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What Is a Medicare Supplement or Medigap Plan?

Published January 21, 2022

Overview

Once you are eligible for Medicare, it’s time to think about how you will pay for any costs that Medicare does not cover.

Medicare does not cover every cost you may encounter. Medicare covers about 80% of health care costs that are covered by Original Medicare. For the approximately 20% of costs that are not covered, you may need to purchase additional coverage. This does not apply to you if you select Medicare Advantage (Part C). Part C of Medicare wraps up all of the services Medicare would pay for into one package. You do not need a supplement if you are enrolled in Part C. This coverage is called a “Medicare Supplement” or “Medigap” plan, and it is sold by a variety of private insurance companies. It is exactly what it sounds like – it’s a plan that supplements or fills the gaps in benefits that Medicare does not cover. A Medigap plan does not cover prescription drugs, nor is it a Medicare Advantage or Part C plan1.

A Medigap plan is voluntary. You can stay with Original Medicare and pay for any extra costs on your own, such as hospital deductibles and coinsurance. Since you can’t predict what care you might need in the future, seniors who are not in a Part C (Medicare Advantage) plan tend to purchase a Medigap plan (about 2 in 10 beneficiaries do) to protect against these additional costs. When your Part B coverage begins, you have thirty days to choose a Medigap plan without being refused or charged more based on your health status. After that time period, you are generally locked into the plan for life and cannot change to a plan that covers more.

How Much Does a Medigap Plan Cost?

These plans require that you pay a monthly premium to the private insurance company. That premium cost can vary significantly, depending on where you live, which company you use, and a variety of other factors2. You can call our associates for help to figure out which plan is best for you.

Types of Medigap Plans

There are ten types of Medigap plans in most states – they are labeled A, B, C, D, F, G, K, L, M, and N. Plans H, I, and J are no longer available because of the addition of a prescription drug benefit — Part D — to Medicare after a 2003 act became a law. These plans are standardized by the Federal Government because they cover the same benefits3. However, when you look at the chart you will immediately see that some plans have a lot of green checkmarks and others do not.

The more green checks you see, the more the plan covers – and the more expensive the monthly premiums will be. If you have several medical conditions and expect to use a lot of medical care as you age, you have to decide how much you can afford to pay on a monthly basis with your premium. Generally, the higher the monthly premium, the more coverage you receive.

What Are the Most Popular Medigap Plans?

The most popular Medigap plans are F, G, and N. They also tend to be the most expensive4. Plans C and F are no longer available to newly enrolled Medicare members.

Chart of Medicare benefits by plan type

As you look at the chart, think about the costs that most concern you. Putting aside Plans K and L for a moment, you can easily see that most of the plans cover the same benefits. For example, all ten plans cover the Part A hospital deductible and coinsurance, even up to a year after Original Medicare coverage has been used up. The differences tend to be the coverage of Part B deductibles, foreign travel, and excess charges Medicare may not cover. If you feel comfortable covering those charges yourself, don’t plan to do much foreign travel or live in a state that prohibits excess charges, you can select a less expensive plan5.

You will notice that Plans K and L cover only 50% and 75% of the benefits. The monthly premiums for these plans are lower than the other plans. However, these two plans have something no other Medigap plan offers – these plans offer an out-of-pocket limit on the amount you would ever pay in a year. For 2021, the limit is $6220 for Plan K (50%) and $3110 for Plan L. If you choose one of those plans, you will have lower monthly premiums, but pay more for care when you use it – however, you will be more protected if there are unexpected costs Medicare doesn’t cover.

When you decide to enroll in a Medigap plan, be sure you investigate all the alternatives. When you enroll in your initial Medigap plan in a timely way, the insurance company cannot take into account your health status in what they charge you. If you decide you want to change your plan later on, you can only select a plan that has less coverage than what you currently have. You can’t choose a plan with more coverage. Talk to our advisors to help you make the right choice!


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1 https://www.medicare.gov/medigap-supplemental-insurance-plans/#/m?lang=en&year=2021

2 https://www.medicare.gov/supplements-other-insurance/whats-medicare-supplement-insurance-medigap/medigap-costs/costs-of-medigap-policies

3 Massachusetts, Minnesota and Wisconsin have their own set of standardized plans.

4 The G and N plans do not cover the Part B deductible. There are high deductible versions of F and G that may be less expensive. There are also state variations to these plans.

5 Eight states prohibit excess charges: Connecticut, Pennsylvania, Massachusetts, Rhode Island, Minnesota, Vermont, New York and Ohio.

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