What are Medicare Supplements?

A Medicare Supplement Insurance, also known as a “Medigap Plan,” is health insurance you purchase from private insurance companies to cover the fees, or gaps, Medicare doesn’t pay.

Medicare gaps include coinsurance, copayments, and deductibles. You pay for these when accessing medically-approved services. If you have Medicare Supplement Insurance, it will pay for the Medicare gaps.

Think of it as a 1–2-3 payment plan.

  1. Original Medicare pays a part of the cost for your medical service, which reduces what you owe.
  2. The Medicare Supplement Insurance (Medigap Plans) pays part of the cost, which reduces more of what you owe.
  3. After both plans pay their part of the cost, you pay the rest.

Medicare Supplement Insurance covers the gaps of the “out of pocket” cost of Original Medicare. Depending on what policy you choose will determine the amount of coverage.

The 10 Standard Medicare Supplements (Medigap Plans)

In 1990, Medicare standardized all Medicare Supplement (Medigap Plans) and provided specific guidelines. Medicare calls them plans and they are identified by a letter. There is Medigap Plan A, Plan B, Plan C, D, F, G, K, L, M and N. Every insurance company has to provide the same set of benefits for each plan.

This means the monthly premium is the main difference between supplements with the same letter. You can compare multiple insurance companies to get the best rate. We receive the most requests for quotes on Medigap Plans F, G, and N.

What is Not Covered by Medigap Plans?

Medigap plans only pay after Medicare pays its share. If Medicare approves a claim and pays the part it owes, they will send the remainder of the bill to your Medigap Plan. If Medicare denies part of the claim, the Supplemental will also deny that portion and you would be responsible for payment. Your Original Medicare and Medicare Supplement work hand in hand.

What is Not Covered by Medicare or Medigap Plans?

There are some things that are not covered by either Medicare or your Medigap Plan. These are:

  • Routine dental, vision and hearing exams
  • Hearing aids
  • Eyeglasses or contacts
  • Long-term care or custodial care

Glossary of Terms

Perhaps the most difficult thing about Medicare supplements is the terminology. Let’s look at the benefits as described by Medicare.

It can be confusing to understand all the Medicare and Medicare Supplement terms.

These brief definitions can help you understand plan benefits.

Medicare Part A coinsurance – All Medigap plans have this benefit. It covers the daily hospital copay you begin accruing after your 60th day.

Medicare Part B coinsurance or copayment – Every Medigap plan has this benefit; it’s one of the most important. Medicare covers 80% of your Part B outpatient expenses, a Supplemental plan pays the other 20%. This can be crucial for high-ticket items like cancer treatments or dialysis.

Blood (First 3 pints) – This benefit is part of all Supplemental plans and pays for the first 3 pints of blood in a blood transfusion. Medicare only pays for the 4th pint and above. Blood is very expensive, which makes this a good benefit.

Part A Hospice care coinsurance or copayment – Supplemental plans pay the hospice costs Medicare doesn’t pay and you usually pay nothing.

Skilled Nursing Facility (SNF) coinsurance – Medicare allows for 100 days of skilled nursing facility care after you have been in a hospital. However, Medicare only pays for the first 20 days. A policy with SNF coverage will pay for the other 80 days.

Medicare Part A deductible – The 2020 Part A deductible is $1,408. You might pay this deductible more than once a year if, for example, you have two inpatient hospital stays more than 60 days apart.

Medicare Part B deductible – In 2020, the Part B deductible is $198/year. You pay the Part B deductible once per year for services such as doctor’s visits, lab work, or physical therapy.

Medicare Part B excess charges – Medicare providers (doctors, hospitals, etc.) can either accept Medicare’s assigned rates for each service or they can charge you an excess charge. This charge can be up to 15% above the assigned rate. It can increase costs for items like diagnostic imaging or surgery. A Medicare Supplement plan can help cover such an expense.

Foreign Travel Emergency – Since Medicare is a U.S. health insurance program, it does not cover you outside our country. Some Medicare Supplements include a foreign travel benefit. It will pay 80% of your expenses up to $50,000, after you pay a small deductible.

Choosing a Medicare Supplement

Medigap plans are standardized so you know exactly what benefits you are buying. However, there are several things you should know about each insurance carrier before you choose your supplement.

  • Rates – If you select a Medicare supplement, you pay a premium. It’s the monthly rate you pay to the insurance company which provides your Medicare Supplement coverage. Compare the rates each insurance provider will charge you. Check to see if they are competitive with other Medigap insurance companies in your area.
  • Rate trend history – Many supplemental policies have an annual rate increase to keep up with medical inflation. Find out what kind of rate increases the insurance company had over the last three years, and find out if it’s reasonable or higher than others.
  • Financial ratings – Some ratings companies look in depth at the financial stability of insurance companies and provide reports, or grades. Ask your agent about the ratings for each carrier.

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