Final answer:
Medigap, or Medicare Supplement Insurance, is supplemental insurance purchased to cover gaps not covered by Medicare Part A and Part B, such as copayments and deductibles. These supplemental policies are sold by private insurers and are essential for individuals who may face significant medical expenses.
Step-by-step explanation:
The supplemental insurance that you might purchase to fill the gaps that Medicare Part A and Part B do not cover is known as Medigap or Medicare Supplement Insurance. While Medicare Part A covers hospital services and Part B covers outpatient services, they both come with deductibles, copayments, and other out-of-pocket expenses. Medigap policies are sold by private insurance companies and can help pay for some of the healthcare costs that Medicare does not cover, including copayments, coinsurance, and deductibles.
As the Medicare system evolved since its establishment in 1965, the complexity and diversity of healthcare needs have led many beneficiaries to seek private insurance options for additional coverage. Employment-based insurance and direct-purchase insurance are common categories of private insurance. These supplemental plans are particularly important for individuals who may incur high medical expenses, as traditional Medicare parts do not have a cap on out-of-pocket spending.
Medicare's limitations were highlighted as it quickly became one of the government's most significant expenditures without covering all of beneficiaries' potential healthcare costs such as prescription drugs. This uncovered space led to criticisms about 'gaps' in coverage, emphasizing the need for supplemental plans like Medigap. Additionally, with regulatory changes and reforms such as those discussed with the Affordable Care Act (ACA), the insurance landscape continues to evolve, affecting Medicare and supplementary insurance options.