Everything You Need to Know About Medicare Supplement Plans

Medicare Supplement plans are a popular choice among Medicare beneficiaries who wish to fill in the gaps of Original Medicare. Original Medicare (Parts A and B) offers excellent health coverage. However, it leaves beneficiaries with quite a few out-of-pocket costs. A Medicare Supplement plan will fill those gaps by picking up some or all of the leftover costs.

What Do Medicare Supplements Cover?

Medicare Supplements are also referred to as Medigap plans. Beneficiaries who enroll in a Medigap plan will have two health insurance plans - one through the federal Medicare program and one through the private insurance company that holds the Medigap plan. 

As long as Medicare approves the service, it will be covered by your Medigap plan. Let’s review the out-of-pocket costs associated with Parts A and B.

We’ll start with Part A, also known as hospital or inpatient insurance. If you are ever admitted as an inpatient to either a hospital or skilled nursing facility, you’ll first need to pay the Part A deductible. In 2023, that deductible is $1,600. An important thing to note about this deductible is that it applies to every benefit period, not just once per year. A benefit period starts on the first day of admission and ends when you’ve been out of the hospital for 60 consecutive days. So, yes, you could pay the Part A deductible more than once a year.

After that, you’ll pay a coinsurance amount based on how many days you’ve been hospitalized. Medicare covers the first 60 days. Then, from day 61 to day 90, you’ll be expected to pay $400 per day. Starting on day 91, you’ll need to use some or all of your 60 lifetime reserve days. The coinsurance cost for a reserve day is $800. Once those are depleted, you’ll be responsible for the entire daily cost.

The costs associated with Part B are a little easier to understand. Like Part A, it has a deductible, but it only has to be paid once annually. Currently, the Part B deductible is $226. Once it’s been met, Medicare pays for approximately 80% of approved services. Part B includes many preventive services, screenings, and vaccines that are covered at no cost.

If you’ve been adding up those costs, they probably seem worrisome. What’s even more concerning is the fact that there is no out-of-pocket maximum for Parts A and B. The sky is the limit on your coinsurance costs. Not to worry, that’s where Medicare Supplements come in handy.

Medicare Supplement Options

You’ve got a few options when it comes to Medicare Supplement plans. There are about ten different Medigap plans - each named by a letter of the alphabet. They include Plans A, B, C, D, F, G, K, L, M, and N, plus a high-deductible version of Plans F and G. Your coverage will depend on which of the plans you choose. We’ll review the three most popular choices today.

Plan F

Plan F picks up every out-of-pocket cost that remains after Medicare pays. It pays for:

• Part A deductible
• Part A coinsurance plus an additional 365 days of hospital costs
• Part B coinsurance/copayment
• Blood (first 3 pints)
• Part A hospice coinsurance/copayment
• Skilled nursing facility care coinsurance
• Part B deductible
• Part B excess charge
• 80% of foreign travel emergencies

There are two disadvantages to Plan F. First, you must have turned 65 before the year 2020 to be eligible to enroll. Second, the premiums are higher than any other Medigap plan and continue to increase more every year. The higher premium often does not make up for the extensive benefits.

Plan G

Plan G is nearly identical to Plan F, with one exception. It pays for:

• Part A deductible
• Part A coinsurance plus an additional 365 days of hospital costs
• Part B coinsurance/copayment
• Blood (first 3 pints)
• Part A hospice coinsurance/copayment
• Skilled nursing facility care coinsurance
• Part B excess charge
• 80% of foreign travel emergencies

Notice the difference? The only difference between Plan F and Plan G is that Plan G doesn’t pay for the Part B deductible. Unlike Plan F, there are no age limitations to enrollment.

Plan N

Plan N is another popular option among beneficiaries, and it actually boasts the fastest-growing pool of enrollees. It pays for:

• Part A deductible
• Part A coinsurance plus an additional 365 days of hospital costs
• Part B coinsurance/copayment
• Blood (first 3 pints)
• Part A hospice coinsurance/copayment
• Skilled nursing facility care coinsurance
• 80% of foreign travel emergencies

Like Plan G, Plan N does not pay the Part B deductible. It also does not include payment for Part B excess charges. An excess charge is an amount over and above the Medicare-approved cost for services. Providers who do not accept Medicare assignment may add an excess charge of up to an additional 15% of the services. Plan N won’t pay those excess charges, but in reality, they are rare as most providers do accept Medicare. In addition, Plan N requires beneficiaries to pay copayments for doctor’s visits and emergency room visits.

Another thing you need to know about Medigap plans is that they are standardized. That means that no matter which insurance company sells the plan, the benefits are the same. Plan G with Company A has the same benefits as Plan G with Company B. Coverage doesn’t change from one year to the next or from one state to the next. 

How Much Do Medicare Supplements Cost?

Medicare Supplements do require beneficiaries to pay a monthly premium. Generally speaking, the more coverage, the higher the premium. For example. Plan G will cost more than Plan N. There are other factors that go into calculating Medigap premiums.

Insurance companies set premiums based on the following:

• Gender: men pay more than women
• Age: older individuals pay more than younger ones
• Location: folks who live in higher cost-of-living zip codes pay more
• Tobacco Use: tobacco users pay more than non-users

Outside of those factors, insurance carriers are allowed to set their own premiums. This is another reason why using a local Medicare agent is so important when looking for a Medicare Supplement. An agent will compare rates between multiple insurance companies to ensure you’re getting the best rate available.