Are Medicare Supplement Plans Worth It?

Medicare Supplement Plans, or Medigap policies, are private insurance plans. They help manage out-of-pocket costs not covered by Original Medicare.

Understanding Medicare Supplement Plans and Their Purpose

Medigap policies work alongside Original Medicare (Parts A and B). While Original Medicare covers many costs, beneficiaries are responsible for deductibles, coinsurance, and copayments. Medigap policies fill these “gaps,” reducing financial exposure.

Original Medicare Part A covers inpatient hospital stays, requiring a deductible and coinsurance for extended stays. Part B covers 80% of approved medical services after its annual deductible, leaving a 20% coinsurance without an out-of-pocket limit. Medigap plans cover these costs.

Medigap policies also cover skilled nursing facility care coinsurance, blood, and Part A hospice care coinsurance or copayments. This offers a more predictable healthcare budget. All Medigap policies of the same letter (e.g., Plan G) offer identical benefits, standardized by CMS.

Premiums for standardized Medigap plans vary significantly among providers. Medigap plans are distinct from Medicare Advantage plans (Part C); you cannot have both simultaneously. Medigap supplements Original Medicare, rather than replacing it. Medicare Advantage plans provide benefits through a private plan, typically with an out-of-pocket maximum.

Exploring Standardized Medigap Plans

Medigap plans are identified by letters A through N, each offering standardized benefits. Plan A provides basic benefits:
Part A coinsurance and hospital costs (365 additional days after Medicare benefits exhausted)
Part B coinsurance or copayment
First three pints of blood
Part A hospice care coinsurance or copayment
Plan B offers all Plan A benefits, plus Part A deductible coverage.

Plans C and F offer the most comprehensive coverage, including Part A and Part B deductibles, Part B excess charges, and foreign travel emergency care. Due to legislation, these plans are only available to individuals eligible for Medicare before January 1, 2020. If eligible on or after this date, you cannot purchase them.

For those eligible on or after January 1, 2020, Plan G is the most comprehensive option. It covers everything Plan F does, except for the Part B deductible. Beneficiaries pay the annual Part B deductible out of pocket before Plan G benefits begin. After meeting this, Plan G covers 100% of remaining approved Part A and Part B costs, including Part B excess charges.

Plan N offers a different cost-sharing structure. It covers:
Part A coinsurance and hospital costs
Part A deductible
Part B coinsurance (with copayments)
Blood
Hospice care coinsurance
Skilled nursing facility care coinsurance
Foreign travel emergency care
Beneficiaries pay a copayment for some office visits and emergency room visits not resulting in inpatient admission. Plan N does not cover the Part B deductible or Part B excess charges.

Less common plans, K and L, offer a different cost-sharing approach, covering a percentage of costs. Plan K covers 50% of Part B coinsurance, blood, and hospice coinsurance, and 100% of Part A coinsurance, hospital costs, and skilled nursing facility care coinsurance, up to an annual out-of-pocket limit. Plan L covers 75% of these same costs, with a higher annual out-of-pocket limit. Once limits are reached, Plans K and L pay 100% of covered services for the remainder of the year.

Plans D and M provide similar benefits with specific variations. Plan D covers the Part A deductible, skilled nursing facility care coinsurance, and foreign travel emergency, but not the Part B deductible or Part B excess charges. Plan M is similar to Plan D but only covers 50% of the Part A deductible. Comparing these offerings helps align a plan with your expected healthcare utilization and financial preferences.

Key Factors for Personalized Evaluation

Choosing a Medigap plan requires assessing individual circumstances and future healthcare expectations. Consider your current and anticipated healthcare needs. If you foresee frequent doctor visits, specialist appointments, or potential hospital stays, a Medigap plan offers financial predictability by limiting out-of-pocket expenses. If generally healthy with minimal healthcare utilization, monthly premiums might outweigh benefits.

Your financial situation and budget are significant. Medigap premiums are paid monthly in addition to the Medicare Part B premium. Assess your ability to comfortably afford these combined costs. Some prefer predictable higher monthly premiums to avoid large, unexpected medical bills; others prefer lower premiums and accept higher out-of-pocket risk.

The choice between Original Medicare (with or without Medigap) and a Medicare Advantage plan impacts Medigap enrollment. Medigap policies work exclusively with Original Medicare. If you prefer Original Medicare’s flexibility to see any doctor or hospital nationwide, a Medigap plan enhances financial protection. If you prefer an all-in-one plan with prescription drug coverage and additional benefits, and are comfortable with network restrictions, a Medicare Advantage plan might be more appropriate.

Geographic mobility and provider choice are important. Frequent travelers within the U.S. or internationally benefit from Original Medicare’s broad acceptance, supplemented by a Medigap plan with foreign travel emergency coverage. This offers freedom to choose any Medicare-participating provider nationwide. Medicare Advantage plans often operate within specific service areas, requiring in-network providers, which limits choices.

Medigap policies do not cover long-term care (nursing home or assisted living), nor private-duty nursing. They also do not cover routine vision, dental, or hearing care, including eyeglasses, dental procedures, or hearing aids. Prescription drug coverage is not included; individuals require a separate Medicare Part D plan.

Navigating Enrollment and Eligibility

Understanding Medigap enrollment rules helps secure favorable coverage. The most significant period is the Medigap Open Enrollment Period (OEP). This six-month period begins when you turn 65 and enroll in Medicare Part B. During this time, insurers must sell any Medigap policy they offer, regardless of health status. They cannot deny coverage, place conditions, or charge higher premiums based on pre-existing conditions.

This guaranteed issue right during the OEP protects beneficiaries. If you miss your Medigap OEP, you may still purchase a policy, but insurers can medically underwrite your application. Medical underwriting reviews health history, potentially leading to denied coverage, higher premiums, or waiting periods. Enrolling during the OEP is highly advantageous.

Specific situations outside the Medigap OEP also grant guaranteed issue rights. These arise when you lose certain health coverage, such as your employer group health plan coverage ending or a Medicare Advantage plan leaving your service area. These rights provide a window, typically 63 days, during which insurers must offer certain Medigap plans without medical underwriting.

When considering a Medigap policy, compare premiums from different insurance companies. While standardized Medigap plan benefits are identical across insurers for the same plan letter, premiums vary considerably. Contact multiple providers for quotes on your desired Medigap plan; this comparison can lead to significant cost savings.