Supplemental Medicare, or Medigap: What It Is, What It Covers, and How to Purchase It

If you use the Medicare system, you should have basic medical and hospital care coverage. That is where Medicare Part A and B come in, which are also known as Original Medicare. However, this coverage is not comprehensive, and in some cases includes copayments and other expenses that you must cover when you need certain services. 

The best way to avoid these costs is to have supplemental Medicare insurance, also called Medigap (so-called because it covers the "gaps" in Medicare). In this article, we will explain what supplementary Medicare insurance is, how it works, what coverage it offers, and how you can purchase it.

Supplemental Medicare, or Medigap: What It Is, What It Covers, and How to Purchase It

Medicare Supplements: Table of Contents

1. Medicare: Plans and Coverage

The Medicare health program was created to cover people in specific circumstances. People age 65 or older qualify for Medicare as long as they are United States citizens or have lived in the US as legal permanent residents for at least five years.

The program is also extended to people who do not meet these requirements, but can still enjoy Medicare if they pay certain premiums. You are eligible for Medicare if you are over 65 years old and do not meet the citizen or resident requirement, but you or your spouse have paid taxes in the United States for at least ten years.

You can also opt for Medicare if you are under 65 years old but have a disability that qualifies you to receive Social Security benefits or if you have terminal kidney disease and need regular dialysis. Finally, you can also be eligible for Medicare when you are under 65 years old if you suffer from Lou Gehrig’s disease (ALS).

If you are in one of these scenarios, you can request coverage from the Medicare program, which has different “parts”, A, B, C, and D. Parts A and B are the basic plans, what is called Original Medicare, while Parts C and D offer extra coverage. More specifically, these plans offer the following services:

  • Medicare Part A: This, the most basic, part of Medicare includes fundamental categories such as hospitalization, home health services, hospice services, and the medical care that older adults receive when living in senior residences or nursing homes.
  • Medicare Part B: Part B supplements Part A by paying expenses derived from diagnostic tasks, the treatments needed for the disease or ailment, and preventative treatments, such as early detection of diseases. Plan B includes costs such as hospital transportation, medical equipment expenses, outpatient care, or clinical research that a patient may be submitted to.
  • Medicare Part C: Also known as Medicare Advantage, this part entails taking out private insurance accepted by the Medicare program to supplement coverage that is not offered by the basic parts. This coverage includes, for example, treatment for hearing or vision problems, dental care, health and wellness programs, nursing expenses, and prescription costs.
  • Medicare Part D: This part of Medicare covers prescriptions, meaning the cost of the medications that have been prescribed to the sick person. With this coverage, the user does not have to pay when he or she goes to the pharmacy, something they would have to do if they only had one of the basic plans in the program.

If you qualify for Original Medicare Parts A and B, you will find that coverage is incomplete and that you are sometimes required to pay some money at the time of treatment. This means that you will have to pay what is called copayments, coinsurance, and deductibles, or pay a part of the cost of treatments, services, or benefits out-of-pocket. The rest is put up by Medicare.

Logically, this is a problem, because you may not have the sufficient financial resources to make those payments when you need certain medical care or services. In order to avoid these problems, you can take out a Medicare supplement, also known as Medigap.

2. Medigap: What is Medicare Supplement Insurance?

This supplemental insurance, or simply supplement, is a policy that is purchased from private insurance companies accepted by the Medicare program. In order to be able to purchase these policies, you must qualify for Medicare Part A and B. Once you have this coverage, you can go on to a supplemental insurance.

With this supplement, you can be covered in the event you must pay copays, coinsurance, or deductibles. In contrast to a monthly or annual premium, the insurance takes care of these extra costs, and you do not have to worry in the event you need something that has extra costs or a copayment.

Additionally, in some cases, Medigap policies also include coverage for services that are not included in Medicare Part A or B. This can be, for example, health insurance for when you travel outside the United States.

On the other hand, there is some care and services that cannot be charged to Medigap. This may be, for example, long-term palliative care. Nor are ophthalmologist or dentist costs accepted. The same thing happens when buying glasses or hearing aids. Finally, Medigap does not cover private nursing, either.

In addition, since 2006, this type of policy no longer includes prescription expenses, which were, in fact, offered before that date. For these expenses, it is better to consider relying on Part C, or Medicare Advantage, which includes these and other benefits.

In order to find out a little more about what Medigap does and does not cover, you can check out the article on Medigap coverage and pricing

3. How Does Supplemental Insurance Work?

Basically, when you have to pay and extra cost, such as a copayment, coinsurance, or a deductible, your supplemental Medigap insurance will pay the portion of the expense that you are responsible for. The rest will continue to be covered by Original Medicare. This way, you will not have to resort to using your money when this happens.

In order to maintain this insurance, you must pay a premium, generally on a monthly basis. Keep in mind that this premium is added to what you are already paying for the Part B Medicare premium. In addition, if you have a Medicare Advantage plan, you can still take out a Medigap insurance policy, but you must drop the Advantage policy before the Medigap policy will come into effect. This means that both products cannot be enjoyed at the same time.

Medigap policies require automatic guaranteed renewal in order to function. This means that, as long as you are up-to-date on your monthly premium payments, you insurer cannot cancel your supplementary insurance for any reason.

However, you can drop Medigap. But, you must choose wisely when to break your contract, because if you do it during a period when there is no open enrollment, you must pay a fine for late inscription in Medicare Part D, which covers medicines.

This sanction will be imposed if you go at least 63 days without accessing the Medicare prescription program or if you do not obtain valid prescription coverage when you fully drop Medigap.

These fines are added to the premium you pay for Medicare Part D and increase what you have to pay for your prescriptions.

And finally, remember that it is illegal for anyone to offer you a Medigap policy if you have taken out a medical savings account, or MSA, which is one of the types of coverage plans from Medicare Advantage.

4. How to Purchase a Supplemental Insurance or Medigap Policy

If you decide to add a supplemental Medigap policy to your Original Medicare, keep in mind some pieces of advice for a transparent purchase:

  • Policies should be clearly named “supplementary Medicare insurance.”
  • The policies they offer use should be standardized and marked with identifying letters (a, b, c, etc.) (at least in most states, because Massachusetts, Minnesota, and Wisconsin use different methods of standardization).
  • Some Medigap offers include additional benefits, so you can choose which best suits you.
  • State laws let you determine which Medigap policies insurance companies offer in your territory.
  • Medigap supplemental insurance includes several types of plans.
  • Insurers are not obligated to offer all Medigap plan types.

5. Types of Medigap Policies

Insurance supplements to Original Medicare are divided into several plans, each offering different benefits. Setting aside Massachusetts, Minnesota, and Wisconsin, which have their own Medigap organization system, the rest of the country offers ten Medigap insurance plans. Each one coincides with a letter, as can be seen below:

Plan A

includes the cost of coinsurance for Medicare Part A and one year of hospital stay in addition to Medicare coverage. It also includes the cost of Part B coinsurance, the first three pints of blood in the case of transfusions, and the copayment or coinsurance for the hospice center coverage offered in Medicare Part A.

Plan B:

Adds Medicare Part A deductible expenses to the coverage from Plan A.

Plan C:

Also includes deductibles from Medicare Part B and coinsurance expenses from skilled nursing homes.

Plan D:

This plan adds 80% coverage of foreign travel emergency costs.

Plan F:

In addition to the above, this plan offers payment of excess charges from Medicare Part B.

Plan G:

Plan G is like Plan F, but does not take on the deductible expenses from Medicare Part B.

Plan K:

This insurance just covers the cost of coinsurance for Medicare Part A in full and one year of hospital stay in addition to Medicare coverage. It also includes the cost of Part B coinsurance, the first three pints of blood in the case of transfusions, and the copayment or coinsurance for the hospice center coverage offered in Medicare Part A. From there, the rest of the benefits only cover 50%, leaving the deductibles and excess charges from Part B, as well as foreign travel emergency costs, uncovered. In contrast to the other plans, this plan also includes a set out-of-pocket expense limit of $5,240 annually.

Plan L

Same as Plan K, but instead of covering just 50% of the cost of the indicated services, the payment is raised to 75%. In turn, the out-of-pocket expense limit stops at $2,260.

Plan M

Coverage from this type of policy leaves out all of the deductibles and excess charges from Medicare Part B. In addition, it only contributes 50% to the deductibles from Part A and 80% of foreign travel emergency costs.

Plan N

This last type of Medigap policy is the same as Plan M, but establishes deductibles in terms of copayments or coinsurance from Medicare Part B: it does not pay for costs under $20 in the case of some medical visits or under $50 in the case of emergency visits that do not include hospitalization.

For the three states that have their own regulations for defining policy types, you should know that what is included in their various programs is generally very similar to the ten standard plans. There are small variations or nuances in coverage levels, but the difference lies mostly in the naming system for policies and certain concepts.

6. What Happens When I Travel Outside the Country?

If you expect to travel outside the United States and you have a Medigap policy, remember that some of the plans include coverage for medical expenses you may face on your trip. More specifically, as we have seen in the above section, this service is offered for plans C, D, F, G, M, and N.

All of these Medigap plans cover any healthcare that you might need during your trip, as long as the need arises during the first two months of your stay abroad and is not covered by Medicare. In addition, these plans cover up to 80% of the expenses charged to you due to medically necessary emergency healthcare after going over the $250/year deductible. Finally, remember that Medigap coverage outside of the country has a lifetime limit of $50,000.

With all of this information, you can now choose your supplemental Medicare insurance policy and enjoy peace of mind, knowing that you will not have to meet unexpected medical expenses. Medigap helps you maintain more comprehensive coverage and, above all, face health problems without fear that your wallet will feel the hit.

7. More information on Medigap or Medicare supplements:

For more details on this coverage, you can consult the full government report on the Medigap program. To purchase additional coverage, the website offers detailed information on Medigap and the Health Insurance Marketplace.

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