Around 14.5 million people have a Medigap policy which helps the beneficiaries cover the “gaps” of Original Medicare such as benefits, deductibles, and coinsurance.1
- Medigap is a variety of supplemental insurance plans that help cover healthcare costs not covered by Original Medicare and each plan varies in what is covered.
- An individual with Medicare can purchase a Medigap plan or a replacement Medicare Advantage plan but not both.
- Costs of the various Medigap plans have different monthly premiums, deductibles, copays, coinsurance, and out-of-pocket costs.
- Medigap plans are rated based on factors that affect the costs of the various policies.
What is Medigap?
Medigap is supplemental insurance policies sold by private companies to help cover various costs of healthcare that Original Medicare does not cover. This may include deductibles, coinsurance, and out-of-pocket costs that Medicare does not pay for first. In order to enroll in a Medigap policy, an insurer must be enrolled in Medicare Part A and Part B.
Medigap policies with the same letter have the exact same coverage no matter where it is sold and provide the same benefits. This is helpful for comparing the different Medigap policies and what they do and do not cover.
However, Medigap policies are standardized differently in Massachusetts, Minnesota, and Wisconsin.
What is the Difference Between Medigap and Medicare Advantage?
Medigap and Medicare Advantage are types of insurance policies sold through private companies. Medigap plans help to cover out-of-pocket costs connected to Original Medicare. Medicare Advantage plans replace Original Medicare for healthcare coverage.
Medicare Advantage plans may offer extra coverage and some cost saving benefits especially for those with pre-existing health conditions. However, choice of providers may be limited. Medigap offers flexibility with healthcare providers.
An individual may choose either a Medigap plan or a Medicare Advantage plan but not both. It is possible to switch plans but switching back might be difficult or not possible.
What do Medigap Plans Cover?
There are 10 standardized Medigaps plans named by letters (A, B, C, D, F, G, K, L, M, N). These plans vary in coverage of copayments, coinsurance, and various medical fees.
All Medigap plans cover (all or some portion of):
- Medicare Part A coinsurance, hospital fees, and hospice coinsurance or copayments
- Medicare Part B coinsurance or copayments
- Blood transfusions (up to a certain number of pints)
Certain plans may offer additional coverage for:
- Hospital deductibles
- Medicare Part B deductible and excess charges (date of eligibility might be a factor in this case)
- Skilled nursing facility coinsurance
- Emergency medical fees during international travel
- At-home recovery
- Preventative care
Who Should Consider Medigap Coverage?
There are various factors when considering purchasing a Medigap policy such as an individual’s health, personal finance, and lifestyle. Researching and calculating costs such as premiums, out-of-pocket expenses, and copays as well as what various policies cover help to make this decision.
Medigap monthly premiums may be pricey but they help cover: additional Medicare fees and excess chargers, hospital stays, national coverage, and foreign travel. Plans are easy to compare and there is an initial six-month enrollment period where an individual is eligible for Medigap policies regardless of health status.
However, Medigap policies do not cover anything that Original Medicare Part A and Part B does not cover. This may include: prescription drugs, hearing, vision, and dental. These policies also may prove difficult to switch once enrolled and eligibility may be limited after the six-month period. They also only cover an individual.
How Much Do Medigap Plans Cost?
Medigap has standardized plans that vary on costs such as: monthly premiums, deductibles, copays, coinsurance and out-of-pocket costs. Plan pricing may also vary based on an insurers’ age, location, insurance company, discounts available, gender, and tobacco use.
Monthly Medicare premiums are still required even with a Medigap plan. Medicare Part A is premium-free for most people. However, some pay up to $499 per month in 2022. Part B premiums may cost around $170 or more depending on income.2
The premium for a Medigap plan is separate and decided by individual insurance companies. These can vary widely anywhere from $44 to $392 per month.3
Deductibles for health care services must be met before Medigap and Medicare will cover costs. For 2022, Part A has a $1,556 deductible per benefit period and Part B has a $233 deductible.2 Medigap policies may cover some or all of these deductibles.
In some states, plans F and G offer a high deductible plan. As of 2020, insurers newly eligible for Medicare cannot enroll in Plans C or F.
Copays & Coinsurance
Medicare pays for health care costs after a deductible has been met but there still may be copays and coinsurance costs. As of 2022, Part A coinsurance may range from $0 to $778 for inpatient stays. Part B includes insurers paying 20% of healthcare services approved by Medicare after the deductible is met.2 These copayments and coinsurance amounts will vary depending on the Medigap policy.
Out of Pocket Costs
Medicare Part A or Part B do not have limitations on out-of-pocket costs. If a Medigap policy does not cover part or all of the Medicare costs, there will still be out-of-pocket costs. However, Medigap policies K and L do have out-of-pocket limits.
Medigap Plan Ratings & Prices
Medigap plans are rated based on factors that affect the prices of the different policies.
Community Rated Medigap Plans
Community-rated or “No-Age-Rated” Medigap plan pricing offers a monthly premium that is the same no matter what the insurers’ age is or health status.These plans may be cheaper over a period of time. However, various factors may change these prices such as inflation.
Issue Age Rated Medigap Plans
Issue-age-rated plans or “Entry-Age-Rated” Medigap plan pricing offers a monthly premium that is dependent on the age of the insurer when buying or being issued the policy. Premiums tend to be lower when buying at a younger age but won’t change with age increase. However, various factors may change these prices such as inflation.
Attained Age Rated Medigap Plans
Attained age-rated Medigap plan pricing offers premiums based on age. There is an increase in premiums with an increase in age. Although these policies might be low for younger insurers, these policies increase in price with age and may increase for various other reasons such as inflation.
What to Consider When Buying a Medigap Plan
There are some factors to consider when purchasing a Medigap policy and through which insurance company. Such factors include:
- Financial: how much financial assistance is necessary? Do the benefits of the plan make up for the costs?
- Services: does the insurer possibly need hospice or a skilled nursing facility? What specific services are needed?
- Travel: does the insurer travel out of the United States? Is international healthcare coverage necessary?
- Specific Medical Needs: does the insurer have unique medical needs? Does Medicare Advantage plan replacement make more sense?
Compare the various policies in the state of residence and get quotes from different insurance companies. Discuss plan pricing with an insurance agent and be sure to inquire about household discounts. Note that some insurance companies’ policies may not be recommended based on commission. Here is a list of helpful questions to ask when researching Medigap policies or speaking to an insurance agent.
Insurers can also discuss policies with a State Health Insurance Assistance Program or “SHIP” for free advice.
- CNBC “Here’s What To Watch For If You’re Buying A Medigap Plan To Cover Some Medicare Costs.” 26 August 2021. https://www.cnbc.com/2021/08/26/what-to-know-when-buying-a-medigap-plan-to-cover-medicare-costs.html. 7 June 2022.
- Medicare.Gov “Medicare Costs At A Glance.” https://www.medicare.gov/your-medicare-costs/medicare-costs-at-a-glance. 10 June 2022.
Office of the Insurance Commissioner Washington State “What Is A Medigap Plan And Why Should I Buy It? https://www.insurance.wa.gov/what-medigap-plan-and-why-should-i-buy-it. 10 June 2022.