WHAT IS 'Medicare Supplementary Medical Insurance - SMI'

Medicare Supplementary Medical Insurance (SMI) describes a range of health insurance sold by private insurance companies to complement Medicare policies. Also known as Medigap, this type of insurance covers the cost of healthcare services that lie outside the scope of Medicare Part A and Part B insurance plans.

BREAKING DOWN 'Medicare Supplementary Medical Insurance - SMI'

Medicare supplemental health insurance covers common gaps in Medicare’s standard insurance plans. People who apply for Medigap coverage must take part in both Medicare’s hospital insurance, known as Part A, and its medical insurance, known as Part B. Insured individuals pay premiums for Medigap policies directly to the private insurance companies that issue them. Those premiums exist above and beyond the premiums paid for Medicare plans.

For example, a person with a chronic condition may rack up a large number of visits to healthcare providers. Even though Medicare Part B likely would cover much of the cost, the patient would still owe deductibles and copayments. By purchasing a Medigap policy, the insured party could potentially save money if the cost of premiums for Medigap insurance ran lower than the deductible and copayment expenses.

Medigap Claims

Most Medigap policies receive Medicare Part B claim information directly from the Medicare program, then remit the difference directly to the healthcare provider. Some policies submit payments to hospitals based upon Medicare Part A claims information but this is less common. Medicare requires policies to pay directly to any doctor participating in Medicare if a patient requests that the insurance company do so.

Medicare Advantage and Medicare Part D compared to Medigap

Medicare itself offers additional plans either to supplement its core offerings or as an alternative to Parts A and B, including Medicare Advantage, also known as Part C, and the Medicare Prescription Drug Plan, known as Part D. Medigap policies do not work in conjunction with those supplemental plans. The federal government forbids private insurers from selling Medigap policies to individuals enrolled in Medicare Advantage. Individuals who enroll in Medicare Part D cannot also receive prescription drug coverage from a Medigap plan.

Potential Fraudulent Practices

The Centers for Medicare and Medicaid Services warn prospective buyers of Medigap policies to be on the lookout for fraudulent practices. Common scams include high-pressure sales tactics, selling duplicate policies or selling policies when insurers are aware that individuals are covered by incompatible government programs, such as Medicaid or Medicare Advantage. In addition, some states regulate the types of Medigap policies that can be sold within their borders. Though Medigap policies are related to Medicare, they are only offered by private insurers. Those shopping for policies should bear in mind that it is illegal for private insurers to misrepresent Medigap policies as federal programs.

  1. Medicare Part A, Hospital Insurance

    One of the four components of the federal government’s health ...
  2. State Health Insurance Assistance ...

    State Health Insurance Assistance Programs (SHIP) offer free ...
  3. Medicare Star-Rating System

    The Medicare Star-Rating System is a method for comparing Medicare ...
  4. Medicare Wages

    Medicare wages are employee earnings that are subject to a U.S. ...
  5. The Medicare Catastrophic Coverage ...

    The Medicare Catastrophic Coverage Act of 1988 (MCAA) is a government ...
  6. Payroll Tax

    A payroll tax is a tax an employer withholds from an employee's ...
Related Articles
  1. Financial Advisor

    Filling In The Medicare Gaps

    Basic Medicare is not a perfect fit for everyone - sometimes, extra policies are required to suit a person's needs.
  2. Retirement

    Pitfalls of Medicare Advantage Plans

    A Medicare Advantage plan may help you lower health costs not covered by Medicare. But there are definite tradeoffs, compared to classic Medicare/Medigap.
  3. Insurance

    Medicare: Understanding the Basics

    Understanding the basics of Medicare can help you plan for the benefits you should expect to receive.
  4. Managing Wealth

    Planning for Healthcare

    Planning how to pay for healthcare during retirement is a must—and the earlier you do it, the better. Medicare often fall short, so here are your options.
  5. Managing Wealth

    Find the Best Medigap Plan for You

    Picking a plan to fill in the “gaps” in Original Medicare from the alphabet soup of options can be daunting. Here are guidelines that can help.
  6. Insurance

    Medicare Enrollment: Everything You Need to Know

    It's important to enroll in Medicare properly to have healthcare coverage in retirement.
  7. Retirement

    How Much Will Healthcare Cost After You Retire?

    The price tag may shock you, which is why you should do some pre-retirement calculations.
  8. Insurance

    Should You Enroll in Medicare if You're Still Working?

    Whether or not you should enroll in Medicare while working depends on your particular situation.
  9. Retirement

    A Couple's Guide to Healthcare Costs in Retirement

    Most health-expense planning is based on the individual, but couples can learn how to enjoy retirement without worrying about big medical expenses.
  1. Can I get dental insurance with Medicare?

    Learn about Medicare and how it does not offer dental insurance and only covers specific dental procedures under certain ... Read Answer >>
Trading Center