Medicare participants share the cost of their healthcare by paying premiums for their Part B coverage as well as deductibles and coinsurance. With the potential to amount to thousands of dollars annually, these costs can overwhelm many Medicare participants. To address the gap between the cost of healthcare and the amount Medicare pays, insurance companies market Medicare Supplements, often called Medigap plans, which pay some or all of the costs that would otherwise come out-of-pocket.
Medicare Supplements and Eligibility
Medicare certifies 10 different Medicare Supplement plans for sale by insurance companies. Plans are identified by letter and standardized nationwide – that is, the benefits offered by a Plan A sold by one company are identical to those offered by every A Plan sold by every insurance company nationwide. This makes it easier to compare different companies’ offerings. The only substantial differences among plans are their prices and the quality of service.
Anyone enrolled in Medicare Parts A and B is eligible to apply for a Medicare Supplement plan. In general, if you apply during the six-month period beginning the month your Medicare Part B coverage begins -- usually the month you turn 65 -- the insurance company must accept your application and cover you without regard to your medical history.
If you’re under age 65 and have Medicare coverage due to disability, your Medigap choices may be limited.
Types of Medicare Supplements
The 10 different Medicare Supplement plans can be divided into two groups. Plans A, B, C, D, F and G, are benefit specific, in which the plan covers some or all services or charges in full.
The second group is more oriented toward cost-sharing, Plans K and L provide limited coverage for most benefits, but pay all costs after an annual limit on the participant’s out-of-pocket limit is reached. The other plans in the second group, Plans M and N, cover most services, but offer limited coverage on deductibles. The premiums charged for the four plans in this second group are relatively lower than those in the first group, but the potential for significant out-of-pocket expenses is greater. They aren’t nearly as popular as those in the first group, and many companies don’t offer them.
Plans A, B, C, D, F and G all offer full coverage for four basic benefits:
- Part A coinsurance and an additional 365 days of hospital care beyond traditional Medicare benefits.
- The first three pints of blood you may need,
- Part A hospice care coinsurance
- Part B coinsurance.
All the plans except Plan A also cover the Part A deductible, which is $1,260 per benefit period as of this publication. A benefit period generally is 60 days, which in practice means that if you’re admitted to the hospital more than 60 days after your previous hospital stay, you’re liable for another deductible.
Plans C, D, F and G also offer some combination of additional benefits, such as the coinsurance due for treatment in a skilled nursing facility, the Part B deductible, Part B excess charges, and costs incurred for medical emergencies outside the country. Plan F is the most comprehensive of all the plans.
Plans D and G changed benefits on June 1, 2010. If you have a D or G plan effective before that date, it has different benefits than those noted here. Four plans – E, H, I and J – are no longer sold, but participants who bought them before they were discontinued generally can keep that coverage.
Plans K and L cover the Part A coinsurance and additional hospital costs at 100 percent, but don’t cover the Part B deductible, excess charges, or foreign travel emergencies at all. Plan K covers all other benefits at 50 percent until the participant has paid $4,940 out of pocket, and Plan L pays the benefits at 75 percent until the participant reaches the out-of-pocket limit of $2,470. After that limit is reached, the plan pays all covered charges.
Plans M and N don’t cover the Part B deductible or excess charges, but Plan N requires a $20 or $50 copayment for some doctor office or emergency room visits. In addition, Plan M covers only 50 percent of the Part A deductible. There’s no cap on out-of-pocket spending under the M and N plans.
Medicare Advantage Plans
Medicare Advantage Plans are not Medicare Supplement plans; in fact, they are a substitute for original Medicare. Advantage plans are not standardized, though they must cover everything Medicare does and be approved by Medicare. If you have a Medicare Advantage policy, it's illegal for anyone to sell you a Medicare Supplement.