A Medicare supplement plan is additional insurance that works in conjunction with Medicare Part A and Medicare Part B benefits. Also known as Medigap, there are 10 standardized plans, A to N. Each lettered plan offers a different level of coverage to suit a variety of needs.
We’ll cover everything you need to know about Medicare supplements, as well as how to choose the best plan, and we’ll answer these frequently asked questions:
Are Medicare supplements worth it? It might seem as if Medigap plans are expensive. But, going with Original Medicare alone is not wise. The coverage gaps in Medicare add up fast, particularly if you have an emergency. Paying 20% of all your outpatient coverage might not seem so bad, but getting slapped with a $1,400 hospital bill really smarts. And that's just for the deductible! We answer this question in more detail here.
For some, the best means getting the most coverage. Medigap Plan F offers the most coverage possible. It covers ALL the cost gaps in Original Medicare. But, many of us have a fixed budget. At the same time, we may be healthy or have a chronic condition that’s easily managed through medications and does not require a specialist. If this is your situation, a Plan F or G policy might be too expensive or simply wasteful. In this case, a Medigap Plan N policy might be a better option. Read What is the Best Medicare Supplement Insurance Plan to learn more.
Medigap insurance policies are designed to fill the gaps (e.g., deductibles and copays) in Medicare Part A and Part B coverage, however, they do not offer additional benefits. Medicare Advantage plans replace Part A and B coverage and often include additional benefits, including prescriptions, dental, vision, and hearing. Click here to learn more about how Medigap plans work.
A Medigap plan works in concert with your Medicare Part A and Part B to pay some or all of your out-of-pocket costs, including deductibles, copays, and coinsurance. To compare what each plan offers, see our Medicare Supplement Plans Comparison Chart.
Before we get into the plans, and what they have to offer, let’s go over some of the terminologies.
Medicare Deductibles, Coinsurance, Excess Charges, and Blood
Most of your Medicare costs can be broken down into deductiblesA deductible is an amount a beneficiary must pay for their health care expenses before the health insurance policy begins to pay its share...., coinsuranceCoinsurance is a percentage of the total you are required to pay for a medical service. ... or copaymentsA copayment, also known as a copay, is a set dollar amount you are required to pay for a medical service...., excess charges, and the cost of blood. Medicare Part A (your hospital insurance) and Medicare Part B (your medical insurance) work differently, so it’s important to understand the costs in each.
Medicare Part A deductible: The 2020 Part A deductible is $1,408 per benefit periodA benefit period is a method used in Original Medicare to measure a beneficiaries use of hospital and skilled nursing facility (SNF) services. With each new benefit period, the beneficiary is charged a new benefit.... It’s not an annual deductible. If you have two inpatient hospital stays more than 60 days apart, you’ll pay the deductible for each period.
Medicare Part A coinsurance: This is the very expensive daily hospital copays that begin after your 60th day in the hospital. All Medigap plans cover this cost.
Medicare Part A HospiceHospice is a special way of caring for people who are terminally ill. Hospice care involves a team-oriented approach that addresses the medical, physical, social, emotional, and spiritual needs of the patient.... care coinsurance or copayment: Medigap plans cover the parts of hospice that Medicare doesn’t. As a result, in most cases, you typically incur no costs.
Medicare Part A Blood (First 3 pints): This benefit is included with all Medigap plans. When you need blood, Medicare only pays for the 4th pint and above. Blood is very expensive, so it’s important to have the first 3 pints covered.
Medicare Part A Skilled Nursing Facility coinsurance: Medicare covers up to 100 days of skilled nursing care after a stay in the hospital when ordered by your doctor. But, Medicare only pays for the first 20 days. You’ll need to choose a plan that offers skilled nursing coverage to get the additional 80 days.
Medicare Part B deductible: For 2020, the Part B deductible is $198 per year. You’ll pay this amount before Medicare begins covering its share of your doctor visits, lab work, and physical therapy. As of January 2020, the Part B deductible cannot be covered by a newly issued Medigap plan.
Medicare Part B coinsurance and copayments: All Medigap plans cover some parts of Part B coinsurance and copayments. Because Medicare only covers 80% of your medical expenses, this benefit is what helps pay the remaining 20% for you. This can be critical in the case of high-cost treatments for dialysis, cancer, etc.
Medicare Part B excess chargesA Medicare Part B excess charge is the difference between a health care provider’s actual charge and Medicare’s approved amount for payment....: Medicare allows healthcare providers to accept Medicare’s assigned rates for each healthcare service. They can also choose to charge you with an excess charge of up to 15% more than the assigned rate. For services like surgery or diagnostic imaging, excess charges can be very pricey. Some plans cover it and some don’t.
Foreign travel emergency: Medicare covers you anywhere you go in the USA, including its territories, but it does not cover foreign travel emergencies. Fortunately, several Medigap plans do. Some plans offer foreign travel benefit coverage on 80% of your expenses up to $50,000 after you pay a small deductible.
Now that you know what’s what, let take a look at some plans.
The 10 Standardized Medicare Supplement Plans
The Original MedicareOriginal Medicare is private fee-for-service health insurance for people on Medicare. It has two parts. Part A is hospital coverage. Part B is medical coverage.... system (Part A and Part B) is designed to pay for about 80% of your major medical costs. The other 20% is paid by the beneficiaryA person who has health care insurance through the Medicare or Medicaid programs.... out-of-pocket or through additional insurance. That’s where supplemental Medicare insurance comes in. It helps fill the 20% gap. That’s why Medicare calls them Medigap plans, but the insurance companies more commonly called them Medicare Supplement plans. Both terms are correct.
The standardized Medigap plans (A, B, D, G, K, L, M, and N) are designed to make supplemental coverage easier to compare. Each lettered plan offers the exact same benefits, regardless of which insurance company you use. The only difference is the price. For the most part, you don’t even need to concern yourself with customer service, because claims are automatic and Medicare bills you for your share of uncovered services.
Until recently, you could also buy Medicare Supplement Plan F and Plan C. Plan F was the most popular plan available, but it was phased out, along with Plan C, because they covered the annual Medicare Part B deductible. Congress passed a new law prohibiting first-dollar coverage by Medicare supplements, bringing the ax down on future sales of these two plans. If you have one of these plans you can keep it, but new policies are no longer permitted.
As a result of this change, the new “best plan” is Medicare Plan G, closely followed by Medicare Supplement Plan NMedicare Supplemental Plan N is one of the ten standardized Medigap plans. Although it is one of the newest plans available, Medicare Plan N is quickly becoming a favorite with Baby Boomers aging into their....
What is a Medicare Supplement Plan F?
Even though Medicare Supplement Plan FMedicare Supplement Plan F is the most comprehensive Medicare supplement plan available. This plan covers all Original Medicare deductibles, coinsurance, and copayments, leaving you with no out-of-pocket costs on all Medicare-approved services.... is no longer available for people turning age 65 this year, we’ll cover it here so you can understand why it’s not really a great loss.
Plan F was a favorite because it covered all of the gaps in Original Medicare. It covered all deductibles, copayments, and coinsurance. So, for a single monthly payment, you were covered for everything. This is why it was so popular.
There is also a high deductible Plan FHigh Deductible Plan F is a version of the regular Medigap Plan F. You pay all costs until spending reaches the annual, then the plan pays all Medicare-approved costs..... It offers its beneficiaries big savings on their monthly premium, but coverage does not start until Part A and B costs reach the annual deductible.
What is a Medicare Supplement Plan G?
Medicare Supplement Plan GIf you're turning age 65 this year, Medicare Supplement Plan G is the most comprehensive Medicare supplement you can buy. It's also the most popular. You might be thinking that Medicare Supplement Plan F is... is identical to Plan F with a single exceptionIn a Medicare Part D plan, an exception is a type of prescription drug coverage determination. You must request an exception, and your doctor must send a supporting statement explaining the medical reason for the.... Plan G does not cover the annual Medicare Part B deductible. As a result, if you have this plan you will pay all costs to see your doctor, or receive other medical services until the deductible is met. Other than that, Plan G covers all other deductibles, copays, and coinsurance.
The interesting thing about Plan G is that it usually costs less than a Plan F policy when you factor in the Plan G annual policy cost plus the Medicare Part B deductible. For this reason, most people don’t consider the loss of the Plan F policies a loss at all.
What is a Medicare Supplement Plan N?
First offered in 2010, Medicare Supplement Plan N is one of the newer Medigap plans and is quickly becoming a favorite. Unlike Plan G, which covers almost everything, Plan N does have some cost-sharing. But, its cost-sharing is simple and not burdensome for most people. That’s why people like it.
With a Plan N policy, you pay up to $20 when you see your doctor and up to $50 when you use the emergency room. You are also responsible for Medicare excess charges. They are additional fees, up to 15% above Medicare’s standard rates, that doctors can add. Plan G covers excess charges, but Plan N does not. However, this simple cost-sharing can save you a lot in monthly premiumsA premium is an amount that an insurance policyholder must pay for coverage. Premiums are typically paid on a monthly basis. In the federal Medicare program, there are four different types of premiums. ....
To see all of the benefits of Plan N, and how it covers you, click here.
You can learn about the other Medigap plans here:
Do Medicare Supplement Plans Cover Things Not Covered by Medicare?
Unlike Medicare Advantage plansMedicare Advantage (MA), also known as Medicare Part C, are health plans from private insurance companies that are available to people eligible for Original Medicare (Medicare Part A and Medicare Part B)...., which can add additional benefits, Medicare Supplement insuranceMedicare Supplements are additional insurance policies that Medicare beneficiaries can purchase to cover the gaps in their Original Medicare (Medicare Part A and Medicare Part B) health insurance coverage.... cannot. So, if Medicare doesn’t cover it, a Medigap plan can’t cover it either. The two are in lock-step when it comes to the coverage of medical services.
As a result, there are some things that are not covered by Medicare and Medigap that most people need, including:
- Prescriptions
- Routine dental
- Vision and hearing exams
- Hearing aids
- Eyeglasses or contacts
- Long-term carea variety of services that help people with their medical and non-medical needs over a period of time. Long-term care can be provided at home, in the community, or in various types of facilities, including... or custodial careNon-skilled personal care, such as help with activities of daily living like bathing, dressing, eating, getting in or out of a bed or chair, moving around, and using the bathroom....
With the exception of complete long-term care and custodial care services, Medicare Advantage plans are available with prescription coverage, dental, vision, and hearing benefits. However, be aware that these additional benefits come at an additional cost that may exceed stand-alone coverage options.
The number one additional coverage most people want and need is prescriptions. Prescription drug coverage is available through the Medicare Part D program starting at about $20 per month. You can shop and compare Medicare Part D plans here.
For your dental and vision needs, we recommend DentalPlans.com.
How to Choose a Medicare Supplement Plan
The beauty of Medigap plans is their simplicity and standardization. Simply by looking at the Medicare Supplement Comparison Chart, you will know exactly what’s included. However, there are a few things, beyond a good rate, that you should check out before buying a policy.
Financial ratings: Insurance companies are financial institutions. As such their stability is important. A few companies rate insurance carriers based on their financials. Our choice is A.M. Best and we update all of the carriers in our database annually. Feel free to ask your agent to include this information when you get quotes.
Rate trend history: Almost all policies allow for an annual rate increase to keep up with inflation. For this reason, it’s important to ask your agent to include the rate increase history when they present quotes to you. Look at the increases for the last 3 years and consider the carrier with the most stable rates, even if their initial rate is slightly higher.
As a final note, a low rate is important, but so is financial stability, and low rate increases over time. If you only shop for the lowest price, you may find yourself paying more later or shopping for a new carrier when the unstable carrier with the super low rate goes out of business.
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