What is Medicare Supplement Insurance, and how does it work?

What is Medicare Supplement Insurance?

Medicare Supplement Insurance is marketed by commercial insurance firms and compensates for medical expenses not covered by Medicare. Better known as Medigap, this insurance covers out-of-pocket expenses such as copays, coinsurance, and deductibles.

KEY TAKEAWAYS

·       Medicare Supplement Insurance, or Medigap, is a form of health insurance policy issued by private insurers to supplement Medicare coverage.

·       It addresses major gaps in Medicare's standard insurance policies.

·       Individuals with Medigap coverage pay monthly premiums straight to the insurance provider.

·       Medigap coverage differs from Medicare Part C, which is commonly known as Medicare Advantage.

How Does Medicare Supplement Insurance Work?

Medicare Supplement Insurance fills the usual gaps in Medicare's baseline coverage. People applying for Medigap coverage must be enrolled in Medicare Parts A and B. Medigap plans augment, not replace, core Medicare coverage.

For people aged 65 and above, the Medigap open enrollment period lasts six months from the first month of Medicare Part B coverage.

Medigap subscribers pay their monthly payments directly to the Medigap provider. These premiums do not replace those paid for Medicare Parts B and D. That is, someone with Medigap will pay one premium for Part B and another for the Medigap coverage provided by the private provider.

There are 10 standardized Medigap plans ranging from Plan A to Plan N. The federal government mandates Medigap providers to standardize coverage in accordance with each plan's standards. This implies that various firms' Medigap plans give equivalent coverage, making it easy to search for the best deal.

All Medigap policies must cover previous conditions after a six-month waiting period. The waiting period does not apply to people who have continuous creditable coverage for six months before to enrolling in a Medigap policy.

Important: Since 2020, Medigap policies cannot cover the yearly Part B deductible. As a result, persons who are not yet eligible for Medicare will be unable to purchase Medigap plans C and F before 2020. Those who had such plans before 2020 may maintain them, and those who were eligible for Medicare before 2020 may be able to purchase them after enrolling.

Special Considerations

Most Medigap policyholders receive Medicare Part B claims data directly from the Medicare program. The private insurance then covers the difference between the service cost and what Medicare pays directly to the healthcare provider. Some insurers provide payments to hospitals using Medicare Part A claim information, although this is less prevalent. Medicare requires Medigap insurers to reimburse providers who accept Medicare directly if the policyholder requests it.

In general, Medigap insurance do not cover dental treatment, eyeglasses, hearing aids, or private-duty nursing. Most Medigap policies, on the other hand, cover emergency medical treatment for the first 60 days of abroad travel, with a 20% coinsurance and a $250 annual deductible.

Some states also regulate Medigap plans. Medigap insurance, which supplement Medicare, are exclusively available from commercial insurers. When looking for supplementary insurance, keep in mind that it is prohibited for commercial insurers to portray Medigap policies as federal programs.

Medicare Supplement Insurance against Medicare Part C

It is easy to mix up Medigap Plan C with Medicare Part C, despite the fact that these two plans are quite different and incompatible.. Medigap, which supplements original Medicare in parts A and B, does not pay out-of-pocket expenses for Medicare Part C plans. Medicare Part C plans, often known as Medicare Advantage plans, replace rather than complement coverage provided by Medicare Parts A and B.

Medigap and Medicare Advantage are similar in that both types of insurance are offered to Medicare beneficiaries by commercial providers under government permission and regulation.

Medicare Advantage plans often feature lower out-of-pocket expenses than standard Medicare coverage under Parts A and B, and they may include additional services including basic hearing, vision, and dental treatment, as well as fitness memberships. The trade-off is that Medicare Advantage plans usually cover treatment largely through network providers and need prior permission for specialty care.

Medicare Advantage premiums, like Medigap premiums, are in addition to the Medicare Part B premium; however, certain Medicare Advantage plans will pay some or all of the Part B premiums for enrollees.

Important: Medigap plans do not cover charges for medical treatments that exceed Medicare restrictions, and the patient is responsible for paying these charges.

Other Medicare Parts:

Part A.

Medicare Part A includes inpatient treatment in hospitals, skilled nursing facilities, and hospices, as well as home health services. However, Part A does not cover all nursing home services, including basic custodial care if that is all the patient requires.

Part A coverage is free for people who have paid into Medicare through payroll taxes for at least ten years, as well as their spouses. Others must pay a monthly premium of $505 for coverage in 2024, which is reduced to $278 for individuals who paid payroll taxes for 30 consecutive quarters (7.5 years).

In 2024, Part A coverage will likewise have a deductible of $1,630 per benefit period, with no limit on the number of benefit periods that the insured may be required to pay a separate deductible during the year. Coinsurance expenses begin after 60 days in the hospital at $408 per additional day, up to a maximum of 90 days in 2024. Medigap policies can help with these out-of-pocket payments.

Part B

Medicare Part B supplements Part A by offering optional coverage for doctor visits, outpatient medical services, ambulance transport, mental health, lab testing, preventative care, durable medical equipment, and home health services. Parts A and B are commonly referred to as original Medicare to distinguish it from privately operated Part C Medicare Advantage programs.

Medicare modifies Part B rates and deductibles on a yearly basis, just as it does Part A. The regular monthly premium for Part B in 2024 is $174.70, with a $240 yearly deductible. Premiums climb incrementally over the norm for around 7% of plan participants with the greatest income. Individuals with more over $103,000 in modified adjusted gross income (MAGI) and joint filers with MAGI more than $206,000 will be subject to premium surcharges beginning in 2024. Part B premium surcharges are dependent on the beneficiary's modified adjusted gross income (MAGI) as reported on their federal tax return two years ago.

Part D

Medicare Part D covers prescription medication benefits.

Coverage costs depend on factors such as:

·       Type of plan

·       The drugs a participant utilizes.

·       The drugstore they choose.

Part D plans are sold by private, Medicare-approved providers. Prescription medication coverage is no longer available to new Medigap plan participants, but those who already have it can maintain it. If you have Medigap prescription benefits and then acquire a Medicare Part D plan, your Medigap insurer must withdraw prescription drug coverage and reduce your premium appropriately. Most Medigap prescription drug coverage policies are not creditable, therefore policyholders are not excluded from Medicare Part D late enrollment penalties.

Medicare adjusts the maximum annual deductible for Medicare D plans each year; it's $545 in 2024.

The average basic monthly premium for regular Medicare Part D coverage in 2024 is $55.50.

When Can I Buy Medigap?

After you've signed up for Medicare Parts A and B, you might consider acquiring Medigap. The open enrollment period for Medigap begins the first month you receive Medicare Part B, as long as you are at least 65 years old. It is critical to acquire Medigap during the open enrollment period; otherwise, it may become unavailable or more expensive later.

What does Medigap cover?

Medigap covers the "gaps" in Medicare Part A and Part B coverage, including copayments, coinsurance, and, in some situations, deductibles. Prescriptions, vision, hearing, dentistry, and long-term care are often not covered by Medigap insurance.

Does Medigap cover pre-existing conditions?

Following a six-month waiting period, Medigap will pay your prior condition expenditures. If you have six months of continuous creditable coverage before purchasing Medigap insurance, the company must cover your prior problems straight immediately. Other scenarios may trigger guaranteed issue rights, which require Medigap providers to supply coverage.

The Bottom Line

Private insurance firms sell Medigap, which helps pay out-of-pocket costs for Medicare enrollees.

Medigap policyholders pay their monthly premiums directly to the insurance company. Medigap coverage differs from Medicare Part C plans, often known as Medicare Advantage.

After you've signed up for Medicare Parts A and B, you might consider acquiring Medigap. If you are at least 65 years old, your Medigap open enrollment period begins the first month you have Medicare Part B. Purchase Medigap during the open enrollment period; otherwise, it may become unavailable or more expensive.