Medicare and Supplemental Insurance: Which Is Primary?

Medicare serves as the primary federal health insurance program for those aged 65 or older, younger people with certain disabilities, and people with End-Stage Renal Disease. While Medicare provides substantial coverage, it does not cover all medical expenses, creating out-of-pocket costs that often necessitate supplemental insurance. This article clarifies how Medicare and various supplemental insurance options coordinate benefits, addressing which one pays first for healthcare services.

Understanding Medicare Coverage

Medicare is structured into several parts, each covering different types of healthcare services. Part A, known as Hospital Insurance, covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home health services. For most individuals who have paid Medicare taxes for at least 10 years, Part A is premium-free.

Part B, or Medical Insurance, covers medically necessary services such as doctor visits, outpatient care, durable medical equipment, and some preventive services. Unlike Part A, Part B requires a monthly premium, which is $185.00 in 2025 for most beneficiaries. An annual deductible of $257 applies to Part B in 2025, after which Medicare pays 80% of the approved amount for most services, leaving the beneficiary responsible for the remaining 20% coinsurance.

Part D provides prescription drug coverage through private insurance companies approved by Medicare. This part involves premiums, deductibles, and copayments or coinsurance. Original Medicare (Parts A and B) has gaps, including deductibles, coinsurance, and services like routine dental, vision, hearing care, and long-term care. These limitations highlight the need for additional insurance.

Understanding Supplemental Coverage Options

To address out-of-pocket costs and service gaps in Original Medicare, beneficiaries consider supplemental insurance options. One common type is Medigap, also known as Medicare Supplement Insurance, sold by private companies. Medigap policies pay some healthcare costs that Original Medicare does not cover, such as deductibles, copayments, and coinsurance. Various standardized Medigap plans are identified by letters.

Medicare Advantage Plans, or Part C, offer an alternative way to receive Medicare benefits. These plans are offered by private insurance companies approved by Medicare and combine Part A and Part B coverage, often including prescription drug coverage (Part D) and additional benefits like routine dental, vision, and hearing care. Unlike Medigap, Medicare Advantage plans replace Original Medicare, meaning Medigap policies cannot be used alongside them.

Employer-sponsored retiree health plans represent another form of supplemental coverage. These plans are offered by former employers or unions to retirees and their families, providing health and/or drug coverage. These plans fill some gaps in Medicare’s coverage, such as deductibles and cost-sharing, and may also offer benefits not covered by Original Medicare. The availability and scope of these retiree benefits vary significantly, as employers are not legally mandated to provide them.

General Rules for Benefit Coordination

Determining which insurance pays first, known as coordination of benefits, is a common question for individuals with Medicare and supplemental coverage. When a beneficiary has Original Medicare and a Medigap policy, Medicare is the primary payer. Medicare first pays its share of approved medical costs, and then the Medigap policy pays its share of the remaining approved amount, based on the specific plan’s terms. This order of payment ensures that gaps left by Original Medicare’s deductibles and coinsurance are addressed by the supplemental plan.

If a beneficiary has Original Medicare and an employer-sponsored retiree health plan, Medicare is the primary payer. The retiree plan then pays after Medicare, covering additional costs or offering benefits not included in Original Medicare. This coordination helps manage out-of-pocket expenses for retirees.

Medicare Advantage Plans operate differently because they are an alternative to Original Medicare, not supplemental to it. When a person enrolls in a Medicare Advantage Plan, the private plan becomes their Medicare coverage. Therefore, the Medicare Advantage Plan processes all claims for covered services, and there is no separate primary/secondary coordination with Original Medicare.

Specific Coordination Scenarios

While Medicare is often the primary payer, specific situations can alter benefit coordination. For individuals covered by an Employer Group Health Plan (EGHP) and Medicare, the size of the employer plays a role. If the employer has 20 or more employees, the EGHP is primary, and Medicare is secondary. If the employer has fewer than 20 employees, Medicare is primary, and the EGHP is secondary.

End-Stage Renal Disease (ESRD) introduces a 30-month coordination period. For individuals with ESRD also covered by an EGHP, the EGHP is primary for the first 30 months of Medicare eligibility due to ESRD, after which Medicare becomes primary. This coordination period begins even if the individual has not yet enrolled in Medicare.

COBRA continuation coverage also has unique coordination rules with Medicare. If an individual has COBRA and Medicare, Medicare pays first, with COBRA as the secondary payer. If COBRA coverage was in place before Medicare enrollment, timely enrollment in Medicare Part B is important to avoid penalties and coverage gaps.

Workers’ Compensation and auto or no-fault insurance are the primary payers. If an injury or illness is covered by workers’ compensation, that plan pays first for related medical care. In cases involving auto accidents where no-fault or liability insurance applies, these insurances are primary to Medicare. Medicare may make conditional payments in some instances, but these payments must be repaid once the primary payer settles the claim.