Medicare Supplement plans help cover the cost 'gaps' in Medicare. Read this comprehensive 101 guide to find out if Medigap plans are right for you.
by Richard Chan
Updated September 10, 2024
9 mins read
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Medicare Supplement (also known as ‘Medigap’) insurance is sold by private insurance companies and are designed to help pay for the out-of-pocket health care costs (or ‘gaps’) that the Original Medicare does not cover.
Around 25% of all Medicare beneficiaries (or around 15 million people) chose to purchase some type of Medigap plans.
Medigap plans are standardized by law and there are currently 10 different standardized plans in most states. The coverage for these plans is standardized by the federal government so there is no difference in coverage between Company A and Company B. As a result, when comparing the different private health insurance companies your choice comes down to price and the insurer’s reputation.
All policies offer the same basic benefits but some offer additional benefits, so you can choose which one meets your needs. In Massachusetts, Minnesota, and Wisconsin, Medigap policies are standardized in a different way.
What are the ‘gaps’ in Original Medicare?
If you have read our Medicare 101 article on What is Medicare?, you may already know that Original Medicare consists of Part A (Hospital Insurance) and Part B (Medical Insurance).
Original Medicare helps to cover your costs for hospital and medical services but it does not cover all the costs. Under both Part A and Part B, you will still be responsible for deductibles, copays, and coinsurance payments. These are known as out-of-pocket costs and are the ‘gaps’ that are often referred to when talking about Medigap.
Below is a summary of some of the key Original Medicare out-of-pocket costs.
| Original Medicare Out-of-Pocket Costs | |
|---|---|
| Part A Coinsurance and Hospital Costs | – Days 0-60: Part A deductible (see below) – Days 61-90: $408 per day – Days 91 and beyond: 100% of the costs (or $816 per day if you have not yet used up your 60 non-renewable “lifetime reserve days” |
| Part B Coinsurance | – 20% coinsurance obligation for all costs after Part B deductible is met |
| Blood (first 3 pints) | – Original Medicare does not pay for the costs for the first 3 units of blood you get in a calendar year. The average cost of a pint of blood can be up to $300. |
| Part A Hospice Care Coinsurance and Copayments | – Original Medicare covers all hospice care costs – However, there may be copays / coinsurance for copayment for prescription drugs for pain relief and symptom control while at home and inpatient respite care |
| Medicare Part A Skilled Nursing Facilities (SNF) Coinsurance | Subject to a ‘qualifying hospital stay’ of 3 days or more, you may be eligible for SNF care. – Days 1–20: $0 per day – Days 21–100: $200 coinsurance per day – Days 101 and beyond: 100% of the costs |
| Part A Deductible | – One time deductible of $1,632 that covers days 0-60 for each inpatient hospital stay |
| Part B Deductible | – $240 deductible for the calendar year |
| Part B Excess Charges | – Doctors who don’t accept the full Medicare-approved amount (or ‘assignment’) as full payment can charge you up to 15% more than the Medicare-approved amount for services or procedures ·This is known as the “excess charge” which is not covered by Original Medicare |
| Foreign Travel | – Original Medicare will not cover costs medical care received overseas (with exception of a few specific circumstances) |
What are the different types of Medicare Supplement (Medigap) plans?
In total, there are 10 Medigap plans available: Plans A, B, C, D, F, G, K, L, M, and N. Each plan provides a different level of coverage which is standardized and determined by the government. For example, Plan G from Company A provides exactly the same coverage as Plan G from Company B.
As Medigap plans are standardized, the only difference when comparing the same plan across different is the price and the insurer’s reputation.
Starting in 2020, Medicare Supplement plans that pay the Medicare Part B deductible, meaning Plans C and F, will no longer be sold to those newly eligible for Medicare on or after January 1, 2020. If you were eligible for Medicare before January 1, 2020, you may be able to buy Medicare Supplement Plan F or Plan C. Other Medigap plans that are no longer for sale include Plans E, H, I, and J. However, they still offer their coverage to those who previously purchased them.
Outlined below is a comparison of each plan available. Plan A provides the most basic coverage while Plan F and G provide the most comprehensive coverage. The coverage provided by other plans falls in between these two extremes.
| Plan A | Plan B | Plan C | Plan D | Plan F* | Plan G* | Plan K | Plan L | Plan M | Plan N | |
|---|---|---|---|---|---|---|---|---|---|---|
| Part A coinsurance and hospital costs up to an additional 365 days after Medicare benefits are used up | Y | Y | Y | Y | Y | Y | 50% | 75% | Y | Y |
| Part B coinsurance or copayment | Y | Y | Y | Y | Y | Y | 50% | 75% | Y | Y*** |
| Blood (first 3 pints) | Y | Y | Y | Y | Y | Y | 50% | 75% | Y | Y |
| Part A hospice care coinsurance or copayment | Y | Y | Y | Y | Y | Y | 50% | 75% | Y | Y |
| Skilled nursing facility care coinsurance | — | – | Y | Y | Y | Y | 50% | 75% | Y | Y |
| Part A deductible | — | Y | Y | Y | Y | Y | 50% | 75% | 50% | Y |
| Part B deductible | — | — | Y | – | Y | – | — | – | – | – |
| Part B excess charge | — | – | – | – | Y | Y | – | — | – | – |
| Foreign travel exchange (up to plan limits) | — | — | 80% | 80% | 80% | 80% | — | – | 80% | 80% |
| Out-of-pocket limit** | N/A | N/A | N/A | N/A | N/A | N/A | $6,940 in 2023 | $3,470 in 2023 | N/A | N/A |
Notes: Y = Yes, — = Not Covered
* Plans F and G also offer a high-deductible plan in some states. With this option, you must pay for Medicare-covered costs (coinsurance, copayments, and deductibles) up to the deductible amount of $2,800 in 2024 before your policy pays anything. (Plans C and F aren’t available to people who were newly eligible for Medicare on or after January 1, 2020.)
** For Plans K and L, after you meet your out-of-pocket yearly limit and your yearly Part B deductible, the Medigap plan pays 100% of covered services for the rest of the calendar year.
*** Plan N pays 100% of the Part B coinsurance, except for a copayment of up to $20 for some office visits and up to a $50 copayment for emergency room visits that don’t result in inpatient admission.
High Deductible and Cost-Share Medigap Plans
Plan F and Plan G are the most comprehensive plans and your costs are typically largely limited to the plan’s monthly premium. These plans cover close to 100% of all out-of-pocket costs. Because of this Plan F and G generally will be the most expensive plans.
In some states there are ‘high-deductible’ versions of Plans F and G. With this option, you must pay for out-of-pocket costs (coinsurance, copayments, and deductibles) up to a deductible amount of $2,800 before the policy helps to pay. These plans enable you to access the more comprehensive coverage of Plan F and G but typically at a lower premium as you take on a higher burden of costs upfront.
Plans K and L are cost-sharing plans that help pay a portion of your out-of-pocket costs. Once you reach an annual out-of-pocket cost of $7,060 and $3,530 respectively, as well as your yearly Part B deductible ($240 in 2024), these Medigap plans will pay for 100% of covered services for the rest of the calendar year. Similar to high deductible Plan F and G, your premiums will generally be lower because you take on more out-of-pocket costs upfront.
Should I enroll in a Medicare Supplement (Medigap) plan?
Before considering a Medigap plan, you should first consider whether you prefer to receive health insurance under Original Medicare (provided directly by the government) or through a Medicare Advantage plan (provided by private insurance companies).
A Medicare Advantage plan is a bundled “all-in-one” alternative to Original Medicare that is delivered by private insurance companies that contract with the federal government. These plans provide the same coverage as Original Medicare and often include benefits not covered by Original Medicare such as Part D drug coverage and dental, vision, and hearing care.
The decision to stay in Original Medicare will often come down to doctor availability. For Original Medicare as long as you go to a medical provider that accepts Medicare, you will be covered, even if traveling out of state. You can read more about the difference in this article that compares Medicare Advantage vs. Original Medicare.
If you’ve decided that you want to be covered under Original Medicare, then you may benefit from a Medigap plan. Benefits include:
- Nationwide coverage: Medigap plans help cover out-of-pocket costs for any Medicare-covered services. As Original Medicare covers any doctor nationwide that accepts Medicare plan, your Medigap plan will also cover any doctor nationwide
- Cost management: Medigap plans help improve the predictability of out-of-pocket costs. By purchasing Medigap coverage, you shift the burden of out-of-pocket costs to the insurance company in return for paying a monthly premium for the plan. For example, if you have a Medigap plan that covers Part B coinsurance (20% of medical costs) you can rest assured that you will not need to pay for this no matter how many times you use Part B-covered services. This factor makes Medigap plans a potentially attractive option for people with chronic conditions who may have significant variability or risk of significant out-of-pocket medical bills each year
- Guaranteed renewable: As long as you pay your premium each month, a private insurance company cannot deny to renew or cancel your coverage. Therefore, even if your health situation changes, you will always be able to retain your Medigap coverage as long as you pay the premium
What Supplement (Medigap) plan should I enroll in?
If you are thinking of a Medigap plan, the plan you choose will depend on your health and financial situation. As mentioned above, one of the benefits of a Medigap plan is that it improves the predictability of your healthcare expenses by shifting the burden of out-of-pocket costs to the insurer in return for a monthly premium.
Given this, the plan you pick should take into account:
- Monthly Premium: Your monthly budget and ability to continuously pay the monthly premium in order to keep a policy in effect
- Usage of Medical Services: Your expected usage of medical services (inpatient and outpatient), including the risk that any current, hereditary, or other conditions could play a risk in increased usage of medical services in the future. If you have a usage rate you may want more comprehensive coverage
For example, the quoted premium for a Plan G might be $150 per month ($1,800 per year). Your standard Medicare Part B premium is $174.70 per month in 2024 ($2,096 per year). Plan G covers all costs except for the Part B deductible of $240. In this example, the maximum annual out-of-pocket cost you will pay is: $4,136 ($1,800 + $2,096 + $240). If you expect your annual medical costs without Medigap to be higher than this (or reasonable risk that it may be higher) then Plan G may be a good way to manage your cost.
You will need to do a similar analysis for each plan and balance the risk of you paying out-of-pocket costs for using medical services by eliminating that risk by paying a monthly premium and having the insurer take that risk.
You can read our article on the most popular Medigap plans to find out what other Medicare beneficiaries are buying.
When can I enroll in a Supplement (Medigap) plan?
If you are eligible for Medicare you are allowed to apply for a Medigap plan at any time. However, with the exception of certain specific situations, federal law does not require insurance companies to sell you a Medigap plan.
In other words, outside of specific situations, insurance companies can medically underwrite you, decide to decline coverage, or sell you a policy with a higher premium and/or make you wait for coverage of pre-existing conditions for up to 6 months.
Medicare Supplement Open Enrollment Period (MS-OEP)
The key exception to the rule is your MS-OEP which is the 6-month period that begins right after you first enroll in Medicare Part B. During the MS-OEP, Medigap companies:
- must sell you a policy without medical questions
- cannot deny you coverage
- cannot charge you an additional premium for coverage because of your medical history
This is known as a ‘guaranteed issue’. For most people this will happen when you turn 65, however, some people may delay enrollment into Part B while they are still working.
In addition, during your MS-OEP, if you previously had at least 6 months of continuous prior ‘creditable coverage’ and did not have a break in coverage of more than 63 days, the Medigap plan cannot impose a waiting period for pre-existing conditions. ‘Creditable coverage’ includes individual health insurance or group health insurance (from an employer).
The MS-OEP only happens once and does not renew once it has lapsed. This is the best time to purchase a Medigap policy if you want one. If you apply for Medigap coverage after your MS-OEP there is typically no guarantee that an insurance company will sell you a Medigap policy. Some states may have other certain guaranteed issue periods outside of MS-OEP.
Final Words
A Medigap, can be a great way to help manage your costs if you have chosen to stay on Original Medicare. There are 10 Medigap plans available in total, however, if you become eligible for Medicare after January 1, 2020, are not allowed to purchase either Plan F or Plan C. As federal law does generally not require insurance companies to sell you a Medigap policy, the best period to sign up for a Medigap is during your MS-OEP.
At CoverRight, we’re here to help you find the right coverage that you deserve. Reach out today and start finding the right Medicare plan for you.
