Original Medicare provides essential health coverage, but it doesn’t cover all medical costs. Beneficiaries may still be responsible for deductibles, coinsurance and copayments, and these can add up quickly. Medicare supplement insurance, also known as Medigap, is designed to help cover certain out-of-pocket costs that remain after original Medicare pays its share.
Learn More About Medicare Coverage
What are Medicare supplement plans?
Medicare supplements, also known as Medigap, are private insurance plans that can help pay for costs that original Medicare doesn’t cover.
These standardized plans are sold by private insurance companies and work alongside Medicare Parts A and B. Medigap is not a substitute for Medicare; it provides supplemental coverage that complements Medicare Parts A and B.
Medicare supplements also differ from a Medicare Advantage plan (Medicare Part C). A Medicare Advantage plan bundles the coverages from Medicare Parts A (hospital), B (medical) and, usually, D (prescription drugs) into one plan that replaces Medicare (i.e., the Medicare Advantage plan becomes the primary payer). On the other hand, a Medicare supplement provides additional coverage beyond that of Medicare Parts A and B.
It is important to note that you cannot have both a Medicare supplement plan and a Medicare Advantage plan at the same time; you must choose between them.
Medigap plans are standardized into ten letter categories: A, B, C, D, F, G, K, L, M and N. This means that the coverage offered under a Medigap Plan G, for example, is the same from one insurance company to another in the same state. While coverage is the same for each plan type no matter which insurance carrier you select, premiums can vary depending on insurer, health conditions, timing and other factors.
Key characteristics of Medicare supplement plans include:
- Standardized benefits across insurance companies for each plan type
- Coverage that supplements original Medicare without replacing it
- Beneficiaries can typically use Medigap coverage anywhere that Medicare is accepted, since most Medigap plans do not have network restrictions
How Medicare Supplement Plans Work in Practice
Medigap plans follow a coordinated payment process with original Medicare. For Medicare-approved covered services, Medicare typically pays first. Then, the Medigap plan may help pay its share of applicable deductibles, copays or coinsurance.
Here’s how the process typically works:
- You receive medical services. You visit a doctor, hospital or other health care provider that accepts Medicare. Most states allow broad access since Medigap coverage generally works with any provider that accepts original Medicare without the need for network referrals.
- Medicare processes the claim. Original Medicare (Parts A and B) reviews the claim and pays its approved portion according to the Medicare contract and payment rules.
- Medigap coverage activates. Your Medicare supplement plan pays its share of covered costs, such as Part B coinsurance, hospital coinsurance or certain copayments, depending on your plan.
- Remaining costs. You are responsible for costs not covered by original Medicare or your Medigap plan. This may include the Part B premium, the separate Medigap premium, prescription drug costs and any services that are outside the plan’s limitations.
All Medigap plans require you to continue paying your Medicare Part B premium in addition to a separate Medigap premium. Medigap plan premiums will vary depending on the coverage you choose, and some plans may have deductibles.
Why People Choose Medicare Supplement Plans
Original Medicare can leave beneficiaries responsible for out-of-pocket costs that can be difficult to predict. For individuals who use health care services frequently or want more predictable medical expenses, Medicare supplement (Medigap) plans may help reduce certain costs that remain after original Medicare has paid its share.
Many people also choose Medigap plans for provider flexibility. Most Medicare supplement plans do not use provider networks, which allows beneficiaries to see most doctors, specialists and hospitals that accept Medicare. Some plans even include limited emergency coverage for foreign travel.
However, Medigap plans do not cover everything. Prescription drug coverage requires a separate Medicare Part D plan, and benefits like dental, vision, hearing aids and long-term care are generally not included. Coverage availability and benefits may vary by plan type, carrier, state and eligibility status, so it’s important to review your options carefully before enrolling.
Considerations When Choosing a Medigap Plan
Choosing the best Medicare supplement for your needs involves more than just comparing monthly premiums. Understanding factors like coverage differences, out-of-pocket costs and enrollment timing can help you select a plan that aligns with your health care needs and budget.
Medigap Cost and Affordability
Monthly premiums are only part of the picture when it comes to health insurance affordability. Medigap plan costs can vary based on factors like the insurer, plan type, age, tobacco use and location.
Insurance companies generally use one of three pricing approaches for Medicare supplements:
- Community-rated plans, also known as no-age-rated plans, charge a flat premium to everyone in the same geographic area, regardless of their age or sex. However, this premium amount can change from year to year, and this plan rating is not available in many states.
- Issue-age-rated plans base premiums on your age when Medigap coverage begins. Pricing does not increase as policyholders grow older.
- Attained-age-rated plans base premium pricing on your current age. These plans often start with lower premiums but increase as policyholders grow older. This is the most common model for Medigap plan premiums.
Coverage and Plan Differences
Coverage varies widely by Medigap plan. Depending on the selected option, beneficiaries may still be responsible for deductibles, copays, coinsurance or other cost-sharing requirements. Some plans also cover Medicare Part B excess charges, which may apply if health care providers do not accept Medicare assignment.
It’s also important to understand how Medigap differs from Medicare Advantage. Medicare supplement plans work alongside original Medicare and generally allow beneficiaries to see providers nationwide that accept Medicare without network restrictions. Medicare Advantage plans may include additional benefits, but they also often involve provider networks, referrals or different cost-sharing requirements.
Enrollment Timing
For many people, the best time to enroll in a Medicare supplement plan is during the Medigap open enrollment period, which lasts six months and begins on the first day of the month in which an individual is both age 65 or older and enrolled in Medicare Part B. During this period, insurance companies generally cannot deny coverage or charge higher premiums based on health status.
Outside of this six-month open enrollment period, medical underwriting may be necessary to secure a Medigap plan.
Is a Medicare supplement plan right for you?
Determining whether a Medicare supplement plan aligns with your health care and financial needs requires careful evaluation of your circumstances. Here are a few questions to consider when evaluating your Medicare coverage options:
- What are your current health care costs, and how often do you use medical services?
- Do you want the flexibility to see providers who accept Medicare without the network restrictions of a Medicare Advantage plan?
- Are you comfortable paying a separate Medigap premium in addition to your Part B premium?
- Would you prefer predictable monthly premiums over more variable out-of-pocket costs?
- Do you regularly have office visits, specialist appointments or emergency room visits?
- How important is protection from Part B excess charges in your state?
- Do you need a separate prescription drug plan to cover prescription costs?
- Do you travel often within the United States or internationally?
- How does Medigap compare with Medicare Advantage in your area?
The right plan choice will depend on your health needs, budget, location and risk tolerance. A Medicare insurance advisor can assist in evaluating your needs, securing quotes for Medigap plans and selecting the right plan for you.
Make an Informed Coverage Decision
Choosing the right Medicare coverage requires understanding your health care needs, budget and long-term goals. Medicare supplement plans can help reduce certain out-of-pocket costs under original Medicare, but plan availability, premiums, underwriting rules and policy terms vary by carrier and state.
Higginbotham’s Medicare specialists work closely with you to evaluate your needs, compare available plans and provide year-round support to help you get the most out of your coverage. Connect with a Higginbotham advisor today to discuss your Medicare needs and explore coverage options that can support your health and financial well-being.
