Medicare Supplement insurance, also called Medigap, is private insurance designed to help fill coverage gaps in Original Medicare. These policies pay for certain out-of-pocket costs not covered by Medicare Parts A and B.
Medigap helps supplement Original Medicare benefits, which is why it’s referred to as Medicare Supplement insurance. But what exactly are the key features and role of Medigap plans? Keep reading for an overview of how these policies work and what they cover.
What is Original Medicare?
To understand Medicare Supplement insurance, it helps to first understand Original Medicare. This refers to the traditional Medicare program administered directly by the federal government that consists of two parts:
Medicare Part A – Hospital insurance that covers inpatient hospital stays, skilled nursing facility care, hospice, and some home health services.
Medicare Part B – Medical insurance that covers doctor visits, preventive services, lab tests, durable medical equipment, and more.
With Original Medicare, beneficiaries pay a portion of the costs for covered services in the form of deductibles, copays, and coinsurance.
For example, Part A has a deductible you must pay when admitted to the hospital. And Part B covers 80% of approved amounts, leaving you responsible for 20% coinsurance.
These out-of-pocket costs are what Medicare Supplement plans are designed to help cover.
What is Medicare Supplement Insurance?
Medicare Supplement insurance refers to private health insurance policies that pay for some of the gaps in Original Medicare coverage. These policies are offered by private insurers and standardized across plans labeled with letters, such as Plan F, Plan G, etc.
Some key things to know about Medicare Supplement plans:
- Pays for Original Medicare out-of-pocket costs like deductibles and coinsurance
- Standardized across insurers – Plan A with one company offers the same benefits as Plan A with another
- Doesn’t cover services not approved by Medicare – no dental, vision, hearing aids, etc.
- You must have both Part A and Part B to purchase a Medigap policy
- Premiums vary based on plan, benefits, and location
Medicare Supplement helps reduce your exposure to out-of-pocket costs for Medicare-approved services. But these plans do not cover everything. You will still have some costs of your own with a Medigap plan.
Medicare Supplement Plan Types
There are 10 standardized Medigap plans labelled with letters – Plans A, B, C, D, F, G, K, L, M and N. Each offers a different level of coverage with certain core benefits included in all policies:
Medicare Supplement Core Benefits
- Part A coinsurance for hospital costs
- Part B coinsurance or copays
- Blood – first 3 pints per year
- Part A hospice coinsurance
The other benefits covered beyond these core services vary based on each Medicare Supplement plan type. These include:
- Skilled nursing facility coinsurance
- Part A and Part B deductibles
- Foreign travel emergency care
- Part B excess charges
Plans F and G for example cover all core benefits plus the Part B deductible, foreign travel, and Part B excess charges. Plan N covers all core benefits and Part B excess charges, but not foreign travel or the Part B deductible.
Comparing the different Medigap plans helps choose the right level of supplemental coverage beyond Original Medicare.
Who Buys Medicare Supplement Insurance?
Medicare Supplement plans are primarily purchased by beneficiaries enrolled in Original Medicare. Some details on eligibility:
- You must be enrolled in Medicare Part A and Part B
- People under 65 can qualify for Medicare and Medigap if disabled
- Certain Medigap plans not available to those under 65
- Guaranteed issue protections when first enrolling in Part B
- Can purchase anytime but premiums may be higher for those outside enrollment periods
Medigap often appeals to those who want low out-of-pocket costs and flexibility to see any provider that accepts Medicare. These plans allow you to budget expenses more easily than other Medicare options.
How Do Medigap Plans Work?
Medicare Supplement insurance works in coordination with your Original Medicare benefits:
You receive medical treatment from a Medicare-approved provider
You show your Medicare card – the provider bills Medicare directly
Medicare pays its share of approved amounts to the provider
Your Medigap plan pays its share for Medicare deductibles, coinsurance, etc. directly to the provider
You pay any remaining copays or coinsurance amounts not covered
This process allows the Medigap insurer to help cover some of the costs Medicare does not pay, reducing your out-of-pocket expenses.
Common Misconceptions About Medigap
There are a few common misconceptions about Medicare Supplement plans worth noting:
Doesn’t cover everything: Medigap only covers Medicare-approved services, not things like vision, dental, hearing aids, etc.
Isn’t a primary plan: It supplements Original Medicare benefits – you must be enrolled in Medicare Parts A and B.
Doesn’t replace Medicare: You still need your Medicare card and pay the Part B premium.
Not the same as Medicare Advantage: Medigap covers Original Medicare costs while Medicare Advantage provides Medicare benefits.
Covers costs, not services: Medigap insurance fills coverage gaps in Original Medicare services.
The key is understanding Medicare Supplement plans work alongside your Original Medicare benefits to supplement those particular covered services.
What Plan Should You Choose?
Choosing the right Medicare Supplement plan involves understanding your needs and budget:
Do you want lower premiums or more coverage? Plans with more benefits often have higher premiums.
How much can you afford in out-of-pocket costs? Do you want copays covered or are coinsurance amounts manageable?
Do you need coverage for things like foreign travel or Part B excess charges? Not all plans include these.
Are you under 65 and need a Medigap plan that allows this? Not all do.
Comparing the plans to find the right balance of premiums and coverage that fits your healthcare needs and retirement budget is key to picking the optimal Medigap policy.
Can Medigap Reject You for Health Conditions?
Medicare Supplement plans cannot refuse you coverage or charge higher premiums based on pre-existing health conditions in most cases.
If you enroll during Medigap open enrollment when you turn 65 and sign up for Medicare Part B, you get these guaranteed issue protections:
- Cannot be denied Medigap coverage if you apply within 6 months of Part B enrollment
- Plan cannot charge you more or exclude pre-existing conditions
Outside this enrollment period, medical underwriting may be allowed in certain states when initially applying. But if you maintain continuous creditable coverage, you maintain your Medigap protections.
Does Medigap Cover Prescription Drugs?
No, Medicare Supplement plans do not include coverage for prescription medications. To get drug coverage, you would need to enroll in a separate Medicare Part D prescription drug plan.
Some Medigap insurers may offer packages bundling together a Medigap plan with Part D coverage for convenience. But the prescription drug benefits would fall under the separate Part D policy.
Medicare Supplement vs Medicare Advantage
Medicare Supplement and Medicare Advantage both offer extra coverage beyond Original Medicare but work very differently:
- Offered by private insurers
- Standardized plans supplementing Orig. Medicare
- Use your Medicare card for providers
- Pay premium for Medigap plan
- Administered by private insurers
- Medicare benefits bundled together
- Use plan card for providers
- Pay premium for Medicare Advantage plan
Medigap covers gaps in Original Medicare while Medicare Advantage provides Medicare benefits through private insurers. They suit different needs.
Is Medigap Worth the Cost?
The premiums for Medicare Supplement plans may seem high, but the coverage can provide savings overall:
- Predictable copays rather than 20% coinsurance with no cap
- Avoid penalties for delays in Medicare enrollment
- Freedom to see any provider accepting Medicare
- Travel coverage with certain plans
- Pease of mind knowing costs are covered
For those wanting lower out-of-pocket costs and flexible coverage, Medigap can provide significant value.
The Bottom Line
Understanding the basics of Medigap helps determine if one of these policies is the right option to supplement your existing Medicare benefits.
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