10 Tips for Navigating the World of Medicare Supplements

By: Melanie Radzicki McManus  | 
elderly couple with medical assistant
Medigap can fill in some of the costs not covered by Medicare. Dean Mitchell/Getty Images

In the U.S., whether you work for someone else or are self-employed, money from every one of your paychecks goes toward Medicare. So you may be surprised — and dismayed — to learn that Medicare will not cover all of your medical costs once you're retired. Far from it. Medicare generally covers just half of your health care bills, which is why many retirees purchase Medicare supplemental insurance, or Medigap.

Medicare coverage is a bit convoluted. Original Medicare consists of Parts A and B. Medicare Part A, which doesn't carry a monthly premium for most people, covers hospital stays, short-term nursing home care, hospice care and some home health services. Part B, for which you're charged a monthly premium, covers physician and outpatient services. Neither Part A nor Part B covers prescription drugs, so retirees often purchase Medicare Part D, which does.


But even with all of this coverage, you're still on the line for deductibles, copayments (often 20 percent of the cost) and coinsurance. And these costs can be significant. That's where Medigap comes in, as it covers many of these costs.

"If you consider that an $86,000 surgery — the average cost for heart bypass surgery — has a copay of $17,000, you should really consider investing in a small premium for [Medigap insurance], a very important coverage," says Lev Barinskiy, CEO of SmartFinancial Insurance.

Here are 10 things to know about Medigap.

  1. Medigap consists of eight standardized plans sold through private insurers. As of January 2020, new Medigap enrollees in most states will have a choice of eight plans standardized by the federal government: A, B, D, G, K, L, M and N (C and F will not be offered to new enrollees in 2020). This means that while you'll have to determine which of the eight plans best fits your needs, every one of those plans will include the same benefits, no matter which insurer is offering them. The exception: Massachusetts, Minnesota and Wisconsin offer their own standardized plans.
  2. The eight Medigap plans vary according to what they cover and how much they cost. The average Medigap policy costs anywhere from about $50 to $300 per month, with premiums varying by state and insurance company. The more costs a Medigap policy will cover, the higher the premium.
  3. Medigap will pay for some long-term care. Medicare only pays for a limited number of days in the hospital, in a skilled nursing facility or for hospice care. Medigap insurance will cover additional time in these facilities.
  4. Medigap does not cover prescription drugs, vision and dental care, eyeglasses, hearing aids and some types of nursing care. So, if you have original Medicare and purchase a Medigap policy, you will still need to purchase Medicare Part D, for example.
  5. Some Medigap plans cover health care costs while traveling abroad. If you plan to travel often once retired, make sure the Medigap plan you select offers this coverage. If you're more of a homebody, you may be better off purchasing travel insurance just when you take a trip.
  6. Medigap doesn't offer family plans. You and your spouse will each need a separate plan. And, depending upon your health, you may be better off purchasing different plans.
  7. Sometimes, Medigap plans can charge more for pre-existing conditions, or even turn you down. Everyone has a guaranteed right to purchase a Medigap policy, provided you buy it during a six-month grace period that starts the first day of the month in which you are at least 65 and enrolled in Part B. During this period, insurers can't charge more if you have a pre-existing condition, either. If you miss buying a policy during this window, however, you could be denied or have to pay more for a pre-existing condition. There are a few specific situations where you would still be protected, such as if your Medigap plan folds and you need to find a new one.
  8. Medigap plans are sold on the basis of age and location. Community-rated policies offer the same premium to everyone in your area, regardless of age; this means that your premiums may be higher than some of the other options when you start out, but lower over time. Issue-age-rated policies offer premiums based on how old you are when you purchase the policy. Preminums don't increase as you age, but will increase for inflation. Attained-age-rated policies start out with low premiums which rise as you get older.
  9. Your Medigap policy is guaranteed to be renewable — as long as you pay your monthly premiums. You will never be dropped, or have your premium hiked, should you develop a serious health condition. But you can't miss a premium payment.
  10. If you're under 65, the rules are different. Providers may deny you Medigap coverage in some states if you're under 65 and have Medicare (because of a disability for instance). But you can always purchase a Medicare Advantage plan instead. These private plans are run by health maintenance organizations (HMOs) and replace Medicare. They may cover more services than Medicare, Part D and Medigap together, and for a lower premium, but you are limited to the provider network.

A final piece of advice from Barinskiy: "You should always make sure to compare Medigap options," he says. "One supplement plan may cost you hundreds of dollars less a year compared with another one that offers the same benefits."

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