Original Medicare (Parts A and B) pays for about 80 percent of your health care needs. To cover the additional 20 percent you may want to consider a Medicare Supplemental Insurance (aka, "Medigap") policy. A supplemental policy is health insurance sold by private insurance carriers, not the government. However, the plans are strictly regulated by Medicare.
A Medicare Supplement can help you pay some of the costs that your Original Medicare won't cover, including your copayments, coinsurance and annual deductibles. Plus, many policies help pay for services not included in Original Medicare.
How do Supplement Plans work with Medicare?
Supplement plans take over where your Original Medicare benefits leave off. That's why these policies are also called Medicare Supplements or "MedSupp" plans. When you supplement your Part A and Part B coverage with an additional policy, Medicare pays its portion first and then your own plan kicks in to pay the rest (up to the limits of the policy).
A Supplement Protects You From Medical Bills
The whole idea behind supplement plans is to protect you from big medical bills due to illness or medical emergencies. For instance, let's say you fell and needed to be taken to the hospital by ambulance. Now you have a $5,000 bill for the ambulance but you have not yet met the annual Medicare Part B deductible ($140 in 2012). In this case your Part B coverage pays 80 percent of the bill, minus the deductible. Without a supplemental insurance plan you would be required to pay approximately $1,140 (in this example). With a MedSupp policy in place, the insurance pays the remaining 20 percent and the deductible amount.
What Benefits are Covered by Supplement Plans?
Medicare has created 10 standardized plans. Each plan is represented by a letter (A, B, C, D, F, G, K, L, M, N). There is also a high deductible version of plan F. The range of benefits and coverage rates vary with each type of plan. All policies cover the following common benefits:
- Medicare Part A coinsurance and hospital costs (up to an additional 365 days after Medicare benefits are used)
- Medicare Part B coinsurance or copayment
- Blood (first 3 pints)
- Part A hospice care coinsurance or copayment
In addition to the basic coverage listed above, supplement policies may also cover:
- Medicare Part A deductible
- Medicare Part B deductible
- Medicare Part B excess charges
- Skilled nursing facility care coinsurance
- Foreign travel emergency
The Medigap Plan Benefits Chart below offers a quick look at the benefits provided by standardized Medigap policies.
Medigap Plans effective on or after June 1, 2010
|Medicare Part A Coinsurance and hospital costs up to an additional 365 days after Medicare benefifits are used up||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Medicare Part B Coinsurance or Copayment||Yes||Yes||Yes||Yes||Yes||Yes||50%||75%||Yes||Yes**|
|Blood (First 3 Pints)||Yes||Yes||Yes||Yes||Yes||Yes||50%||75%||Yes||Yes|
|Part A Hospice Care Coinsurance or Copayment||Yes||Yes||Yes||Yes||Yes||Yes||50%||75%||Yes||Yes|
|Skilled Nursing Facility Care Coinsurance||No||No||Yes||Yes||Yes||Yes||50%||75%||Yes||Yes|
|Medicare Part A Deductible||No||Yes||Yes||Yes||Yes||Yes||50%||75%||50%||Yes|
|Medicare Part B Deductible||No||No||Yes||No||Yes||No||No||No||No||No|
|Medicare Part B Excess Charges||No||No||No||No||Yes||Yes||No||No||No||No|
|Foreign Travel Emergency (Up to Plan Limits)||No||No||Yes||Yes||Yes||Yes||No||No||Yes||Yes|
* Plan F also offers a high-deductible plan. If you choose this option, this means you must pay for Medicare-covered costs up to the deductible amount of $2,070 in 2012 before your Medigap plan pays anything.
** Plan N pays 100% of the Part B coinsurance, except for a copayment of up to $20 for some office visits and up to $50 copayment for emergency room visits that don't result in an inpatient admission.
*** After you meet your out-of-pocket yearly limit and your yearly Part B deductible ($140 in 2012), the Medigap plan pays 100% of covered services for the rest of the calendar year.
(Chart Source: Choosing a Medigap Policy: A Guide to Health Insurance for People with Medicare, Centers for Medicare and Medicaid Services)
Benefits that are not covered by a Supplemental Policy
Most supplemental policies do not cover the following health care products services:
- Vision or dental care
- Hearing aids
- Private-duty nursing
- Long-term care (care in a nursing home)
IMPORTANT: Federal Law allows health insurance companies to offer additional benefits in their supplemental insurance plans. As a result, some plans may cover certain vision, dental and hearing-related services. These features are not common in most areas, but ask your agent to find out what is available to you.
Additional Supplemental Insurance Facts
- You must have both Part A and Part B to get a supplemental insurance policy.
- Policies must be clearly identified as "Medicare Supplement Insurance."
- Supplemental Insurance policies only cover one person. If you are married, both you and your spouse will need your own policy.
- Not all types of Medigap policies are available in all state. A few states have their own regulations.