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How Medicare Supplement Plans Work
- Braden Medicare Insurance
- Oct 2, 2024
- 7 min read
Updated: Jan 7
Michael T. Braden August 27, 2024 MEDICARE SUPPLEMENTS & MEDIGAP
THIS IS HOW ORIGINAL MEDICARE COORDINATES WITH MEDICARE SUPPLEMENT/MEDIGAP PLANS
If you’re around 65, close to retiring, or already retired, chances are you’re researching Medicare. During your research, perhaps you’ve come to like what Original Medicare, or Medicare Part A and Part B, offers. But there’s a glaring problem you may have spotted:
Medicare doesn’t cover some of the costs your employer-provided insurance likely used to cover. Luckily, with a Medicare Supplement plan, you can get coverage more like what you were used to.
A Medicare Supplement plan is an excellent option for people who prefer the government-run Medicare program but want a few more of their costs covered. This article explains what a Medicare Supplement plan is, how it works, the benefits each plan offers, and more.
WHAT EXACTLY IS A MEDICARE SUPPLEMENT PLAN?
A Medicare Supplement (also known as Medigap) plan is a supplemental insurance plan sold by a private company. This type of insurance helps cover costs that Original Medicare doesn’t, such as deductibles, copayments, and coinsurance.
EXPOSING THE GAPS IN ORIGINAL MEDICARE
Original Medicare covers a wide range of illnesses, ailments, and preventative treatments. But under this insurance, you may still end up paying quite a bit more than you were expecting for services that you thought should be better covered. For example, hospital stays are covered under Medicare Part A, but only for up to 90 days. If you were to contract an illness requiring a more extended stay, you’d face steep medical bills. This situation is one of many “gaps” that people often wish were filled.
Original Medicare is like a dam holding back a reservoir of medical costs you’ll never have to worry about. In many cases, these costs don’t affect you if Medicare covers you and you continue to pay your premiums. But in this same dam, there are a few leaks—costs that will be passed to you, especially if you’re a frequent user of your Medicare health insurance. This is where Medicare Supplement (Medigap) plans help.
A Medicare Supplement plan is like a private insurance company plugging some of the leakier holes in the dam of Medicare coverage. But unfortunately, it’s not free. And the more leaks insurance companies fill, the more it will cost you in premiums (monthly payments). But in the long run, you can avoid spending a lot of money out of pocket later if you’re willing to pay a little more in premiums in the short term.
JUST HOW DO MEDICARE SUPPLEMENT PLANS WORK?
Once you enroll in both Part A and Part B, you have the option to add a Medicare Supplement plan to give yourself additional coverage. Medicare Supplement plans work in addition to your existing Medicare coverage, so the benefits of the Medigap plan kick in once coverage from Part A or Part B ends.
Additionally, the federal government regulates which benefits each plan provides. The plans themselves offer the same benefits no matter which company sells them. This means that no matter which company you purchase a Plan F (one of many Medigap policies) from, the benefits must all match the Plan F benefits set by law.
It’s worth noting, however, that premiums for a plan can vary widely from one company to the next. For this reason, you may be able to find better deals if you get quotes from various companies.
It’s pretty easy to get Medicare Supplement plans confused with Medicare parts because some of them share names. Keep in mind, they are not the same.
Medicare Part A, Part B, Part C, and Part D are all sections of Medicare. Medicare Supplement Plans A, B, C, D, F, G, K, L, M, and N are Medigap policies that supplement your Original Medicare coverage. The plans supplement coverage for the parts.
EXPLANATION OF MEDICARE SUPPLEMENT PLAN BENEFITS?
1. MEDICARE PART A HOSPITAL COSTS & CO-INSURANCE
Remember the example from the beginning, about the person who stayed in a hospital longer than 90 days? This benefit is especially valuable for worst-case-scenario hospital stays. Under Medicare Part A, a hospital stay past 60 days (until day 90) will cost you coinsurance payments. Days 90 and beyond are far more expensive. The Part A coinsurance and hospital benefit remedies these potentially high costs, kicking in for up to a full year, once your Original Medicare benefits are used up.
2. MEDICARE PART B CO-INSURANCE & CO-PAYMENTS
This covers coinsurance or copayments that doctors and other providers typically charge you under Part B.
3. YOUR 1ST THREE PINTS OF BLOOD ARE FREE
Under Original Medicare, you have to pay for every pint of blood you receive until you hit four pints in a calendar year. You’re covered for the first three pints you get in a year with this benefit.
4. HOSPICE CO-INSURANCE & CO-PAYMENTS
Medicare Part A covers Hospice care, but there can be a few co-payments. For instance, with Original Medicare alone, you must pay $5 per prescription. And if your hospice facility needs to temporarily move you to another facility, like a nursing home, you’ll have to pay 5% of respite care costs. With Part A hospice care co-payment coverage, all these co-payments would be covered, so hospice would essentially be free.
5. CARE AT A SKILLED NURSING FACILITY OR SNF
Suppose you receive care from skilled nursing or therapy staff. These facilities may be part of a nursing home or a hospital and are registered as SNFs with Medicare. Treatment in SNFs includes physical therapy, audiology, occupational therapy, and others.
Although Original Medicare covers treatment in an SNF for up to 20 days, after day 20 you incur daily coinsurance(currently $185.50 per day in 2022).1 Those fees are completely covered if you purchase a plan with the SNF care coinsurance benefit.
6. PART A DEDUCTIBLE
Part A of Medicare will cover your first 60 days in a hospital, but only after you meet your not-so-small deductible in your benefit period ($1,556 in 2022).2 A plan with this benefit covers your Part A deductible completely.
7. PART B DEDUCTIBLE
This is a significant benefit that covers your deductible for any Medicare-approved Part B service. With this deductible covered, you can see a doctor without any out-of-pocket cost.
The Part B deductible benefit is controversial, so much so that Congress will no longer allow plans that cover the Part B deductible (Plan F and Plan C) to be sold after January 1, 2020. Newly eligible beneficiaries after 2020 will not be able to buy Plan F or Plan C, but anyone who already had either of these plans before can keep them
The 2023 Annual Part B Deductible is decreasing from $233 to $226.
8. PART B EXCESS CHARGES
If you go to a doctor who doesn’t accept “assignment” (another way of saying the doctor agrees to the Medicare-approved amount for a service), they can legally overcharge you for the service. The Part B excess charge benefit covers these excess charges.
9. FOREIGN TRAVEL COVERAGE
In general, Original Medicare doesn’t cover emergency services outside the U.S. There are a few rare exceptions, such as traveling from foreign countries to US territories (e.g., driving through Canada to reach Alaska). If you enjoy foreign travel, this is a great benefit to have in addition to, or instead of, other Travel Insurance.
10. OUT OF POCKET LIMIT
A benefit many are typically used to with private insurance, the out-of-pocket limit applies only to Plans K and L. When you reach your Annual Part B deductible (in 2021, the Medicare Annual Part B deductible was $203) and the out-of-pocket limit for your plan, your Medigap plan pays 100% of your covered services for the rest of the year.
ARE MEDICARE SUPPLEMENT PLANS EXPENSIVE?
It depends! Generally, the more coverage a plan provides, the higher the cost. But prices also vary by insurance company, beneficiary location, and the number of other people on the plan in your area. Again, by law, every plan must cover the same benefits, so shopping around can save you money.
WHAT IS THE BEST TIME TO ENROLL IN A MEDICARE SUPPLEMENT PLAN
You can enroll within six months of signing up for Medicare Part B, as long as you have your Medicare Number.
Besides choosing a plan that best suits your needs, timing is critical when purchasing a Medigap plan. For anyone 65 and over, within a six-month window of signing up for Medicare Part B, federal law guarantees the following protections:
You cannot be denied a Medicare Supplement policy offered in your area.
You cannot be charged higher premiums based on pre-existing health conditions.
Federal law assures these protections (called guaranteed issue rights) within that six-month window. But once that window closes, Medigap providers can deny you coverage, charge you more based on your health, or require you to wait longer for coverage to begin.
If you are considering a Medigap plan, do your absolute best to obtain your policy during the period when you have guaranteed issue rights.
THE EIGHT THINGS YOU NEED TO UNDERSTAND ABOUT MEDICARE SUPPLEMENT AND MEDIGAP PLANS
You must have Medicare Part A and Medicare Part B.
A Medigap policy is different from a Medicare Advantage Plan. Those plans are ways to get Medicare benefits, while a Medigap policy only supplements your Original Medicare benefits.
You pay the private insurance company a monthly premium for your Medigap policy. You pay this monthly premium in addition to the monthly Part B premium that you pay to Medicare.
A Medigap policy only covers one person. If you and your spouse both want Medigap coverage, you'll each have to buy separate policies.
You can buy a Medigap policy from any insurance company that's licensed in your state to sell one.
Any standardized Medigap policy is guaranteed renewable, even if you have health problems. This means the insurance company can't cancel your Medigap policy as long as you pay the premium.
Some Medigap policies sold in the past covered prescription drugs. But, Medigap policies sold after January 1, 2006, aren't allowed to include prescription drug coverage. If you want prescription drug coverage, you can join a Medicare Prescription Drug Plan, also known as Medicare Part D.
It's illegal for anyone to sell you a Medigap policy if you have a Medicare Advantage Plan, unless you're switching back to Original Medicare.
ITEMS THAT ARE NOT COVERED BY MEDICARE SUPPLEMENT OR MEDIGAP PLANS
It is important to remember that your Medicare Supplement Policy will mirror Original Medicare. There are some items not covered by Original Medicare. Some of these items are:
Routine Dental Care
Routine Eye Care (Glasses & Contacts)
Routine Hearing Care
Hearing Aids
Long Term Care
Short Term Care
Private Nursing Care
INSURANCE POLICIES THAT ARE NOT MEDIGAP
Some types of insurance aren't Medigap plans; they include:
Medicare Advantage Plans (like an HMO, PPO, or Private Fee-for-Service Plan)
Medicare Prescription Drug Plans
Medicaid
Employer or Union Health Plans, including the Federal Employees Health Benefits Program (FEHBP)
TRICARE
Veterans' benefits such as CHAMP
Long-Term Care Insurance
Native American Indian Health Service, Tribal, and Urban Indian Health Plans
