Optimize your asset allocation for retirement.
Understanding Medicare Supplement Plans
Medicare Supplement Insurance—often called Medigap—is private health insurance designed to help fill the “gaps” in Original Medicare (Parts A and B). These gaps include deductibles, copayments, and coinsurance that can add up quickly. A Medigap plan works alongside Original Medicare, paying costs that Medicare does not fully cover.
Key Features of Medicare Supplement Plans
• Standardized Benefits: All Medigap plans are standardized by the federal government. This means that Plan G from one company offers the same core benefits as Plan G from another; the difference is in price, customer service, and added features.
• Nationwide Acceptance: If a provider accepts Medicare, they will also accept your Medigap plan.
• No Network Restrictions: Unlike many Medicare Advantage plans, Medigap allows you to see any doctor or hospital that accepts Medicare.
• Guaranteed Renewable: As long as you pay your premium, your plan cannot be canceled due to health changes.
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The Different Medigap Plans
There are currently 10 standardized Medigap plans available in most states, identified by letters A, B, C, D, F, G, K, L, M, and N. Each plan covers a different portion of Medicare’s cost-sharing requirements.
Most Popular Plans
• Plan G:
Covers all gaps in Medicare except the Part B deductible. It is currently the most comprehensive plan available to new Medicare beneficiaries and is widely chosen for its predictable out-of-pocket costs.
• Plan N:
Offers lower premiums than Plan G, but you pay small copayments for some office visits and emergency room visits, and it does not cover the Part B excess charges in certain states.
• Plan F:
Covers 100% of all Medicare gaps, including the Part B deductible. However, it is only available to individuals who became eligible for Medicare before January 1, 2020.
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Other Plans at a Glance
• Plan A: The most basic option, covering only core benefits like Part A coinsurance and hospital costs.
• Plan B: Adds coverage for the Part A deductible to Plan A’s benefits.
• Plan C: Similar to Plan F but without coverage for Part B excess charges; also only available to those eligible before January 1, 2020.
• Plan D: Covers many of the same benefits as Plan C but does not include the Part B deductible or excess charges.
• Plan K & Plan L: Offer lower premiums but require higher cost-sharing; they cover a percentage (50% for K, 75% for L) of most benefits.
• Plan M: Covers 50% of the Part A deductible and offers moderate premium savings.
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Choosing the Right Plan
When evaluating a Medigap plan, consider:
• Your Health Needs: Frequency of doctor visits, hospital stays, and specialty care.
• Budget: Balancing premium cost with potential out-of-pocket expenses.
• Travel: Medigap plans may include limited foreign travel emergency coverage, which is valuable for those traveling abroad.
• Enrollment Timing: The best time to enroll is during your Medigap Open Enrollment Period—six months starting the month you are 65 or older and enrolled in Medicare Part B. During this time, you have guaranteed issue rights, meaning you can enroll without medical underwriting.
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Medicare Supplement plans can offer peace of mind by limiting unexpected medical costs and providing flexibility in choosing healthcare providers. While the benefits are standardized, premiums and service can vary widely between insurers, making it essential to compare options carefully.
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Medicare generally provides health insurance for most people age 65 and older, and others who have received Social Security disability benefits for at least 24 months, have end-stage renal disease or have amyotrophic lateral sclerosis (also known as Lou Gehrig’s disease). Medicare is similar to Social Security, since it is a federal program that you have paid into throughout your career. Just like Social Security, you want to maximize this benefit in retirement.
Medicare is split into four parts:
- Part 1: Hospital insurance – covers the costs of health care at medical facilities. Offers coverage for medically necessary inpatient care at hospitals, skilled nursing facilities, hospices and some home health services.
- Part 2: Medical insurance – covers the costs of health care outside medical facilities. Offers coverage for doctors’ services, hospital outpatient care, mental health and some preventative health care services.
- Part 3: Medicare Advantage (MA) plans – policies you can purchase from certain private insurance carriers that provide the same (or more) coverage as Parts A and B.
- Part 4: Prescription drug coverage offered through private Medicare-approved insurance companies.
Many people with Part 1 do not pay a premium because they have already paid enough into the system. As with Social Security, a certain portion from each one of your paychecks is deducted to pay for Medicare. When you’ve had Medicare tax withheld from you or your spouse’s pay for at least 40 calendar quarters, then you may be eligible for free Part 1 coverage.
The monthly premium associated with Part 2 is set according to income level, although most people will pay a standard monthly premium amount and a small yearly deductible. Individuals and couples who have an annual income greater than their corresponding thresholds will have an extra charge added to their premium due to their high income level. Parts 3 and 4 are provided via private insurance companies so the monthly premiums of these policies depend on the extent of their coverage and can vary between companies.
Bottom Line
While there is no shortage of things to prepare for in retirement, it’s critical to also address your health needs and concerns by crafting a comprehensive health care strategy. There are various ways to accomplish this, with Medicare being the most important for many Americans.
Disclosure: We are not affiliated with, or endorsed by, the Social Security Administration or any other government agency. We do not offer every plan available in your area. Please contact Medicare.gov, 1-800-MEDICARE, or your local State Health Insurance Program (SHIP) to get information on all of your options.