With no annual out-of-pocket max under Original Medicare, the right Medigap plan could save you big bucks on your healthcare costs.
Medigap, also known as Medicare Supplement insurance, is a type of health insurance plan that is used to cover fees that Original Medicare leaves for you to pay out-of-pocket. With Medicare, as with most health care plans, you will usually pay monthly premiums, deductibles, coinsurance payments, and copayments, along with other health care costs. Medigap plans function as supplemental insurance to cover these payments for you, and can also cover some other fees that Medicare will usually leave for you to pay out-of-pocket.
How Many Medigap Plans Are There?
Medigap plans are offered by private insurance companies, not by the government. Because of this, there can be a lot of variety when it comes to plan pricing. However, the plans themselves are completely standardized. There is a limited number of Medigap plans and every insurance company must offer the same coverage for each plan.
Because there are a variety of fee categories that you can pay for out-of-pocket, Medigap plans can cover a wide range of out-of-pocket cost types. Thanks to the variety offered, you can probably find one that works for your needs.
There are nine different categories that Medigap plans cover, and ten plans in total. These plans are as follows:
- Plan A
- Plan B
- Plan C
- Plan D
- Plan F
- Plan G
- Plan K
- Plan L
- Plan M
- Plan N
Some plans have a “high deductible” version, where the monthly premiums are lowered in exchange for a higher yearly deductible. However, the coverage itself will be the same as the basic plan.
So, What Exactly Does Medigap Cover?
Medigap plans will cover costs associated with nine specific categories. The categories that Medigap plans cover generally only apply to Original Medicare. Original Medicare refers to Medicare Part A and Medicare Part B only, not Medicare Advantage or prescription drug plans. The categories covered are:
- Part A coinsurance and hospital costs up to 365 days after benefits are used up
- Part B coinsurance or copayment
- Part B deductible
- Part A deductible
- Part A hospice care copayment or coinsurance
- Skilled nursing facility coinsurance
- Part B excess charges
- Blood (first 3 pints)
- Foreign travel exchange
For each of these categories, the relevant Medigap plan will usually either cover the category in full or not at all. However, some plans also cover some categories in part. For example, Medigap plan K covers 50% of your Part B coinsurance or copayment.
Medicare makes it easy to compare plans, with lots of information offered here.
How Can I Tell if Medigap is Right For Me?
Because there are so many Medigap plans out there, it can sometimes be confusing to understand which is best for you. Part of the reason for this is that doing a cost analysis for Medigap plans can be complicated. After all, you will be paying monthly premiums for your Medigap plan, so it will be costing something, and for some people it may not be worth it at all.
To make things more complicated, many of the types of fees that Medigap plans cover, like excess charges and coinsurance payments, can vary from year to year and person to person, making estimating them difficult. However, doing a cost analysis for some Medicare Supplement plans can help you estimate if they will be worth it or not for you. Because all Medicare plans have the same general fees, you should be able to find all of the information you need easily.
How to do a Medigap Cost Analysis
The basic idea behind doing a cost analysis for Medigap plans is to see if they will save you more money than you spend on them. To do this, you will have to find quotes or at least estimates for the given plans in your area.
The basic way to do this is simple. To figure out what the Medigap plan will cost you, simply multiply the monthly premium by twelve, and this is how much your Medigap plan will cost each year.
Then, take a look at every fee category that the given plan covers, which is what you would pay out-of-pocket without the Medigap plan. If the amount is fixed for each person for each year, like the Part A deductible, simply add it in. If it is something that can vary from year to year, like the Part B coinsurance or copayment, then try to estimate your yearly amount based on previous years. Add up all of these numbers together, and you'll see roughly how much you spend on out-of-pocket costs each year.
If your out-of-pocket costs exceed the Medigap monthly premium costs for the year, then the Medigap plan will end up saving you money.
While this can be somewhat overwhelming to do given that there are so many plans, it can be a lot easier if you just narrow down which plans you think would work for you, and use rough estimates that don’t sacrifice too much accuracy. The savings can be substantial, so it is always worth it to not skip this step before you choose to commit to a plan.
What Are the Most Popular Medigap Plans?
The most popular Medigap plan at the moment is Plan F. The main reason for this is that Plan F offers a lot of coverage and is also offered by a lot of insurance companies, which in general makes prices go down. Plan F is a great option for many people and is one of the plans that offers a high deductible version, which comes with lower premiums. You can expect ordinary Plan F plans to cost around $150 per month, although this can vary widely depending on many factors. Where you live, though, plays the largest role in how much you'll pay for a Supplement plan - as does whether you sign up during your Medigap Open Enrollment Period. This is because your application won't go through medical underwriting, which means you can't be denied a policy or charged more - even if you have pre-existing medical conditions. We cover this in full here.
Plan G, along with Plan K and Plan N, are also popular alternatives to Plan F. These plans offer slightly less coverage and are therefore cheaper. However, they still cover many of the big categories that end up costing Medicare beneficiaries a lot of money in the long run.
Of course, it’s still useful to take a look at some other plans and see how much they cost in your area. While some plans like Plan A and Plan B aren’t quite as popular, they may be a perfect fit for you.
Changes to Medigap Policy in 2020
Medigap policy changed in 2020, and although there are a variety of changes being rolled out, a few of these are most central and likely to impact you. The most important change is that as of January 1, 2020, Medigap plans cannot cover the Part B deductible for new beneficiaries.
It’s important to note that this new rule is effective based on the date that you became eligible for Medicare, not the date that you actually enrolled in Medicare, or got a Medigap plan. If you were eligible for Medicare before January 1, 2020, then you will still be able to purchase Medigap plans that cover the Part B deductible, like Plan F.
However, those who became eligible in 2020 or later are not eligible for these plans. For this reason, it is expected that Plan G will rise in popularity, as it is the plan that is most similar to Plan F. Plan G is just like Plan F but does not cover the Part B deductible. In 2023, that amounts to $226 per year.
Medigap and Medicare Advantage?
If you have a Medicare Advantage or Medicare Part C plan, you will not be able to enroll in a Medicare Supplement plan as well. To get a Medigap plan, you must be enrolled in Original Medicare. Medicare Advantage plans set their own deductibles, coinsurance, and copayments, so it makes sense that Medigap plans do not apply to them.
Medigap and Part D Plans
Similar to Medicare Advantage, Medigap plans won't be able to help cover fees associated with your Part D prescription drug coverage. Because Part D plans are offered by private insurance companies and vary in coverage and pricing, Medigap plans aren't standardized to cover out-of-pocket costs associated with these Medicare prescription drug plans.
What to Remember Before You Buy a Medigap Plan
Medigap plans offer you many options for additional Medicare coverage to supplement your primary health insurance. Because plan prices vary a lot, make sure to get quotes from various insurance companies and see if any discounts are offered for your situation. Most importantly, before you choose your plan, make sure to do a thorough cost analysis to determine what you need covered most, and which plan fits the best with your financial and medical needs.
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