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What Is Medigap? How Does It Work & Should You Buy It?

A doctor holding a golden piggy bank.

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 health care 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 choose to 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 even 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 that equates to $60 out of your pocket. Your Medigap plan would kick in and cover that $60 for you so that you did not owe any money out-of-pocket 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.

In the past, some Medigap plans 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 will need to pay out-of-pocket for any cost-sharing expenses associated with your Part D plan.

There are roughly ten different Medigap plans available today, and those plans are 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. You should look at your personal health situation and history to determine which plan is right for you.


Medigap Plans VS. Medicare Advantage Plans

An elderly lady reading a document about medigap.

Medigap plans and Medicare Advantage plans are not the same things. These are two entirely different types of insurance plans, and they cover different things. As we already mentioned, your Medigap policy will cover out-of-pocket costs not covered by Original Medicare. This might include your copay or coinsurance amount that you are required to pay when you visit the doctor. Medigap coverage is not mandatory, and you can choose whether to enroll.

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. These plans are also managed by private insurance companies, 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 types of 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. However, many plans include additional benefits beyond what Medicare provides. These extra benefits often include dental coverage, vision coverage, a Medicare prescription drug plan, and even gym memberships. Most plans require the payment of a monthly premium, although some plans have a zero premium.

The other important thing to note when comparing these two types of plans is the fact that you cannot enroll in both a Medigap plan and a Medicare Advantage plan. While it is not required that you 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.


Benefits Of Medigap Insurance

Enrollees in Medigap plans often see many great benefits from their plan. One of the biggest benefits is the fact that your overall 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.

The other big benefit of Medicare supplement plans is the fact that most of them provide coverage for items beyond traditional Medicare coverage. For instance, Plans C, D, F, G, M, and Plan N all 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. This means that if your medical provider charges more than the Medicare-approved amount, your Medigap plan will pay for the difference. Otherwise, you would be stuck with that bill. Since there are many different types of Medigap insurance policies, you should compare them at to determine which one is right for you.


Cost Of Medigap Plans

A stethoscope on top of a fanned stack of $20 bills.

So, how much do Medigap plans cost? Even though they help to lower your overall out-of-pocket health care costs, Medigap plans typically have a monthly premium associated with them. The monthly cost of a plan can range anywhere from $40 to $150 per month. 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 in 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 very low monthly premium, but you must meet the deductible before coverage kicks in.

Plans that offer lower coverage amounts, 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 as well. The private insurance companies who issue these plans can perform full medical underwriting in some situations and adjust your monthly premium accordingly.


How To Enroll In Medicare Supplement Insurance

Although Medicare supplement plans are managed by private companies, 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 that will cover your copays and coinsurance amounts. They can also provide additional medical insurance that will cover things like foreign medical care, nursing facility care, outpatient services, and lengthy hospital stays. If you need additional financial assistance beyond a Medigap plan, you should consult your state health insurance assistance program or Medicaid office.


Frequently Asked Questions


What is the difference between Medicare and Medigap?

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.


What is the downside to Medigap plans?

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.


Why are Medigap plans expensive?

Not all Medigap plans are expensive. While the plans that provide the most benefits are somewhat expensive, they still usually only average around $120 to $150 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 $20 to $40 per month. Similarly, plans that offer a lower level of benefits can be purchased for $60 to $80 per month.