How to Compare Medicare Supplement Plans

Medicare is not free. Many people qualify for premium-free Medicare Part A, but Medicare Part B requires a monthly premium. On top of that, there are deductibles, copays and other expenses that can add up to major out of pocket expenses. To keep these costs down, some people buy a Medicare Supplement Insurance policy, also called Medigap.
Medigap policies do not replace Medicare. Instead, they supplement coverage and cover some of the out-of-pocket costs that Medicare enrollees normally have. Although you have to pay a premium for Medigap, buying a Medigap policy can make your healthcare costs more predictable and shield you from massive out-of-pocket costs.
There are multiple Medigap policies, offered by multiple private insurers. The good news is that these plans are standardized, and this makes them easy to compare.
Standardized Medigap plans are identified by the letters A, B, C, D, F, G, K, L, M and N. Most states use the same system of standardization, but policies in Massachusetts, Minnesota and Wisconsin are standardized in a different way.

Key Terms to Know

Before you start comparing Medigap policies, it’s helpful to know the lingo. Here are some terms that you should know as you compare Medicare Supplement plans.

• Coinsurance: Coinsurance is the amount you may be required to pay of pocket as your share of the cost of services. Coinsurance is a percentage of the cost.
• Copayment: The copayment or copay is the amount you may be required to pay out of pocket as your share of the cost of services or supplies. The copay is a set dollar amount.
• Deductible: The deductible is the amount you have to pay out of pocket before the insurer starts paying its share. Although some Medigap policies cover Part B deductibles, a new rule prevents newly eligible Medicare enrollees from purchasing these plans. Anyone who ages into Medicare on or after January 1, 2020, cannot purchase a plan that covers the Part B deductible. These are plans Medigap Plans C and F.
• Excess Charges: Medicare establishes an approved cost for services. If a doctor charges more than this amount, the difference is called an excess charge. Excess charges can occur when you see a doctor who doesn’t accept Medicare assignment, and you can be responsible for additional cost.
• Medicare Part A: Medicare Part A is hospital insurance. It helps cover inpatient hospital stays, care in a skilled nursing facility, hospice care and some home health care.
• Medicare Part B: Medicare Part B is medical insurance. It helps cover services from doctors and other providers, outpatient care, preventative services and medical supplies.
• Medicare Part C: Medicare Part C is often called Medicare Advantage. It is a private alternative that combines the coverage of Medicare Part A and Medicare Part B, often with Medicare Part D Prescription Drug coverage and other benefits as well.
• Medicare Part D: Medicare Part D provides prescription drug coverage. Medicare Part D plans are provided by private insurance companies. Medigap policies do not provide coverage for prescription drugs.
• Original Medicare: Also called traditional Medicare, the term Original Medicare is used to refer to Medicare Part A and Medicare Part B. It is often used to contrast Medicare Advantage.

A Look at the Plans

When you compare Medicare Supplement plans, it’s helpful to consider which benefits they do or do not provide, as well as the coverage amounts. Then you need to decide which benefits are most important to you.
All off the standardized Medigap policies here (Plans A, B, C, D, F, G, K, L, M, and N) provide 100 percent coverage for Medicare Part A coinsurance and hospital costs for up to an additional 365 days after Original Medicare benefits are used.
The rest of the benefits vary. This chart covers the differences.

1. Plan N covers 100% of most Part B coinsurance or copay costs, but there is a $20 copay for some office visits and a $50 copay for emergency room visits that don’t result in inpatient admission.
2. When provided, foreign travel emergency coverage will provide 80 percent coverage up to the plan limits. See the policy for details on the limits.
3. In 2020, the out-of-pocket limit for Plan K is $5,880, and the out-of-pocket limit for Plan L is $2,940.

There may be some variation to the plan benefits listed above, and states may have additional rules that impact coverage. Review the policy details before signing up for a plan.

Questions to Ask

Before settling on a Medigap plan, ask yourself a few questions to determine your needs.

• Are you traveling out of the country? Original Medicare typically doesn’t provide coverage outside of the United States. If you expect to travel to a foreign country during retirement, you should consider purchasing a Medigap plan that covers foreign travel emergencies. These are Plans C, D, F, G, M and N.
• How do you want to limit out of pocket costs? Original Medicare does not cap out-of-pocket expenses, so you may end up paying a lot without additional coverage. Plans K and L provide 50 or 75 percent coverage of many out-of-pocket costs with an out-of-pocket cap, so your costs are reduced and then capped. The other Medigap policies don’t have an out-of-pocket cap because they offer 100 percent coverage of many out-of-pocket costs.
• Did you age into Medicare on or after January 1, 2020? If so, you are not eligible for Plans C and F, which cover the Medicare Part B deductible.

More Important Facts to Know

Medigap plans help with a lot of expenses, but they don’t cover everything. Don’t expect your Medigap policy to cover extra services like long-term care, hearing aids, dental care or eyeglasses. Some Medicare Advantage plans cover these services. Medicare Advantage, also called Medicare Part C, is a private alternative to Original Medicare. Medigap plans do not work with Medicare Advantage plans, however, and you cannot purchase a Medigap plan if you are enrolled in a Medicare Advantage plan.

The best time to buy a Medigap plan is during your Medigap Open Enrollment Period. This period lasts for six months, and it starts when you are 65 and enroll in Medicare Part B for the first time. During the Medigap Open Enrollment Period, insurers cannot deny coverage or charge higher rates based on your current or previous health conditions. Once this period is over, however, insurers are free to use medical underwriting to deny applications or calculate rates. Because of this, you may not be able to get – or afford – coverage after your Medigap Open Enrollment Period.

Your Medigap policy will provide individual coverage for you. It will not cover your spouse or other family members. If your spouse wants the same policy, he or she can enroll separately. However, if your health needs are different, a different plan option may be more suitable.
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