Medigap Explained in 2021

Medigap, or Medicare Supplemental Insurance, is a plan that can be purchased in addition to Medicare Parts A and B. These plans help cover out of pocket costs and are less restrictive than Medicare Advantage plans. 

Benefits of Medigap

Medigap is supplemental insurance that complements traditional Medicare Parts A and B. Unfortunately, traditional Medicare doesn’t cover all costs related to care. You will still be responsible for things like deductibles, coinsurance, and copayments. Other benefits include things like coverage when traveling outside of the U.S. 

Downsides to Medigap

Medigap is great for some people, but still not as comprehensive as Medicare Advantage. For example, vision, dental, long-term care and hearing aids will not be covered under Medigap. Prescription drug plans must also be purchased separately if you’d like drug coverage. In contract to Medicare Advantage, almost all of these things are commonly included. You cannot have both a Medigap plan and a Medicare Advantage plan at the same time.

Medigap Basics

To start, these plans are standardized across all insurance companies and have letters assigned to them. An AARP Medigap Part G plan is going to offer the same basic benefits as an Aetna Medigap Part G plan. The difference with insurance companies is going to be the level of customer service received. Below is a table that highlights the difference between Medigap plans A through N from Medicare’s website.

Every insurance company decides which Medigap policy that it wants to sell, with a few restrictions. Each company doesn’t have to offer every plan, but must offer Plans A, C and F if they offer any plans at all. 

The below table answers the question: Is it covered? Any percentages show how much is covered

Part A coinsurance and Hospital costs YesYesYesYesYesYesYesYesYesYes
Part B coinsurance or copaymentYesYesYesYesYesYes50%75%YesYes
Part A Hospice Care Coinsurance or CopaymentYesYesYesYesYesYes50%75%YesYes
Skilled Nursing Facility Care CoinsuranceNoNoYesYesYesYes50%75%YesYes
Part A deductibleNoYesYesYesYesYes50%75%50%Yes
Part B DeductibleNoNoYesNoYesNoNoNoNoNo
Part B ExcessChargeNoNoNoNoYesYesNoNoNoNo
Foreign travel exchangeNoNo80%80%80%80%NoNo80%80%
Out-of-pocket MaximumNoNoNoNoNoNo$6,220$3,110NoNo

Requirements and ground rules for Medigap

Just like Medicare Advantage, you are required to have Medicare Parts A and B to purchase a Medigap plan. Once purchased, the monthly premium paid to the sponsoring insurance company is IN ADDITION TO your normal Part B monthly premium. These policies only cover yourself, so you and your spouse will have to purchase them separately. I must also note that if you want drug coverage, you will need to purchase a different Part D plan that comes with its own premium. With Medigap, you could pay three premiums: your monthly part B premium, your Medigap premium, and your Part D drug premium.

Medigap Plan F is the most common plan because it provides the most comprehensive coverage.

Medigap is confusing

Yes, all of this is very confusing and has way too many options. However, armed with the right knowledge, these plans can save you a lot of money and be a great fit for your personal needs. So who can benefit from them? I think of someone who utilizes health coverage frequently, but would not want to take advantage of the benefits of Medicare Advantage. 

Medicare Supplemental Insurance is great for people who often utilize their Part A and Part B benefits of Medicare, but just want some additional coverage for the out of pocket costs. Folks with chronic conditions, frequent or expected hospitalizations, or several trips to the doctor all could benefit from these plans.

It is important to note that these plans are not restrictive like Medicare Advantage. When I say restrictive, I am referring to the choice of provider. With Medigap plans, there are no “preferred” providers, gatekeepers, or other restrictions on who and when you can see for your healthcare. 

Nomads and travelers

Unlike Medicare Advantage, which restricts you to a select network of doctors, Medigap has no restrictions. Here is a great example of how this can benefit someone with Medigap. 

Each winter, Norma flies down to Myrtle Beach from Pennsylvania to get away from the cold. Norma rents a condo for 3 months, then stays with family in Texas for two weeks during Christmas. During her trip, she gets sick with a stomach infection and goes to the ER. After she gets sent home, she has to follow-up with a gastroenterologist.

With a Medicare Advantage plan, Norma’s doctors at the beach would be considered out-of-network and cost her significant money out of pocket. With a Medigap plan, it would be the same cost to her as if she had stayed in Pennsylvania. The Medigap plan would help cover the normal deductibles, copayments, and coinsurance associated with her ER visit and gastroenterologist appointment.

Where should I get a Medigap Plan?

It is important to keep in mind that each Medigap Plan has the same exact benefits regardless of which insurance company offers it. The main differentiator is the reputation of the insurance company and the quality of customer service. Before selecting a plan, try calling the general customer service line for each health insurance company. Make note of who answers, how quickly you get through to an actual human, and how responsive and polite that person is. This may seem trivial, but when you have a health expense that you don’t understand this will be supremely important.

The bottom line

Medigap does not have the coverage and benefits that Medicare Advantage has. For the right people, Medigap can be a great supplement to Medicare. If you are a traveler or spend time living in two locations, Medigap is the most cost-efficient way to receive care. If I had to go with a Medigap plan, I would pick Plan F from a health insurance company I trust to have good customer service.





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