Q: What are Medigap plans and how do they work?
A: Medigap plans are Medicare supplement insurance plans, and are sold by private insurance companies that agree to abide by federal Medicare guidelines. A Medicare enrollee cannot purchase a Medigap policy unless he or she also has Medicare Part A and Part B, and Medigap policies only cover one person — there are no joint policies, so a married couple will need two policies, one for each spouse. Medigap plans cannot be used in conjunction with Medicare Advantage.
Although Medigap plans are issued by private insurance carriers, the policies are standardized. As of 2018, in most states, there are up to ten different Medigap plans: A, B, C, D, F, G, K, L, M, and N (not all plans are available in all areas). These plans are standardized, so a Plan F in Colorado provides the same coverage as a Plan F in California — although the insurers that offer the plans will be different, and the pricing will be different.
However, there are three states where Medigap plans are standardized differently:
Paying for your coverage
If you have Original Medicare (ie, Medicare A and B) along with a Medigap plan, you’ll pay two premiums: one for Medicare Part B, and another for the Medigap plan (assuming you have premium-free Medicare A). Medicare B premiums are deducted from your Social Security check, but Medigap premiums are paid directly to the private insurance carrier that provides the plan. Neither Medigap nor Original Medicare will cover outpatient prescription drugs, so enrollees can also purchase Part D prescription drug coverage, which would be another separate policy with a separate monthly premium.
What does Medigap cover?
The purpose of a Medigap plan is to cover all or part of the charges that an Original Medicare (Medicare A and B) beneficiary would otherwise have to pay out-of-pocket. For the most part, Medigap plans are designed to cover out-of-pocket costs for services that are covered by Medicare, as opposed to care that Medicare doesn’t cover and that the enrollee has to pay entirely out-of-pocket. So Medigap plans do not cover dental and vision charges, for example, as Original Medicare does not cover dental and vision.
Medicare A and B both have deductibles and coinsurance. After the deductible, Medicare Part B typically pays 80 percent, leaving the patient to pay the other 20 percent, with no cap on the out-of-pocket charges. Medicare Part A also has a deductible for each benefit period, and then coinsurance that starts to accrue after 60 days in the hospital. As with Part B, there is no cap on how much an enrollee can spend in out-of-pocket costs under Part A. Medigap plans protect Medicare beneficiaries from those deductibles and coinsurance charges – that is, they bridge the “gap” in Medicare.
Plans C, D, F, G, K, L, M, and N pay for at least of a portion of skilled nursing facility care; Plans C, D, F, G, M, and N pay for emergency medical care when the enrollee is traveling in a foreign country. Also, Plans F and G can pay for excess doctor fees you may be charged under Medicare Part B. And all Medigap plans include hospice benefits.
Plans C and F also cover the Medicare Part B deductible, which is $183 in 2018. Medigap plans that cover the Part B deductible will no longer be available to newly-eligible enrollees after the end of 2019, under the terms of 2015’s Medicare Access and CHIP Reauthorization Act (MACRA). The idea is to ensure that Medicare enrollees have some “skin in the game” and have to pay at least a portion of their own costs if and when they need outpatient care, as opposed to having supplemental coverage that provides first-dollar coverage. People who already have first-dollar Medigap coverage will be able to keep it after 2019, but new enrollees will not be able to purchase it.
Plan F is the most comprehensive and is quite popular with Medigap enrollees, but it also tends to be the most expensive of the Medigap plans (carriers set their own prices, so although the benefits are standardized, the prices can vary from one carrier to another).