What is Medicare Supplement Insurance?

Original Medicare, Part A and B, pays for many of your health-care services and supplies, but it doesn’t pay for everything. That’s why you may want to consider getting a Medicare Supplement plan, also called Medigap. Unlike Original Medicare, a Medicare Supplement plan is offered through private insurance companies. These Medigap plans help pay some of the hospital and medical costs that Original Medicare doesn’t cover, such as copayments, coinsurance, and yearly deductibles.

Some Medicare Supplement plans also help pay for a few services that Original Medicare doesn’t cover, such as emergency overseas travel coverage or Part B excess charges. Two out of ten Medigap plans include a yearly out-of-pocket limit, which Original Medicare doesn’t include. Basically, a Medigap policy fills the “gaps” in Original Medicare coverage.

Here’s an overview of how Medicare Supplement plans work, the types of benefits they cover, and how to enroll.

Medigap plans supplement your Original Medicare benefits, which is why these policies are also called Medicare Supplement plans. You’ll need to be enrolled in Original Medicare to be eligible for Medigap coverage, and you’ll need to stay enrolled in Original Medicare for your hospital and medical coverage. Medicare Supplement plans aren’t meant to provide stand-alone benefits.

Depending on the state that you live in, you may not be able to get Medicare Supplement coverage if you’re under 65 and have Medicare because of disability, end-stage renal disease, or amyotrophic lateral sclerosis. States aren’t required to offer Medigap coverage to beneficiaries under 65. If you’re under 65 and enrolled in Original Medicare, check with your state’s insurance department to find out if you’re eligible to enroll in a Medicare Supplement plan.

Keep in mind that Medigap plans don’t include prescription drug coverage (Part D), so if you want help with your medication costs, you’ll need to enroll in a stand-alone Medicare Prescription Drug Plan. In addition, you can’t use your Medicare Supplement plan to pay for costs you may have with a Medicare Advantage plan. Medigap insurance can only be used to cover costs in Original Medicare.

If you have Original Medicare and a Medicare Supplement plan, Original Medicare will pay first, and your Medigap policy will fill in the cost gaps. For example, suppose you have a $5,000 ambulance bill, and you have already met the yearly Medicare Part B deductible. Medicare Part B will pay 80% of your ambulance bill. If you have a Medicare Supplement plan that covers Part B copayments and coinsurance costs, then your Medigap policy would then pay the remaining 20% coinsurance of your $5,000 ambulance bill. Some Medicare Supplement plans may also cover the Part B deductible.

As a Medicare beneficiary, you may also be enrolled in other types of coverage, either through the Medicare program or other sources, such as an employer. When you first sign up for Original Medicare, you’ll fill out a form called the Initial Enrollment Questionnaire and be asked whether you have other types of insurance. It’s important to include all other types of coverage you have in this questionnaire. Medicare uses this information when deciding who pays first when you receive health-care services.

Below is a list of other types of insurance you may have. Please note that these types of coverage are different from Medicare Supplement plans:

  • Medicare Advantage plans (like an HMO or PPO)
  • Medicare Prescription Drug Plans (Part D)
  • Medicaid
  • Employer- or union-sponsored group coverage
  • TRICARE
  • Veterans’ benefits
  • Long-term care insurance policies
  • What benefits do Medicare Supplement plans cover?

Currently, there are 10 standardized Medigap plans, each represented by a letter (A, B, C, D, F, G, K, L, M, N; there’s also a high-deductible version of Plan F). These plans are available in most states; Massachusetts, Minnesota, and Wisconsin each have their own different set of standardized Medicare Supplement plans.

Coverage levels and premiums vary, but the benefits of each plan within a lettered category remain the same despite the insurance company or location. For example, Plan A benefits are the same in New Jersey as they are in Oregon. If a Medicare Supplement plan includes a certain benefit, this benefit is covered 100% unless otherwise specified.

In general, all Medicare Supplement plans cover the following benefits:

Medicare Part A includes coverage for bills related to hospital care, skilled nursing facility or nursing home care, hospice care and home health services. Most enrollees will not pay an annual premium for Part A coverage. However, individuals who submitted less than 30 quarters of Medicare taxes will pay an annual premium. Medicare updates premiums each year and as of 2018, annual premiums range between $232 and  $422. Part A coverage will have annual deductibles and coinsurance costs. SIM plans will assist with covering these out-of-pocket expenses.

Medicare Part B is an optional coverage in most cases. Part B coverage helps to pay a portion of non-hospital provided medical care, such as doctor visits, home health services, physical therapy, durable medical equipment, outpatient services, ambulance service, and many other medical needs. Annual premiums have a basis on the income earned in the years before enrollment. Like Part A coverage, Medicare adjusts premiums each year. As of 2018, the base fee is $134, but those receiving Social Security benefits may be less. Individuals earning a higher income in the years before enrollment will pay a higher annual premium. Part B coverage will have annual deductibles and coinsurance costs.  SIM plans will assist with covering these out-of-pocket expenses.

Medicare Part C is also known as a Medicare Advantage plan. As with SIMs, Advantage plans come from private providers. These plans include and replace Medicare Part A, B, and D  coverage, with the exception of hospice care. Medicare pays the premiums for participants. Plans have a structure of health maintenance organization (HMO), preferred provider organization (PPO) plans, private fee-for-service (PFFS) plans and special needs plans (SNPs). The federal government forbids private insurers from selling Medigap policies to individuals enrolled in Medicare Advantage. To be eligible the individual must live in the plan’s service area, have Medicare Parts A and B, and not have an end-stage renal disease. These plans come from private providers who have government approval.

Medicare Part D is a prescription drug benefit program. An individual participant’s actual costs will vary depending on several factors, including the specific plan they choose, the medications they use, and the pharmacy they select. Also, individuals with incomes over $85,000 may pay more than low-income individuals. These plans come from private providers who have government approval. Individuals who enroll in Medicare Part D cannot also receive prescription drug coverage from a Medigap plan. Part B coverage will have annual deductibles and coinsurance costs.  Medicare updates maximum deductible amounts each year which as of 2018, is $405. SIM plans will assist with covering these out-of-pocket expenses.

Additional facts about Medicare Supplement plans:

  • You must have Medicare Part A and Part B to get a Medicare Supplement plan.

  • Every Medigap policy must be clearly identified as “Medicare Supplement Insurance.”

  • A Medicare Supplement plan can only cover one person, so if you are married, you and your spouse would need to buy separate policies.

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