Medicare Supplemental Insurance

If you have had original Medicare insurance for long, you might have realized that there are some areas which are not covered by Part A and Part B coverage. These gaps in coverage have also been noticed by private insurance companies. These insurance companies offer solutions to these uninsured areas called Medicare Supplemental Insurance, also called Medigap policies. Medigap policies are not really beneficial for individuals with Medicare Advantage Plans. These typically offer coverage that fills in the gaps in Part A and Part B coverage anyway. Therefore, if you are enrolling in a Medicare Part C (Medicare Advantage) Plan, you do not need to purchase a Medigap policy as well.

When you become eligible for Medicare, you have two basic ways to receive your coverage. The first is original, or traditional, Medicare coverage. This is also called Medicare Part A and Medicare Part B. Medicare Part A is hospital insurance. Medicare Part B is medical insurance. The second way to get your Medicare coverage is through a Medicare Part C policy, also called a Medicare Advantage Plan. Medicare Part C plans are policies offered by Medicare-Approved private insurance companies that combine Part A and Part B coverage, as well as some other benefits, usually including prescription drug coverage (Medicare Part D).

If you choose a Medicare Advantage Plan that offer prescription drug coverage, you are done with decisions and have all your allocated coverage. If your MA plan does not cover prescription drugs, or if you chose original Medicare, you will need to decide if you want to purchase Medicare Part D (prescription drug) coverage. At this point, patients choosing the Part C route are definitely done with the decision-making process. Patients in the Original Medicare path can decide if they wish to purchase Medicare supplemental insurance (a Medigap policy) to fill in any spaces in coverage by tradition Medicare Parts A and B.

A Medigap policy can help cover costs associated with health care which are not covered by original Medicare, such as copayments, coinsurance, and deductibles. In most states, insurance companies are required to offer standardized Medicare supplemental insurance policies. These standard coverage designations in policies are identified by the letters A-N. Different private insurance companies must be approved by Medicare. They must offer the standard policies, but they can charge whatever price they want. Massachusetts, Minnesota, and Wisconsin are states which deviate from this standardization process.

There is also a Medicare supplemental insurance policy type available in some states called a Medicare SELECT policy. These policies are limited to certain insurance providers. They may be less expensive than other Medigap policies.

Out of the A to N standard policies, there are some which are no longer for sale. If you currently have these policies, you can keep them, but they cannot be purchased as new policies. These out-of-date policies are designated as E, H, I, and J.

There are nine basic areas of Medicare supplemental insurance which can be included or not included depending on which standard plan you choose. These areas are:

  • Medicare Part A Coinsurance and Hospital Stays (up to 365 days past the date Medicare benefits are used up): Included in A, B, C, D, F, G, K, L, M, and N.
  • Medicare Part B Coinsurance or Copayment: Included in A, B, C, D, F, G, M, and N at 100%, K at 50%, and L at 75%.
  • Blood (the first three pints): Included in A, B, C, D, F, G, M, and N at 100%, K at 50%, and L at 75%.
  • Part A Hospice Care Copayment or Coinsurance: Included in A, B, C, D, F, G, M, and N at 100%, K at 50% and L at 75%.
  • Skilled Nursing Facility Care Coinsurance: Included in C, D, F, G, M, and N at 100%, K at 50% and L at 75%.
  • Medicare Part A Deductible: Included in B, C, D, F, G, and N at 100%; K and M at 50%; and L at 75%.
  • Medicare Part B Deductible: Included in C and F.
  • Medicare Part B Excess Charges: Included in F and G.
  • Foreign Travel Emergency (up to plan limits): Included in C, D, F, G, M, and N.

Plan F has a high deductible built in to the plan, meaning you have to meet a higher deductible (over $2,000 in 2012) before the Medicare supplemental insurance plan starts paying for anything. Plans K and L have set out of pocket limits (K: $4,660, L: $2,330).

As you can see, Medigap policies are not for covering items like vision, dental, health and wellness, long-term care, and private duty nursing. Medicare supplemental insurance should be thought of as an extension of the coverage in original Medicare. Some people may think that different kinds of health care products, like Medicaid, Medicare Part D Plans, Medicare Advantage Plans, and TRICARE, are Medicare supplemental policies, but these are not Medigap insurance.

Shopping around different private insurance companies can help you get the best price on the type of Medicare supplemental insurance policy you want. You will have to pay a monthly premium in addition to your Medicare Part B premium. Each Medigap policy is only applicable to one person. If you are married, you and your spouse will each have to buy a separate Medigap policy. One of the primary reasons for this is that Medigap policies can be underwritten using medical condition as criteria for setting price and acceptance. The good news is that if you apply for a Medicare supplemental insurance policy during your Medigap Open Enrollment Period, you can purchase any plan, regardless of pre-existing conditions. This is not the case if you wait until after your open enrollment period.