Is a Medicare Supplement Plan Primary or Secondary?

Medicare Supplement Plans, often known as Medigap, are designed to assist individuals with certain healthcare costs not covered by Original Medicare. A common question is their payment hierarchy: are they primary or secondary? Understanding how different health insurance plans coordinate benefits is important for managing healthcare expenses. This article clarifies the role of Medicare Supplement Plans in the payment process.

Original Medicare’s Primary Role

Original Medicare, comprising Part A (Hospital Insurance) and Part B (Medical Insurance), serves as the primary payer for Medicare-covered services. Part A covers inpatient hospital stays, care in a skilled nursing facility, hospice care, and some home health services. Part B covers medically necessary doctor services, outpatient care, durable medical equipment, and some preventive services.

For covered services, Original Medicare pays its share first, based on its approved amounts. Medicare Part B pays 80% of the Medicare-approved amount for most outpatient care and services, after the annual deductible is met. This initial payment by Original Medicare establishes its role as the foundational coverage.

Medicare Supplement Plans’ Secondary Role

Medicare Supplement Plans function as secondary payers, paying after Original Medicare processes a claim and pays its portion. These private insurance policies are designed to cover out-of-pocket costs, or “gaps,” not fully covered by Original Medicare. Medigap policies do not replace Original Medicare; they work with it to reduce a beneficiary’s financial responsibility.

After Original Medicare pays its designated share, the Medicare Supplement Plan then pays its benefits for the remaining Medicare-approved costs. This includes expenses like Medicare Part A deductibles and coinsurance for hospital stays, as well as Medicare Part B coinsurance. Some Medigap plans may also cover the Medicare Part A deductible, skilled nursing facility coinsurance, or Medicare Part B excess charges, which are amounts doctors can charge above the Medicare-approved amount. These plans provide more predictable out-of-pocket costs.

Coordination with Other Coverage

When an individual has Original Medicare, a Medicare Supplement Plan, and other types of health insurance, the coordination of benefits rules determine which plan pays first, second, or even third. This hierarchy varies significantly depending on the specific combination of coverages. If an individual is still working and covered by an employer group health plan (EGHP), the size of the employer can influence whether the EGHP or Medicare is primary. For employers with 20 or more employees, the EGHP is primary for those 65 or older, with Medicare acting as secondary. If the employer has fewer than 20 employees, Medicare is primary.

For those with TRICARE, Medicare is the primary payer, and TRICARE for Life acts as a secondary payer, covering Medicare’s deductibles and coinsurance. If an individual has both Medicare and veterans’ benefits, they must choose which benefit to use for each service, as Medicare will not pay for services authorized by the Department of Veterans Affairs (VA). Medicaid is always the payer of last resort, paying after Medicare, employer group health plans, and Medicare Supplement Insurance.

Medicare Supplement vs. Medicare Advantage

Medicare Supplement Plans and Medicare Advantage Plans (Part C) serve distinct roles, with a fundamental difference in primary payment. Medicare Advantage Plans are an alternative to Original Medicare, offered by private insurance companies. When an individual enrolls in a Medicare Advantage Plan, that plan becomes the primary payer for their Medicare-covered services.

As alternatives to Original Medicare, individuals cannot have both a Medicare Supplement Plan and a Medicare Advantage Plan. A Medicare Supplement Plan is designed to work only with Original Medicare, filling its cost-sharing gaps. If a person chooses a Medicare Advantage Plan, they cannot use a Medigap policy to supplement it, as the Medicare Advantage Plan becomes the primary source of coverage.