Illness-episode approach: costs and benefits of medigap insurance.

Over two-thirds of Medicare beneficiaries have private supplementary coverage, but few know enough about Medicare, their own supplements, or available alternatives to make intelligent comparisons and informed purchasing decisions. The illness-episode approach, a new way to provide insurance information to Medicare beneficiaries, calculates out-of-pocket costs likely to be faced by beneficiaries experiencing 13 illnesses, under Medicare alone and under different medigap policies. Applying the approach to six policies marketed in Los Angeles in 1986 revealed that plans varied widely in their ability to reduce financial vulnerability; many still leave the elderly with substantial out-of-pocket costs.