What Is Medigap?

Ready to learn how Medigap works?

Medigap plans (also known as Medicare Supplements) are one of the two main coverage options when it comes to choosing which coverage options best fit your unique needs while on Medicare. It is crucial that before we describe what Medigap plans are, we specify that these plans are NOT Medicare Advantage plans. You can learn more about Medicare Advantage plans Here.

The Centers for Medicare & Medicaid Services (CMS) defines Medigap plans as “health insurance sold by private insurance companies to fill the gaps in Original Medicare.” When you choose to enroll in a Medigap plan, your primary coverage is still Original Medicare (Parts A and B), and your Medigap plan becomes your secondary coverage. It is crucial to remember this when it comes to an understanding of how Medigap plans work.

Throughout this whole process of learning more about Medigap coverage, remember that because Medicare remains your primary coverage, they are “the boss.” What we mean by this is that your Medigap insurance does not dictate where, when, or how you seek medical treatment. Instead, you have the freedom and flexibility to receive Medicare-approved care at any provider or facility around the country that accepts Original Medicare.

So long as a facility or provider accepts Original Medicare, they have to take your Medigap plan, regardless of the private insurance company that provides your coverage. Instead of asking, “do you take XYZ insurance company?” you can ask, “do you accept Original Medicare?”.

Generally speaking, Original Medicare covers 80% of the cost of medical procedures, and you are responsible for the remaining 20% (Here, you can learn more about the out of pocket costs of Original Medicare). The Medigap plan you choose will help cover the remaining 20% of medical expenses, depending on the type of plan (below) that you select.

Lastly, Original Medicare does not provide prescription drug coverage; therefore, Medigap will not cover prescription drug costs either. Individuals that choose to enroll in a Medigap plan will also want to enroll in a stand-alone prescription drug coverage known as “Part D.” Private insurance companies provide Part D coverage (not the federal government). We can help you find the unique Part D coverage to compliment your Medigap coverage.

Costs of Medigap Plans

Just like with all health insurance, the cost of Medigap coverage needs to placed into two categories:

1. Fixed Monthly Costs
2. Variable Out of Pocket Costs

Medigap coverage generally has higher fixed monthly premiums (compared to Medicare Advantage plans), but lower variable out of pocket costs should you need medical care. Both monthly premiums and out of pocket costs for Medigap plans depend on which standardized Medigap plan you select. In this example, you can see the estimated monthly premiums and yearly out of pocket medical costs for a 65-year-old (in Metro Detroit) that chooses a Medigap Plan G as their coverage option.

Here is another example of the monthly premiums and out of pocket costs with Medigap Plan N.

Remember, Part D prescription drug coverage costs should also be added to the overall cost of Medigap coverage as you will likely want to purchase Part D coverage as well. 

Types of Medigap Plans

The Centers for Medicare and Medicaid Services (CMS) states that “Insurance companies can only sell you a “standardized” Medigap (Medicare Supplements) policy. Medigap policies must follow Federal and state laws. These laws protect you. The standardized Medigap policies that insurance companies offer must provide the same benefits. Generally, the only difference between Medigap policies sold by different insurance companies is the cost.”

Because Medigap plans are standardized, you will often hear Medigap (Medicare Supplements) plans referred to by a specific letter (ex. Plan F, Plan G, Plan N, etc.). There is no difference in base benefits for Plan G from company X compared to Plan G from company Y.

Here is a chart from the official “Medicare & You Handbook” showing the benefits of the ten standardized Medigap (Medicare Supplements) plans currently offered to consumers: