Medicare Supplement Plans

A Medicare supplement (Medigap) insurance, sold by private companies, can help pay some of the health care costs that Original Medicare doesn't cover, like co-payments and co-insurance.

Some Medigap policies also offer coverage for services that Original Medicare doesn't cover, like medical care when you travel outside the U.S. If you have Original Medicare and you buy a Medigap policy, Medicare will pay its share of the Medicare-approved amount for covered health care costs. Then your Medigap policy pays its share.

A Medigap policy is different from a Medicare Advantage Plan (Medicare Part C Plan). Those plans are ways to get Medicare benefits, while a Medigap policy only supplements your Original Medicare benefits.

8 things to know about Medigap policies

• You must have Medicare Part A and Part B.

• If you have a Medicare Advantage Plan, you can apply for a Medigap policy, but make sure you can leave the Medicare Advantage Plan before your Medigap policy begins.

• You pay the private insurance company a monthly premium for your Medigap policy in addition to the monthly Part B premium that you pay to Medicare.

• A Medigap policy only covers one person. If you and your spouse both want Medigap coverage, you'll each have to buy separate policies.

• You can buy a Medigap policy from any insurance company that's licensed in your state to sell one.

• Any standardized Medigap policy is guaranteed renewable even if you have health problems. This means the insurance company can't cancel your Medigap policy as long as you pay the premium.

• Some Medigap policies sold in the past cover prescription drugs, but Medigap policies sold after January 1, 2006, aren't allowed to include prescription drug coverage. Legally you must enroll in a stand-alone Drug Plan or face life-long financial penalties.

• It's illegal for anyone to sell you a Medigap policy if you have a Medicare Medical Savings Account (MSA) Plan.

Medigap policies don't cover everything

Medigap policies generally don't cover long-term care, vision, eyeglasses, dental care, hearing aids, or private-duty nursing. It doesn’t cover short-term nursing care (unless it is skilled nursing and lasts less than 21 days under Medicare Part A). The typical cost for non-covered nursing care is $7,000 to $11,000 per month.

Medigap Policies are many but fall into Ten Defined Plans

Medicare defines each of the Medicare Supplement Insurance Plans and certifies them annually for compliance with their rules. Within each Lettered Plan (Plans A through N) the benefits are to be identical between companies. Companies also have to get each state in the union to give them approval annually before offering them to residents of the state. The only difference is the cost and the customer service experience.

Plans C and F are only available now if one turned 65 before 2020.

Pricing Medigap Coverage

Each insurance company decides how it will set the price, or premium, for its Medigap policies. It’s important to ask how an insurance company prices its policies. The way they set the price affects how much you pay now and in the future.

Medigap policies can be priced or "rated" in 3 ways:

• Community rated: One premium regardless of age. However, Insurance Companies may give discounts to younger clients.

• Entry age-rated: Price annually changes but is tied to the rate for the age first entered into the insurance.

• Age-rated Each year price goes up linked to the age that year.

Note: The cost of Medigap policies can vary widely. There can be big differences in the premiums that different insurance companies charge for the same coverage. Changing Medigap insurers raise the risk of other companies declining to sell you coverage depending on your health status. (insurance rating) After age 65, there is no guaranteed issue. One has only guaranteed renewal annually. (There is an exception called the Oregon Birthday Rule. It mandates guaranteed issue of any Medicare Supplement during one's birthday month when moving from one Supplement to another company's same Plan Letter.

As you shop for a Medigap policy, be sure to compare the same type of Medigap policy and consider the type of pricing used. For example, compare a Medigap Plan G from one insurance company with a Medigap Plan G from another insurance company. (Apples to apples)

Only upon turning age 65 does Medicare force insurers to sell their policies with guaranteed issue and no rate increase for current health status other than tobacco use. After that, companies can refuse patients based on their health or offer a policy at a higher price (medical underwriting).

The cost of your Medigap policy may also depend on whether the insurance company:

• Offers discounts (like discounts for women, non-smokers, or people who are married; discounts for paying yearly; discounts for paying your premiums using electronic funds transfer; or discounts for multiple policies).

• Uses medical underwriting or applies a different premium when you don’t have a guaranteed issue right (also called “Medigap protections”), or are not in a Medigap Open Enrollment Period.

• Sells Medicare SELECT policies that may require you to use certain providers. If you buy this type of Medigap policy, your premium may be less.

Go to www.medicare.gov/find-a-plan/questions/medigap-home.aspx to enter your zip code. You will get a Policy summary of monthly premiums and estimated annual cost.

Recommendations

• It isn't brilliant to just be insured with Medicare Part A, B, and D because of financial exposure. The major options are with choosing a Medicare Supplement or going with Medicare Part C, Medicare Advantage.

• Going with a supplement gives the individual the most freedom of choice geographically to seek care and what physicians they want to see when. But it has its price. Supplements are expensive and typically cost more each year.

• If one lives 6-months in Oregon and 6-months in the desert or lives out of a Recreational Vehicle touring the country, a Medicare Supplement is the obvious choice.

• 90% of people choosing a supplement choose Plan G as it covers the cost of everything that Medicare covers a part of except the annual Part B Deductible. But Plan N or Plan B is less expensive, although it exposes some uncovered risks.

• Some Insurance Companies raise rates higher and faster than others but start at age 65 as the lowest price. Once people have a plan, they tend not to review it annually to see if they should change carriers.

• It is usually more cost-effective to go with Part C Medicare Advantage with an integrated Part D coverage if money is of concern.

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