5 minute read

Medigap - Medicaid

Medicine EncyclopediaAging Healthy - Part 3Medigap - Medigap Insurance, Medicare Managed-care Plans, Employer-sponsored Policies, Medicaid


There are four ways in which Medicare beneficiaries with low incomes can qualify for Medicaid coverage. Under the traditional or "full coverage" mechanism, low-income Medicare beneficiaries who qualify for cash payments such as Supplementary Security Income, or who are deemed to be medically needy by their states, can qualify for Medicaid benefits. The second route is the Qualified Medicare Beneficiary (QMB) program, which is aimed at beneficiaries without full Medicaid coverage whose incomes are at or below the poverty level.

Third, the Specified Low-Income Medicare Beneficiary (SLMB) Program is aimed at those with incomes just above the poverty level (not more than 20 percent higher). Finally, the Qualified Individual Programs (QI-1 and QI-2) covers some individuals with incomes that are 20 to 75 percent higher than the poverty level.

Of the 16.5 percent of Medicare beneficiaries who are also covered by Medicaid, just over half (8.3 percent) are enrolled under the traditional program, almost half (7.4 percent) are eligible through QMB, and 0.8 percent have SLMB coverage. Only a negligible percentage (about 0.1 percent) have QI coverage. Those eligible for full coverage, as well as those with QMB coverage, do not have to pay the Medicare Part B premium or the Medicare deductibles and coinsurance. Furthermore, those with full coverage can take advantage of other benefits provided by their state Medicaid program, such as coverage for preventive services, prescription drugs, and long-term nursing home care. In contrast, those with SLMB and QI coverage do not receive any covered benefits besides those provided by Medicare. Rather, they are just exempted from paying the monthly Part B premium ($50.00 per month in 2001).

Disadvantages to Medicaid supplemental coverage include the cost of this coverage to the state and federal government and the fact that seniors are not permanently eligible for coverage. One way to ensure continuous coverage is to purchase individual Medigap coverage, but this is very expensive and generally not recommended. Otherwise, when individuals lose their Medicaid eligibility they find themselves at considerable financial risk as a result of Medicare's substantial premium and cost-sharing requirements.

Another major problem with Medicaid supplementation is the fact that many individuals who are eligible for this coverage are unaware of the fact. It is estimated that between 1.9 and 2.4 million people are eligible but not receiving QMB benefits, and 1.4 million are eligible for but not receiving SLMB. Altogether, this represents about 45 percent of eligibles. Almost none of the half million people eligible for QI have it. These figures are of concern to policymakers, in part, because these individuals are likely to receive less medical care, but also because of the financial cost. If someone is eligible for but not receiving QMB, SLMB, or QI, they receive $546 less annually in Social Security benefits because the Part B premium is withheld. Furthermore, those who should be receiving QMB are paying the substantial Medicare cost-sharing requirements, or alternatively, have a Medigap policy that they do not need.

Having Medicaid coverage makes a tremendous difference in how much a person has to pay out-of-pocket for medical care. On average, those with Medicaid pay a total of $337 per year out-of-pocket, compared to $1,735 for those with Medicare coverage only. Those below the poverty level who have Medicaid pay an average of only 8 percent of their income towards medical expenses and insurance premiums, compared to 54 percent for poor beneficiaries who have Medigap coverage, and 48 percent for those with HMO coverage.



ALECXIH, L. M, et al. "Key Issues Affecting Accessibility to Medigap Insurance." New York: The Commonwealth Fund, 1997.

CHULIS, G. S., et al. "Health Insurance and the Elderly: Data from MCBS." Health Care Financing Review 14, no. 3 (1993): 163–181.

CHULIS, G. S.; EPPIG, F. J.; and POISAL, J. A. "Ownership and Average Premiums for Medicare Supplementary Insurance Policies." Health Care Financing Review 12: 255–275.

COOPER, B. S., and DAVIS, M. H. "On the Road to Medicare Drug Coverage." Paper presented at the Seventh Princeton Conference, sponsored by the Robert Wood Johnson Foundation, May 13, 2000.

DOWD, B., et al. "Issues Regarding Health Plan Payments Under Medicare and Recommendations for Reform." Milbank Quarterly 70, no. 3 (1992): 423–453.

EPPIG, F. J., and CHULIS, G. S. "Trends in Medicare Supplementary Insurance: 1992–96." Health Care Financing Review 19, no. 1 (1997): 201–206.

ETTNER, S. L. "Adverse Selection and the Purchase of MediGap Insurance." Journal of Health Economics 16, no. 5 (1997): 499–624.

Families USA Foundation. "Shortchanged: Billions Withheld from Medicare Beneficiaries." Washington, D.C.: Families USA Foundation, 1998.

FOX, P. D.; RICE, T.; and ALECXIH, L. "Medigap Regulation: Lessons for Health Care Reform." Journal of Health Politics, Policy, and Law 20, no. 1 (1995): 31–48.

GOLD, M. "Trends Reflect Fewer Choices." Monitoring Medicare+ Choice Fast Facts. Washington, D.C.: Mathematica Policy Research, 2000.

GROSS, D. J., et al. "Out-of-Pocket Spending by Medicare Beneficiaries Age 65 and Older: Further Analysis of 1997 Projections." Paper presented at the Association for Health Services Research Annual Meetings, Washington, D.C., June 1998. Prepared by the Public Policy Institute of the American Association of Retired Persons, and the Lewin Group, Inc.

KORNFIELD, T., and GOLD, M. "Is There More or Less Choice?" Monitoring Medicare+ Choice Fast Facts. Washington, D.C.: Mathematica Policy Research, December 1999.

KPMG Peat Marwick. Health Benefits in 1998. Washington, D.C.: KPMG Peat Marwick, 1998.

LAMPHERE, J., et al. "The Surge in Medicare Managed Care: An Update." Health Affairs 16, no. 3 (1997): 127–133.

LANGWELL, K. M., and HADLEY, J. P. "Insights from the Medicare HMO Demonstrations." Health Affairs 9, no. 1 (1990): 74–84.

MCCALL, N., et al. "Private Health Insurance and Medical Care Utilization: Evidence from the Medicare Population." Inquiry 28 (1991): 276–287.

MCCALL, N.; RICE, T.; and HALL, A. "The Effect of State Regulations on the Quality and Sale of Insurance Policies to Medicare Beneficiaries." Journal of Health Politics, Policy, and Law 12, no. 1 (1987): 53–76.

MCCORMACK, L. A., et al. "Medigap Reform Legislation of 1990: Have the Objectives Been Met?" Health Care Financing Review 18, no. 1 (1996): 157–174.

MORRISEY, M. A.; JENSEN, G. A.; and HENDERLITE, S. E. "Employer-Sponsored Health Insurance for Retired Americans." Health Affairs (Spring 1990): 57–73.

RICE, T.; GRAHAM, M. L.; and FOX, P. D. "The Impact of Policy Standardization on the Medigap Market." Inquiry 34 (1997): 106–116.

RICE, T., and BERNSTEIN, J. "Supplemental Health Insurance for Medicare Beneficiaries." Medicare Brief No. 6. Washington, D.C.: National Academy of Social Insurance, 1999.

U.S. General Accounting Office. "Medigap Insurance: Law Has Increased Protection Against Substandard and Overpriced Policies." Pub. no. GAO/HRD-87-8. Washington, D.C.: USGAO, 1986.

U.S. General Accounting Office "Retiree Health Insurance: Erosion in Retiree Health Benefits Offered by Large Employers." Pub no. GAO/ T-HEHS-98-110. Washington, D.C.: USGAO, 1998.

WARE, J. E., JR., et al. "Differences in 4-Year Health Outcomes for Elderly and Poor, Chronically Ill Patients Treated in HMO and Fee-for-Service Systems: Results from the Medical Outcomes Study." Journal of the American Medical Association 276 (1996): 1039–1047.

Additional topics