Many people think that Medicare pays for all of your health care expenses. However, that is not the case. Even after you enroll in Medicare, you will still be responsible for many of the costs associated with your healthcare services.
This is because Medicare follows a cost-sharing model. You will be required to pay a monthly premium for your Medicare Part B coverage, and you will also owe deductibles, copays, and coinsurance amounts when you have medical services performed.
Many people buy a Medigap plan or Medicare supplemental insurance to help with these additional expenses. Keep reading as we tell you exactly how Medigap insurance works and whether it might be right for you.
What Is Medigap Coverage?
Medigap coverage is supplemental insurance for Medicare that helps pay for out-of-pocket expenses not covered by Original Medicare. These costs generally include copays and coinsurance amounts.
- Before 2020, some Medigap plans would cover your Medicare Part B deductible. However, current law prohibits Medigap from covering your Part B deductible. However, if you are already enrolled in a plan that covers your deductible, you will be allowed to keep that plan.
So, what is Medigap coverage used for? Let’s take a look at an example. Imagine that you visit your doctor to have some tests performed. Suppose you owe a 20% coinsurance amount for those tests, which equates to $60 out of your pocket. Your Medigap plan would kick in and cover that $60 so that you did not owe any out-of-pocket money for the doctor’s visit.
Some plans even include additional benefits, like medical care during foreign travel, additional nights during a hospital stay beyond what Medicare covers, long-term care expenses, or the first three pints of blood during a blood transfusion.
- Some Medigap plans previously provided benefits for Medicare Part D prescription drugs. However, after 2006, the law no longer allows Medigap to cover prescription drug costs.
You can still enroll in a Medicare Part D plan, but you must pay out-of-pocket for any cost-sharing expenses associated with your Part D plan.
There are roughly ten Medigap plans available today, standardized across all states. Even though these plans are managed by private insurance companies, Medigap Plan F or Medigap Plan G will be the same regardless of where you live.
Each plan has slightly different coverage details and options. Some plans provide a higher level of coverage, but those plans usually include a higher monthly premium. It would be best to consider your personal health situation and history to determine which plan is right for you.
KEY TAKEAWAYS
- Medigap is a supplemental insurance for Original Medicare that helps cover copays and coinsurance costs.
- Medigap can potentially reduce your overall out-of-pocket costs, plus most plans provide coverage for items beyond traditional Medicare coverage.
- Enrollment in Medigap aligns with regular Medicare enrollment periods; waiting beyond the open enrollment period may lead to higher premiums and a full medical underwriting.
Medigap Plans VS. Medicare Advantage Plans
Medicare Advantage plans and Medigap plans are not the same. They are two entirely different types of insurance plans that cover other things.
Medigap Plans
As mentioned, your Medigap policy will cover out-of-pocket costs not covered by Original Medicare. This might include the copay or coinsurance amount you must pay when you visit the doctor. Medigap coverage is not mandatory, and you can choose whether to enroll.
Medicare Advantage Plans
Medicare Advantage plans, on the other hand, roll all your Medicare coverage into a single plan. These plans are also known as Medicare Part C. These plans typically include Medicare Part A, Medicare Part B, and Medicare Part D prescription drug coverage. Again, a Medicare Advantage plan is not mandatory.
Private insurance companies also manage these plans, but they are not standardized. The plan details vary by plan, and the plans available to you depend on where you live. You can find PPO plans, HMO plans, and other plans. Selecting the right one for your situation requires careful research.
- The law requires that each Medicare Advantage plan include at least the same minimum level of coverage as Original Medicare.
- Many plans include additional benefits beyond what Medicare provides. These extra benefits often include dental coverage, vision coverage, a Medicare prescription drug plan, and gym memberships.
- Most plans require a monthly premium, although some have a zero premium.
One or the Other
The other important thing to note when comparing these two types of plans is that you cannot enroll in both a Medigap and a Medicare Advantage plan.
While you are not required to enroll in either, enrollment in one prevents you from enrolling in the other. So, if you choose to enroll in Medigap, you cannot sign up for a Medicare Advantage plan and vice versa.
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Benefits Of Medigap Insurance
Enrollees in Medigap plans often see many great benefits from their plans. One of the most significant benefits is that out-of-pocket Medicare costs are typically lowered. Just like with most health insurance plans, Medicare requires the payment of cost-sharing amounts, like copays and coinsurance. Medigap plans cover many of these costs, so you might need to pay your monthly Medigap premium and nothing else.
Another big benefit of Medicare supplement plans is that most of them provide coverage for items beyond traditional Medicare coverage.
- For instance, Plans C, D, F, G, M, and Plan N cover 80% of your foreign travel emergency medical care.
- Plan A and others provide up to 365 additional days of hospital insurance after your Medicare benefits have run out.
- Plan G even covers your Part B excess charges. Your Medigap plan will pay for the difference if your medical provider charges more than the Medicare-approved amount. Otherwise, you would be stuck with that bill.
Since there are many Medigap insurance policies, you should compare them at Medicare.gov to determine which is right for you.
Cost Of Medigap Plans
So, how much do Medigap plans cost? Even though they help lower overall out-of-pocket healthcare costs, Medigap plans typically have a monthly premium associated with them. The monthly cost of a plan can range anywhere from $50 to $300. The level of coverage provided has a big effect on the cost of the plan.
The higher the monthly premium, the more coverage you will usually receive. Some Medigap health plans are also available as a high-deductible option. This means that you must meet an annual deductible before your policy begins to cover expenses. These plans typically have a small monthly premium but must meet the deductible before coverage kicks in.
Plans that offer lower coverage, like Plan K or Plan L, are usually the cheapest. These plans typically average around $50 per month. On the other end of the spectrum sits Plan G, which offers the highest benefits of any plan available today. Premiums for Plan G usually average $120 to $150 per month.
The cost of your plan can vary according to your location and health history. In some situations, the private insurance companies that issue these plans can perform full medical underwriting and adjust your monthly premium accordingly.
TIP
Medigap and Medicare Advantage are two different types of plans. You cannot enroll in both, so you will need to decide ahead of time which plan is best for you.
How To Enroll In Medicare Supplement Insurance
Although private companies manage Medicare supplement plans, there are certain timeframes during which you should enroll in coverage. If you decide you want to purchase Medigap, you should enroll during your open enrollment period. This will guarantee you the lowest rates on your policy, and it will guarantee that a policy will be issued to you.
Waiting past this open enrollment period means that you will need to sign up during an annual enrollment period. Doing this means that the insurance company will perform full medical underwriting on your application. You might end up paying a higher premium or even have your coverage denied completely.
Social Security beneficiaries should sign up for Medigap as soon as their Medicare coverage begins if they decide they want to purchase a policy. Your open enrollment period starts on the first day of the month of your 65th birthday and runs for six months. Signing up during this period will guarantee you the lowest rates on your policy. This could end up saving you a lot of money on your monthly premium over the course of your lifetime.
The Bottom Line
Medicare supplement insurance, or Medigap, will help pay for out-of-pocket expenses associated with your Medicare coverage. While you will still be responsible for paying your Part B premium, you can find a Medigap plan covering your copays and coinsurance amounts.
They can also provide additional medical insurance covering foreign medical care, nursing facility care, outpatient services, and lengthy hospital stays.
If you need further financial assistance beyond a Medigap plan, consult your state health insurance assistance program or Medicaid office.
Frequently Asked Questions
There is a big difference between Medicare and Medigap. Many people wonder, “Does Medicare pay for all my health care expenses?” The answer is no. You are still responsible for paying copays and coinsurance amounts since Medicare follows a cost-sharing model.
Medigap is supplemental coverage that will pay for your out-of-pocket expenses that Medicare does not cover. For instance, Medigap will cover your copays or coinsurance amounts so that you do not have to pay them.
Medicare and Medigap work together to cover most of your health care expenses.
The biggest downside to Medigap plans is the fact that they require the payment of a monthly premium. Even though some people might consider this a downside, most people still benefit from a Medigap plan.
While you might have to pay a monthly premium, these plans can significantly reduce your overall out-of-pocket costs. The amount of the copays and coinsurance that a Medigap plan will cover can more than account for the monthly premium cost. To determine whether one of these plans is right for you, you should look at your overall health care costs.
A Medigap plan should lower your overall out-of-pocket expenses, even when you factor in the monthly premium. If you rarely receive medical treatment, a Medigap plan might not make sense for you. You might pay more in monthly premiums than your plan pays for you in covered expenses.
Not all Medigap plans are expensive. While the plans that provide the most benefits are somewhat expensive, they still usually only average around $175 to $300 per month. These plans are expensive because they will cover virtually all of your out-of-pocket expenses associated with Medicare — except your Part B premium and Part B deductible.
These plans will pay your copays and coinsurance amounts for you, plus they provide additional benefits beyond your standard Medicare coverage.
You can also find a high-deductible plan that might only cost you $40 to $60 per month. Similarly, plans that offer a lower level of benefits can be purchased for $80 to $100 per month.
You can find a Social Security Administration office near you by using our SSA office locator and searching for your closest location.
