Medicare Supplement Plans: The Ins & Outs Of Medicare & Medigap

Even though your Medicare plan covers a lot of your healthcare costs, you still have to pay some charges out-of-pocket. If you’re looking to expand your Medicare coverage even further, then you might want to invest in a Medicare supplement plan.

Medicare Glossary: Medicare Terms You Need To Know

Premium

A ‘premium’ is the amount you pay per month so that you can reap the benefits of your insurance. Premiums are set by your insurance provider.

Deductible

Deductibles are the minimum amount of money you need to cover before your Medicare and supplement plans can kick in. A deductible covers a set period of time, usually a year.

Copayment/Copay

A copayment is a way of cost sharing between the insurer and the insured. It is a fixed amount that you pay whenever you avail of a specific health service (e.g. $20 for every doctor visit, $50 for every emergency room visit, etc.). 

Copays can be paid after or on top of the deductible, or it can apply before the deductible has been met. In the latter case, copayments do not count towards your deductible.

Coinsurance

Coinsurance is another form of cost sharing like copayment, except it is only charged after your deductible has been met. Coinsurance can also be in the form of a percentage (e.g. a 10% coinsurance means that the insured pays 10% of the bill while the insurer pays the remaining balance).

How Does Medicare Work?

Medicare supplement plans work in conjunction with your Medicare, so it’s important that you understand how the latter works before you can understand the former.

There Are Two Main Parts To Medicare Supplement Plans: Part A & Part B

Medicare Part A

Medicare Part A covers inpatient hospitalizations. The cost of Part A largely depends on how long you’ve been working and remitting taxes. For every quarter (3 months) that you have been working, you earn 1 credit. That means you earn 4 credits for every year. The more credits you earn, the lower your part A premium.

  • If you earn 40 credits: you don’t pay a premium and are automatically opted into the program upon retirement.
  • If you earned less than 40 credits but more than 30 credits: you can buy into Medicare at a premium of $240 per month.
  • If you earned less than 30 credits: you can buy into Medicare at a premium of $437 per month.

The annual deductible for Part A is $1364, up to 60 days straight of inpatient hospitalization. For inpatient hospitalization over 60 days, the daily coinsurance is at $341 per day. For over 90 days, $682 per day.

Medicare Part B

Medicare Part B, on the other hand, is completely optional. Still, most retirees buy into Part B because of the additional coverage. It covers outpatient and medical services.

Premiums for Part B depends on how old you are when you apply for it, but is usually in the range of $104-135.50. The deductible is low at $185 a year, and Medicare pays 80% of the approved charges after that.

Other Things To Consider

There are also two other parts that may or may not come into play. Part C is also called Medicare Advantage, an alternative option to Medicare Part A/B that functions like an HMO. Part D covers prescription drug plans.

What Are Medicare Supplement Plans?

Also known as Medigap, Medicare supplement plans cover the “gaps” in Medicare coverage. Plans can vary, but they generally help subsidize some or all of your out-of-pocket costs, such as deductibles, copays, and coinsurance.

Like with Medicare, you can avail of your Medigap benefits at most doctors, clinics, or hospitals—no matter who your insurance provider is. If your doctor accepts Medicare (and 93% of doctors do), they will accept your Medigap benefits as well. 

Medicare supplement plans are guaranteed renewable, which means that you will continue to be covered even if you have health conditions or file multiple claims.

Who Is Eligible For Medicare Supplement Insurance Plans?

The eligibility for Medicare supplement insurance plans are the same as the eligibility for Medicare benefits, plus a few other considerations as well. You can immediately enroll in a Medigap plan if you:

  • Are a beneficiary of Medicare Part A and Part B, available for the following persons:
    • Retirees aged 65 or older
    • Eligible disabled persons under 65 who have received 24 months of social security benefits
    • Persons with Lou Gehrig’s disease (ALS)
    • Persons with Stage 5 kidney failure (ESRD)
  • Are NOT a beneficiary of Medicare Part C/Medicare Advantage

For retirees who are not enrolled in Medicare Part B, you must enroll in Part B first before you can become eligible for Medigap. After enrolling in Part B, you need to wait 6 months before you can buy a Medicare supplement plan.

Medigap is available to both U.S. and non-U.S. citizens; however, non-U.S. citizens have a waiting period of 5 years after they receive their original Medicare benefits before they can apply for Medigap, unless they have a U.S. citizen spouse.

You can apply for Medigap whenever you want, but the best time to apply is within 6 months from receiving your original Medicare benefits (on the first day of the month of your 65th birthday).

This is called the Medigap Open Enrollment Period, when you are guaranteed eligibility to a Medicare supplement insurance plan of your choosing, regardless of any pre-existing health conditions.

After this 6-month period, you can still apply for Medigap. However, insurance providers can deny your application or charge significantly higher premiums to cover you.

What Do Medicare Supplement Plans Cover?

Your coverage on top of your original Medicare benefits will depend entirely on the plan you get. Even though the plans differ in what and how much they cover, you can expect the following benefits from all of the plans:

  • The same benefits from every insurance provider, in every state* (e.g. Plan A in Florida under Insurer 1 offers the same coverage as Plan A in California under Insurer 2)

*with the exception of Massachusetts, Minnesota, and Wisconsin

  • Access to almost 900,000 primary care physicians who accept Medicare in the United States
  • Full or partial coverage of Medicare Part A coinsurance costs, up to 365 days after benefits are exhausted
  • Full or partial coverage of Medicare Part A hospice care coinsurance or copayments
  • Full or partial coverage of Medicare Part B coinsurance or copayments
  • Full or partial coverage of the cost of the first 3 pints of blood used in any medical procedure

Generally, Medicare supplement plans do not cover the following:

  • Vision (eye exams, eyeglasses)
  • Dental
  • Hearing aids
  • Long-term care
  • Prescription drugs (on new plans after 2006)

Some Medicare supplement plans cover additional benefits. These Medicare plans can offer full or partial coverage of one or more of the following:

  • Medicare Part A deductible
  • Medicare Part B deductible
  • Medicare Part B excess charges
  • Medicare Part B preventive care coinsurance
  • Skilled Nursing Facility (SNF) care coinsurance
  • Foreign travel emergency (80% of costs up to plan limit)

How Much Do Medigap Plans Cost? 

Insurance providers cannot change the benefits you receive under each Medigap plan, but they can dictate your premiums. This is why Medicare supplement plans can vary wildly depending on your state and insurer.

Other factors that go into calculating your Medigap premium are age, gender, overall health, and whether or not you’re a smoker. Some insurers offer household discounts as well.

Generally, higher premiums mean more coverage. Lower premiums either have less coverage or higher deductibles.

Because insurers can charge different premiums, it’s important to do your research and compare plans and providers before buying into Medigap. Premiums can change every year, so you may need to compare rates on an annual basis. 

Again, all the plans are exactly the same in terms of benefits. If you switch to a cheaper provider for the same Medigap plan, you will receive the same benefits as with your old provider.

Types Of Medicare Supplement Plans

There are 10 different Medigap plans currently being offered. They are labeled Plans A through N, although Plans E, H, I, and J have already been closed off to new beneficiaries.

For a quick overview of the different plans, check out the comparison table below.

Supplement Plan A

Supplement Plan A is the most basic of all Medigap plans. All insurance providers are required to offer Plan A, although some states may not be obligated to offer it to disabled Medicare beneficiaries under 65. 

Medigap Plan A covers:

  • 100% of Part A coinsurance and hospital costs
  • 100% of Part A hospice care coinsurance or copayment
  • 100% of Part B coinsurance or copayment
  • 100% of the first 3 pints of blood used in any medical procedure

Supplement Plan B

Supplement Plan B covers everything in Plan A, plus:

  • 100% of Part A deductible
  • 100% of SNF care coinsurance

Supplement Plan C

Supplement Plan C is one of the more popular plans because of its comprehensive coverage. Plan C covers everything in Plan B, plus:

  • 100% of Part B deductible
  • Foreign travel exchange (up to 80% of plan limits)

Unfortunately, Medigap Plan C is being discontinued. New beneficiaries cannot enroll into Plan C after January 1, 2020. Beneficiaries who are enrolled in these plans prior to this date can still avail of their benefits.

Supplement Plan D

One of the least popular plans, Supplement Plan D covers everything in Plan B, plus the foreign travel exchange (up to 80% of plan limits).

Supplement Plan F

Supplement Plan F is the most popular Medicare plan, with over half of new enrollees buying into it. It is the most comprehensive plan that covers all costs, in exchange for a high monthly premium. Under this plan, there are virtually no out-of-pocket costs because Medicare and Medigap will cover everything.

Some insurers offer Plan F at a lower premium but with a high deductible. For this option, you pay all healthcare costs up to a deductible of $2300 before your Medigap kicks in.

Like Plan C, Plan F is also being discontinued and cannot be bought after January 1, 2020.

Supplement Plan G

Supplement Plan G has been gaining popularity in recent years and is likely to take over Plan F as the preferred plan when the latter gets discontinued. Plan G covers everything in Plan F except for the Part B deductible of $185 year.

Even though Plan G doesn’t cover the Part B deductible, competitive monthly pricing can actually make it even more cost-effective than Plan F in some states.

Supplement Plans K, L, M

These plans are special because they offer partial coverage of some of the Medigap benefits. This allows you to pay a lower premium. All of the plans cover 100% of the Part A coinsurance and hospital costs, but differ with the rest.

In addition to that, Plan K covers 50% and Plan L covers 75% of the following:

  • Part A hospice care coinsurance
  • Part B coinsurance
  • First three pints of blood
  • SNF care coinsurance
  • Part A deductible

Medigap Plan K has an out-of-pocket limit of $5,560, while Plan L has a limit of $2,780.

Medigap Plan M is similar to Plan D in most respects, except that it only covers 50% of the Part A deductible.

Because of low partial coverage, these plans are rarely bought.

Supplement Plan N

Introduced less than a decade ago, Supplement Plan N is one of the newest and most affordable plans in the Medigap roster. This plan is similar to Plan D, except that you may need to cover small copayments for office and emergency room visits in exchange for a lower premium.

Conclusion

There are many different Medicare supplement plans and even more insurance providers. Start by choosing the Medigap plan that fits your needs best. When comparing plans, consider not just the premiums but also any out-of-pocket costs that could accumulate throughout the year. 

Once you’ve decided on the perfect Medicare supplement plan for you, shop around for rates from different insurance providers to get the best deal possible.