part B benefits. Medicare Advantage Plans include: Health Maintenance Organizations, Preferred Provider Organizations, Private Fee-for-Service Plans, Special Needs Plans, and Medicare Medical Savings Account Plans.

If you’re enrolled in a Medicare Advantage Plan: (1) Most Medicare services are covered through the plan; and (2) Medicare services aren’t paid for by Original Medicare.  Most Medicare Advantage Plans offer prescription drug coverage.

Medigap Policies

Medigap or supplemental Medicare Insurance Policies are now offered under set federal guidelines. New York State Insurance Department has regulations conforming to the federal standards. Additionally Chapter 501 of the Laws of 1992 made certain changes in New York State Insurance Law which affect Medigap policies, for example, effective April 1993 all Medigap policies in New York State have level premiums, not based on age or sex.

Enrollment in Medigap Policies

Enrollment is open to individuals with Medicare coverage.[18] Under New York State law effective April 1993 enrollment is open throughout the year (in other states enrollment is open for six months following the date of enrollment in Part B for those over age 65).[19] Some policies do not provide coverage until six months after enrollment. However if an existing policy is being replaced, the waiting period must be waived. In determining whether a pre-existing condition provision applies, under New York law effective January 1993, the Medigap insurer must give credit for the time a person was previously covered under any other health insurance (private or employer plan) if the previous coverage was within 60 days of the new coverage.

Guaranteed Renewability

All policies purchased after November 3, 1991, must be guaranteed renewable. Companies can require conversion to one of the new standard policies from policies purchased prior to that date.[20]

Guaranteed renewable means a policy cannot be cancelled because of health reasons. However, it can be cancelled for non-payment of premiums or if incorrect or incomplete information was provided on application.

Groups can terminate group policies, but the individual policy holder will be allowed to continue coverage with another group or conversion to an individual policy.

Standardized Benefits

Policies now fit into standard categories (A through N). E,H, I and J will no longer be sold after 6/1/2010, but individuals who have these plans can keep them. C and F will no longer be sold after 1/1/2020, but individuals who have these plans can keep them. All plans offer the following core benefits (2020 amounts):

  1. $352/day hospital co-insurance from days 61 to 90.
  2. $704/per day co-insurance during the 60 lifetime reserve days.
  3. 365 additional hospital days covered in full after the reserve days.
  4. The Part B 20% co-insurance.[21]
  5. First three pints of blood.

Plans A through J have one set of basic benefits, and Plans K and L have a different set of basic benefits. (Medigap Plan K has a $4,000 out-of-pocket annual limit. Medigap Plan L has a $2,000 out-of-pocket annual limit). For K and L, once you meet the annual limit, the plan pays 100% of the Medicare Part A and Part B copayments and coinsurance for the rest of the calendar year.

Plans B-L & N pay the $1,364 hospital deductible per spell of illness. Plan M pays 50% of the deductible.[22]

All policies beyond Plan B pay the $176/day skilled nursing facility co-payment for days 21 through 100.

Other important benefits to consider which are covered under some plans include the following:

  • $198 Part B annual deductible (Plans C, F, and J).
  • Excess charges above the Part B allowable charges. (Remember doctors may charge up to 115% of Medicare’s fee schedule). (Plans F, I, J).

Check for additional information on the Medicare Prescription Drug Benefit known as Medicare Part D.

Some benefits are not covered by any policy and careful comparison to employer retiree policies, etc. may be warranted. These uncovered benefits include: custodial nursing home care; nursing home care beyond 100 days; unlimited prescription drugs; private duty nursing.

Termination of Certain Supplemental Medicare Policies

As part of the Medicare Access and CHIP Reauthorization Act of 2015, Congress eliminated certain Medigap plans that cover Medicare Part B deductibles and other expenses owed by Part B policyholders. The federal law will no longer allow insurance companies to offer certain Medigap policies—such as Plan C or Plan F—starting in 2020.

One of the most controversial aspects of Plan F was the extent of its coverage. Plan F policies cover Medicare Part A and Part B deductibles, as well as the 20 percent of outpatient benefits that Medicare Part B do not cover. Thus, a policyholder who has coverage under Parts A, B, and Medigap Plan F is essentially covered 100 percent, dollar for dollar, for any medical costs. Critics complain that this will cause unnecessary doctor visits and healthcare costs. These critics believe, on the other hand, that if Medicare recipients must pay for a portion of their medical care, it will spare the Medicare program unnecessary costs.

Medicare recipients can protect their Medigap coverage. First, everyone currently enrolled in a Medigap Plan F or Plan C may keep this coverage for the remainder of their lives. Anyone who enrolls in such a program before January 1, 2020, may also retain this Medigap coverage.

Another option is Part G coverage. This functions similarly to Plan F coverage, except recipients, must pay small annual Part B deductibles.


  1. This article was originally printed March 12, 1992, by the New York State Bar Association Elder Law Section as part of its program & materials entitled Elder Law Update: Long Term Care Insurance. It has been updated as of January 2019.
  2. 42 U.S.C. §425, 42 C.F.R. §408.10 et. seq.
  3. Certain persons are not automatically enrolled and must file an application at Social Security. Examples of nonautomatic enrollment are: widows and spouses not eligible on their own work records and persons who work beyond age 65.
  4. The standard Part B premium amount in 2020 is $144.60 (or higher depending on your income). However, most people who get Social Security benefits pay less than this amount (due to the statutory hold harmless provision, which limits certain beneficiaries’ increase in their Part B premium to be no greater than the increase in their Social Security benefits).  Note: If your income is above $85,000 (single) or $170,000 (married couple), then your Medicare Part B premium may be higher.
  5. Voluntary enrollees must enroll in Part B if they take Part A. They may however take Part B without A. Voluntary enrollees pay a monthly premium for Part A with the amount based on their number of quarters of Social Security coverage.  In 2020, for voluntary enrolees coverage the premium $252 per month for people having 30-39 quarters of Medicare-covered employment and $458 per month for people who are not otherwise eligible for premium-free hospital insurance and have less than 30 quarters of Medicare-covered employment.
  6. See above for special enrollment period for Medicare Part B for persons who work past age 65.
  7. Thanks to Eve Fisher from CMS for this clarification.
  8. Coverage limitations are per “spell of illness.” A spell of illness begins with the first day of inpatient care in a hospital or nursing home and ends when the beneficiary has been hospital and nursing home free for 60 consecutive days.
  9. There is a 190-day lifetime limit on inpatient psychiatric hospital coverage.
  10. New York State law also limits balance billing. But the state limit (105%) does not apply to selected home and office visits.
  11. A spell of illness begins with the first day of inpatient care in a hospital or nursing home and ends when the beneficiary has been hospital and nursing home free for 60 consecutive days.
  12. Even though nursing facilities may be classified as skilled they may be providing services which will not qualify for Medicare coverage.
  13. Therapy is required on a daily basis, however most facilities only offer therapy five days per week and this will meet the criteria. If daily therapy is ordered by the physician a break of one or two days in rehabilitation services will not disqualify.
  14. The three day hospital stay must be within the 30 days prior to Nursing Home Care.
  15. 42 C.F.R. §409.20 to 409.36.
  16. 42 U.S.C. §§1395d; 1395f(a)(2)(D); 42 C.F.R. §409.40
  17. The hospital reimbursement is based on the prospective payment system where payments are based on Diagnosis Related Groups or DRG’s.
  18. Some policies are available only to beneficiaries over age 65.
  19. Also in New York State, an individual cannot be refused coverage because of health conditions. No medical questions can be asked. Once accepted a person cannot be terminated due to claims experience.
  20. Some policies sold prior to standardization offered benefits no longer available. For example some AARP (Prudential Policies) had some extended nursing home benefits that paid for Medicare qualified skilled nursing home care (see above) for an additional 265 days.
  21. But see previous section on balance billing for doctors not accepting assignment.
  22. But see Medicare coverage section above for spell of illness definition.

See also: