The Curious Case Of Hospital Indemnity Insurance For Medicare Beneficiaries

Medicare beneficiaries have two options for their health coverage: original Medicare or a Medicare Advantage (MA) plan. Original Medicare is administered by the federal government and provides coverage generally paid as fee-for-service, while MA plans are administered by private insurance companies that cover, at a minimum, the same services as original Medicare. Both options, however, raise affordability concerns for beneficiaries because of unique "gaps" in the coverage they provide.

Beneficiaries choosing original Medicare can purchase Medigap plans to cover their deductibles and cost sharing. MA enrollees are not allowed to buy a Medigap plan, but their MA plans often provide dental, vision, and hearing benefits not covered by original Medicare. They may also purchase a lesser-known hospital indemnity insurance (HII), which provides cash payouts after a hospital stay or a receipt of certain health care services.

Nonetheless, little is known about HII in the Medicare context: These policies are not comprehensive insurance coverage and are therefore exempt from applicable federal requirements. In this article, we propose an initial research agenda on HII and identify four potential strategies for necessary data collection.