The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 not only creates the first prescription drug benefit in the history of the federal health insurance program, it also prohibits new sales of three out of 10 standard Medigap policies, after 2005. In most states, Medicare supplement (“Medigap”) policies A through J are the only ones that can be sold to cover costs Medicare won’t pay. Of those, plans H, I, and J include prescription drug benefits, with J offering the greatest coverage. These three plans no longer can be offered, as of 2006, when Medicare will begin covering some prescriptions, but existing policies may be maintained.
Under the new law, anyone who holds onto a Medigap policy with drug coverage won’t be able to sign up for the new Medicare drug plan. It’s possible, though, that this restriction will be eased by future legislation because there will still be substantial exposure to prescription drug costs, when the Medicare plan is introduced in 2006.
Even though Medigap plans H, I, and J are on the endangered list, some insurers will continue to offer them, through 2005. Current holders of H, I, and J can convert to another plan, with no lapse in coverage.
