When Congress combed through the Medicare program during the recent budget debate, it also rewrote from top to bottom the laws covering "medigap" insurance -- private policies that are sold to plug the numerous holes in Medicare that an elderly person might fall through.

The net effect is to put a firm federal hand on the regulation of this insurance.

The new law "is incredibly comprehensive," said Linda Lipsen, legislative counsel with Consumers Union, which had lobbied hard for the revisions.

When fully implemented, it will make it easier for consumers to comparison shop, require that carriers pay out in benefits at least 65 percent of the dollars they collect in premiums and provide federal assistance to states to set up counseling programs to help elderly people choose the policy best suited for them.

The measure had been pushed particularly by Sen. Thomas A. Daschle (D-S.D.) and Reps. Ron Wyden (D-Ore.) and Doug Walgren (D-Pa.), but supporters had feared that it would be dropped as Congress focused its attention on the budget.

Medigap insurance has always been an important protection, but the new cuts in the program have made it even more so. Medigap policies pick up where Medicare leaves off -- such as when you overstay your hospital coverage -- and picks up "co-pays" and deductibles and other out-of-pocket costs a patient may have to bear.

Consumer groups have long recommended that individuals carry such coverage if they can, but so many policies appeared on the market with so many whistles and bells that only the very well informed or lucky consumer ended up with a good deal for the money.

The new law "really gives something back to senior citizens," said Lipsen. "It's going to make the private market work."

The American Association of Retired Persons agreed that "these Medigap reforms will make it easier for consumers to understand and compare policies." And the 65 percent payout requirement will give them "more bang for the buck," the group said.

Under the law, all companies that offer insurance to supplement Medicare must offer a "core" package of basic benefits, and they must provide consumers with understandable outlines of coverage that are comparable in language and format to facilitate comparison shopping.

The law also limits carriers to a maximum of nine additional coverage packages that go beyond the core plan. These, too, must be uniform so that they can be compared.

The National Association of Insurance Commissioners is given nine months to determine what should be in these packages -- and to work out other regulations, and then states have a year to enact them. If the NAIC can't meet the deadline, the secretary of health and human services will step in, and if states fail to do their part, the federal government will do it for them.

This means that it might be a couple of years before the law is fully in place, but Consumer Union's Gail Shearer said she believes that the NAIC and the states will move quickly. "We think we're looking at about a year and three-quarters" before the law is implemented, she said.

The industry, although not enthusiastic about some of the bill's provisions, favors the "overall purpose" of the law, said a spokeswoman for the Health Insurance Association of America.

In other major features, the law:

Bans the sale of duplicative policies, including a requirement that a seller of medigap insurance obtain a written statement from the buyer about other policies the buyer owns and his or her eligibility for Medicare.

Forbids insurers to deny coverage or charge higher rates to anyone purchasing a policy within six months of becoming eligible for Medicare part B benefits. "It means that everybody gets at least one shot at the best policy on the market" when they turn 65, said Shearer.

Forbids "preexisting-condition" exclusions, waiting periods and probationary periods when a policy is purchased to replace an existing one and the new policy's benefits are similar to the old one's.

Requires that medigap policies be guaranteed renewable.

Consumer groups noted that the bill's provisions do not apply to employer-provided group insurance and it does not cover "dread disease" policies -- those covering a single type of ailment such as cancer -- and hospital indemnity policies. But in general they were enormously pleased.

Lipsen pointed also to the counseling program in the bill, though she cautioned that the money for it -- $10 million over three years -- must still be appropriated. She noted that 12 states already have such programs and they have been very popular.

"These programs really save a lot of money, and consumers are extremely enthusiastic" when they have had a chance to use them, she said.

"The members {of Congress} really deserve a lot of credit. Sometimes when they go behind closed doors what comes out is really valuable."