People with Original Medicare (Parts A and B) are subject to coverage gaps that can be very expensive during a bad health year.
For example, enrollees pay a $1,484 deductible when admitted to the hospital in any given coverage period. Those with Part B medical insurance also pay a $203 deductible, after which time they must pay 20 percent of the cost of all Part B covered services during the rest of the year.
Importantly, there is no cap on an enrollee's Part B out of pocket costs.
Medicare supplement insurance plans are private, state-regulated insurance policies that help fill in some of these coverage gaps. For that reason, this insurance is sometimes called "Medigap".
This kind of insurance is given a letter name A through N. The benefits are standardized, meaning a Plan A or Plan G has the same coverage and same coverage rules no matter which company offers the policy.
Medicare supplement insurance only covers the things that the Original Medicare plan covers.
Routine dental care and most prescription drugs, for example, are not covered by Original Medicare, and so a person's Medigap plan also will not cover those things. This is also true for most prescription drugs.
If you want coverage for those things, you will either need to buy one additional insurance policy (sometimes more than one) or join a Medicare Advantage plan that covers more than Original Medicare.
An estimated 13.5 million Americans have a Medicare supplement plan. Monthly premiums vary widely depending on the enrollee’s age, gender, plan letter and zip code.
Medigap enrollees typically pay more than $100 per month for their policy. Many enrollees also have a standalone Part D drug plan costing (on average) an additional $33 per month.
In most states, Medicare supplement insurance plans are allowed to deny enrollment to people with pre-existing health conditions if that person wishes to enroll after their initial "New to Medicare" enrollment period.
Some states have special "guaranteed issue" rights where someone having an otherwise disqualifying pre-existing health condition is permitted to change their Medigap policy without medical underwriting; for example, to obtain a lower plan premium or different benefits.
These states include California, Connecticut, Maine, Missouri, New York, Oregon and Washington.
Medigap Plan F and Plan G are the most popular supplement plans because they provide the most generous coverage to their enrollees.
Starting in 2020, anyone new to the Medicare program is by law not allowed to enroll in a Medigap Plan F but if you already one, you're allowed to keep it.
Most industry experts think Plan F premiums will increase rapidly as younger, healthier people are not permitted to join. As a result, many Plan F enrollees have switched to Plan G, an option with almost the same amount of coverage that's available to anyone with Medicare.
Every Medigap insurance company is required to offer Plan A. Not to be confused with Medicare Part A, a Plan A supplement policy pays a portion of the enrollee's hospital and medical out of pocket costs.
Plan A does not cover Original Medicare's hospital or medical deductibles, making it unappealing to most seniors.