What Are Medigap Policies?
Original Medicare (which includes Part A Hospital Insurance and Part B Medical Insurance) pays for many, but not all, health-related services and medical supplies. You can purchase an insurance policy to cover the “gaps” that are not paid for by Medicare, such as copayments, coinsurance, and deductibles. These can add up to a lot of out-of-pocket expenses, especially if you are hospitalized or need skilled nursing home services.
Some Medigap policies also will pay for certain health services outside the United States and additional preventive services not covered by Medicare.
Medigap insurance (also known as Medicare Supplement Insurance) is voluntary and you are responsible for the monthly or quarterly premium. Medicare will not pay any of your costs to purchase a Medigap policy.
How Do Medigap Policies Work?
If you are in Original Medicare (Parts A and B) and you have a Medigap policy, first Medicare pays its share of the Medicare-approved amounts for your covered health care costs. Then your Medigap policy pays its share of the cost.
For example: Alice G has type 2 diabetes and visits her primary care physician every three to four months for follow-up care. Her Medigap policy covers Plan B coinsurance, but not her Plan B deductible. At the beginning of the year, she pays for the first $155 of her medical visit costs. Thereafter, Medicare pays 80% of the Medicare-approved amount of her doctor’s visit and her Medigap policy pays the remaining 20% - since Medicare approves an office visit amount of $65, Medicare pays $52 and Medigap pays $13.
Medigap policies are sold by private insurance companies. These policies are required to be clearly identified as Medicare Supplement Insurance. And, each policy must follow Federal and state laws designed to protect consumers.
Medigap insurance companies can only sell you a standardized Medigap policy identified by letters A through L.
Each Medigap plan must offer the same basic benefits, no matter which insurance company sells it. So, Medigap Plan F has the same set of benefits regardless of insurance company or location.
A Medigap tip from Dr. Mike: Not all plans are available in all areas. And, three states – Massachusetts, Minnesota and Wisconsin – have their own Medigap policies that are different from the standard Medigap plans.
How Much Does Medigap Insurance Cost?
How much you pay for a Medigap policy depends on the plan you pick and which insurance company you use.
Each of the plans (A through L) offers a different set of benefits and the costs vary with the amount of coverage. In general, Plan A, which provides the fewest benefits has the lowest premiums. Medigap plans that offer more benefits, such as Plan J, usually have a higher premium. According to the Medicare Rights Center, the most popular Medigap plans are C and F, because they cover major benefits and are less expensive than many other plans.
Although Medicare defines what each Medigap plan offers, it does not regulate what the insurance company can charge. Private insurance companies can charge different premiums for exactly the same Medigap coverage.
For example: In New York City, as of December 2009, the monthly premium for Medigap Plan C ranged from a low of $232 to a high of $337. This would amount to an annual difference of $1260!
What Type of Benefits Do Medigap Policies Offer?
Medigap plans A through J must include the following basic benefits:
- Inpatient Hospital Care: Covers the Medicare Part A coinsurance (but not the Part A annual deductible) plus coverage for an additional 365 days after Medicare coverage ends.
- Medical Costs: Covers the Medicare Part B coinsurance (but not the Part B annual deductible) or copayments for hospital outpatient services. The Part B coinsurance is generally 20% of the Medicare-approved amount for the service.
- Blood: Covers the first three pints of blood you need each year.
Depending on which Medigap plan you select, you can get coverage for additional expenses and benefits Medicare doesn't cover, including:
- Hospital annual deductible (plans B to L)
- Skilled nursing facility coinsurance (plans C to L)
- Part B annual deductible (plans C, F and J)
- Emergency care during foreign travel (plans C to J)
- At-home recovery care (plans D, G, I and J)
- Preventive care not covered by Medicare (plans E and J)
- Medicare Part B excess doctor charges (plans F, G, I and J) – an excess charge is the amount above the Medicare-approved amount that a doctor who does not participate in the Medicare program can charge.
A Medigap fact from Dr. Mike: Medigap Plans L and K provide coverage for Medicare Part A deductibles and coinsurance, blood, and coinsurance or copayments for Medicare Part B, hospice care, skilled nursing facilities, and Medicare-covered preventive care. These plans have different cost-sharing requirements than Plans A through J and you will need to meet a yearly out-of-pocket limit that may exceed $4500.
Starting June 1, 2010, the types of Medigap plans you can buy will change. Plans E, H, I, and J will no longer be sold (if you already are enrolled in one of these plans, you can keep your plan). Two new Medigap plans (M and N) will be offered.
Do I Need a Medigap Policy if I am enrolled in a Medicare Advantage Plan?
As long as you are enrolled in a Medicare Advantage Plan, you do not need to buy a Medigap policy. In fact, it is illegal for anyone to sell you a Medigap policy if you are in an advantage plan. The benefits offered by a Medigap policy are covered by your advantage plan and the Medigap supplement does not pay for your advantage plan's deductibles, copayments, or coinsurance.
Where Can I Learn More About Medigap Coverage?
Before buying a Medigap plan, it’s important that you understand Medicare’s Medigap rules, your rights, as well as the Medigap options available in your state. The following resources are a good place to start: