What Are Medicare Supplement Plans?

You know when you have leftovers from a fancy restaurant, but it’s not quite enough to fill you up, so you have to grab some chips, an apple, cheese and peanut butter—oh, and three cookies—to really satisfy you?

That’s what a Medicare supplement plan (also called Medicare Supplemental Insurance plans and Medigap) does. Medicare is like the leftovers—enough to count as a meal, but not really enough to fully meet your needs—and Medigap finishes the job.

Understanding Medicare

First, we’ll quickly go over Medicare because if you don’t know what that is, understanding supplement plans will be a little difficult. (If you want more than a quick look, check out our deep dive, What Is Medicare?)

Medicare Basics and Definition

Medicare is health insurance run by the federal government for people 65 and older and those with disabilities. It’s divided into parts called Medicare Parts A, B, C and D. Parts A and B together are known as Original Medicare.

• Part A is hospital insurance.
• Part B is medical insurance (covers things like doctor visits and outpatient services).
• Part C is its own separate thing called Medicare Advantage. It’s offered by private insurance companies and bundles Parts A, B and D together with a few other benefits and restrictions.
• Part D is drug coverage. 

Gaps in Medicare Coverage

Sure, Medicare pays for a lot, but not everything. Like with any health insurance, you pay a premium for Medicare (Part A is free for most people, but you’ll have to pay for Parts B, C and D if you choose to get that coverage).

But besides that, every time you use Medicare, you have to pay deductibles and coinsurance out of your own pocket. And with Original Medicare, you don’t have a yearly out-of-pocket maximum, so you’ll always have to pay a coinsurance (your share of the cost for any service or drug) no matter how much it adds up to over the year. Yikes!

This means if you’re in and out of the hospital a lot with a problem they can’t figure out—as in, they send you to a slew of specialists who order a bunch of tests—you’re paying coinsurance for all of that. No matter how high the total goes.

Each part of Medicare comes with its own yearly deductible. That’s how much you have to pay out of pocket before Medicare starts to kick in at all. In 2024, Part A’s deductible is $1,632, Part B’s is $240 and Part D’s is no more than $545 per year.^1,2 Medicare Advantage (Part C) has a variable deductible since it comes from private insurance companies. Once you hit your deductible, you still have to pay coinsurance—which is the percentage of the cost you’re responsible for (usually 20%).

All that adds up to a pretty penny (and quick).

What Are Medicare Supplement Plans?

For you wellness gurus out there, Medicare supplement plans are not coverage for your CoQ10, Norwegian cod liver oil and B12 (you’ll just have to budget for those on your own). Medigap plans are designed to help pay for costs Medicare doesn’t cover—like coinsurance and deductibles. They supplement Original Medicare coverage.

Definition and Purpose of Supplement Plans

With all those costs left to you to pay, it’s a good thing Medicare supplement plans were invented! These plans are designed to help cover the sometimes high cost of deductibles and coinsurance. Private insurance companies offer Medigap plans to give you more control over how much coverage you have.

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Medigap plans are lettered A through N, and each one works alongside Original Medicare (Parts A and B) slightly differently. Now, don’t get the lettered plans confused with the lettered parts of Medicare. They aren’t the same!

But Uncle Sam thought it’d be a good idea to name them the same way. To be honest, Uncle Sam is sounding a little like your senile old uncle who calls all your cousins the same name. But let’s keep it straight: Medicare Part A (hospital insurance) is not the same thing as Medigap Plan A, and so on.

Each lettered plan covers your out-of-pocket costs related to Medicare at a different level. Let’s look at how each plan differs.

Types of Medigap Plans                                                              

There are 10 different Medigap plans currently available and four more that are no longer available but still exist. Some of those 10 plans aren’t actually available to folks new to Medicare, some aren’t available in certain states, and not every insurance company sells every plan. So, while every plan offers standardized coverage, plan availability is not the same across the board.

Take a look at the table below to see what kind of gap coverage each plan offers.

Source: Medicare.gov¹

Looking at the benefits of Plan F, you can see why it’s been the most popular, but like we mentioned earlier, some plans aren’t always available anymore—and F is one of them. Plans C and F are now available only to people who were eligible for Medicare before January 1, 2020, but didn’t enroll at that time, or people who already have them. That’s because the government changed the rules, and now Medigap plans can no longer cover Part B deductibles. (Reason #500 why you should look for someone you trust to help you navigate this stuff.)

Benefits for Plans D and G depend on the purchase date. Anyone who bought one of those plans on June 1, 2010, or later will see different benefits from people who bought those plans since.

You may have noticed a few letters missing from the alphabet of plans in that chart. That’s because Plans E, H, I and J are not sold anymore. If you already have one, though, you should be able to keep it.

Because it offers the most benefits, Plan G is becoming the most popular Medigap plan with folks new to Medicare. Except for your Part B deductible, Plan G covers all your Medicare-covered medical expenses.

Supplement Plan N is the second most popular type of Medigap plan for new Medicare enrollees. People with fewer medical needs tend to like it because it’s cheaper than Plan G while still offering a lot of coverage. It saves you money by letting you carry more risk for higher out-of-pocket costs. But if you don’t have a lot of medical needs, it can make sense to risk it.

All the plans are standardized and offer the same basic benefits in every state except three: Massachusetts, Minnesota and Wisconsin (because they’re special).²  

For example, in Massachusetts the Medicare supplement plans aren’t lettered. Your choices if you want a Medigap plan are the Core Plan, Supplement 1 Plan and Supplement 1A Plan. (Cough* Cough* Excuse us, we’re just choking on how dry those names are.) If you live in one of these states, check with your state or a Medicare expert to find out what’s available.

Benefits of Medicare Supplement Plans

Because they offer more flexibility, Medigap plans are usually a better fit than a Medicare Advantage plan for most people. Let’s look at all the benefits of a Medicare supplement plan.

Financial Protection

The main purpose of Medigap is to cover the out-of-pocket expenses you’re left with after Medicare has paid its share. You’ll have a yearly deductible to meet and coinsurance to pay every time you use a service like the hospital or doctor’s office. Depending on what plan you choose, Medigap will cover up to 100% of your Part A deductible and coinsurance costs.

Flexibility and Choice

One of the good things about Medigap is that you can go to any hospital, doctor or service provider that accepts Medicare. If you’ve got health insurance now (please say you do), you know you have to go to providers within your insurance company’s network. With Original Medicare and a Medigap policy, you can go almost anywhere.

Travel Coverage

How does six weeks in Cabo sound? Or one of those Viking cruises up the Seine where you stop and eat pastries every chance you get? Or maybe you’re just visiting your middle child who decided to up and move to New Zealand. If you love traveling overseas, there are Medigap plans that cover unexpected medical needs abroad. Plans C, D, F, G, M and N will cover 80% of your costs for services normally covered by Medicare after you meet your deductible.

Comparison With Medicare Advantage Plans

We mentioned above that Medicare Parts A and B are Original Medicare, while Part C is Medicare Advantage. The big difference between Medigap and Medicare Advantage is that Medigap is added on to Original Medicare to create a full coverage plan, while Medicare Advantage is a separate plan that bundles Parts A, B and often D.

Medigap has many different options so you can customize it to your needs. Medicare Advantage is all one package, so you have less flexibility.

In conjunction with Original Medicare, Medigap doesn’t have a yearly out-of-pocket maximum. Medicare Advantage does. But keep in mind, Medigap is meant to keep all those out-of-pocket costs in your pocket (by covering them up to 100%)—so even if they add up to $1 million before the year is out, Medigap will keep paying.

With Medigap, you can go to any provider who accepts Medicare. But Medicare Advantage limits you to using providers within a network. And Medicare Advantage folks who need to see a specialist are on their own if that specialist isn’t in the network.

If you have Medigap, you’ll potentially have up to three Medicare-related cards: one for Parts A and B, one for Part D and one for Medigap. If you have Medicare Advantage, you’ll just have one card because it comes in a bundle.

One of the attractive things about Medicare Advantage is how simple it sounds. Having everything all together sounds easier. And it probably is in some ways. But for most people, Medicare Advantage isn’t a good fit.

Medigap Costs

With Medigap, all plans that are titled with the same letter have the exact same coverage. But since they’re offered through private insurance companies, the price can vary. So it’s important to understand how the plans are priced (aka rated) and shop around for the best option.

Premiums

Medigap plans are a form of private health insurance, so you do have a premium. And remember, you’ll also pay a premium for Medicare Part B.

Insurance companies make the call on how much you’ll pay for your Medigap policy—and they use different methods to determine the number.

There are three ways companies calculate your premium or rates:

• Community-rated (aka no-age-rated)
• Issue-age-rated (aka entry-age-rated)
• Attained-age-rated

Community-rated: If an insurance company prices their premiums based on this method, premiums will be the same across the board and your age will not factor in. So Joe who’s 65 will pay the same as Marie who’s 70.

Issue-age-rated: With this method, your premium will be based on your age when you applied. So if you applied at age 65, your premium will be cheaper than Edwina who applied when she was 69.

Attained-age-rated: Every year your premiums will be a little higher if you buy a policy rated according to attained age. (Get it? As you “attain” a new age, your rate increases.) So if your premium was $125 when you were 65, it’ll be something like $130 the next year.

No matter which method the insurance company uses, location, gender, marital status and lifestyle (think smoking, not whether you like to wear Omega watches or drive a convertible) also affect your rate.

Pricing on your available Medigap plans will depend on the provider. Shop around to make sure you’re getting the best deal. Remember, not all Medigap plans are available in every state.

Out-of-Pocket Costs

We already went over this, but let’s do a quick recap of what out-of-pocket costs Medigap plans generally cover.

Medicare supplement plans usually cover some or all of:

• Part A coinsurance hospital costs
• Part B coinsurance or copayment
• First three pints of blood
• Part A coinsurance or copayment for hospice care
• Skilled nursing facility care (but Plans A and B don’t)
• Part A deductible (but Plan A doesn’t)
• Foreign travel emergency (only some plans)

Medigap plans don’t cover anything ineligible for Medicare like dental or vision costs, hearing aids, or long-term care. They also only cover drugs or Part B deductibles for folks who were eligible for Medicare prior to January 1, 2020.

Choosing the Right Plan

So, this is the part where the rubber meets the road. You’ve read all the articles, you’ve looked at all the plans, and it’s time to decide which one is right for you.

The right Medigap plan will meet your coverage needs (like foreign travel because you go to Italy every summer) and meet your budget.

Here are some questions to consider when trying to decide:

• How much is the premium?
• How are the plan premiums rated? (Will the price go up next year?)
• Are the premiums for this policy impacted by anything else like your gender or lifestyle?
• Will the company cover you based on your health status?
• Is there a waiting period if you have pre-existing conditions with the policy?
• How long is the waiting period before your coverage begins?

When you’re shopping around for a Medigap policy, it’s a good idea to keep track of everyone you talked to and the information on policies they gave you (or find someone like the advisors at Chapter to do that for you!).

How to Enroll in Medicare Supplement Plans

So, these plans seem pretty great, but how do you enroll? We got you.

Eligibility Requirements

Not just anybody can get one of these special amazing benefit plans. You must own at least 50 hectares of land, have a castle upon it, and be no further than seventh cousins to the king. Yes, joking. But there are eligibility requirements.

You must be one of the following:

• 65 years old (or older)
• Getting disability benefits
• Diagnosed with amyotrophic lateral sclerosis (ALS)
• Diagnosed with end-stage renal disease (ESRD)

You also must be enrolled in Medicare Parts A and B, but it’s a big fat no if you’re enrolled in a Medicare Advantage plan. You can sign up for Medigap the same month you enroll in Medicare Part B.

If you enroll during your Medigap Open Enrollment Period, you can’t be denied coverage for preexisting conditions. But if you did not have other health insurance before enrolling and have a preexisting condition, the insurance company could delay your coverage up to six months. Once you’ve got a Medigap policy, the insurance company can’t cancel it even if your health changes (unless you don’t pay your premiums).

Medigap Open Enrollment Period

You have one opportunity to sign up for Medigap when you’re guaranteed coverage. During your Medigap Open Enrollment Period (Medigap OEP), insurance companies can’t deny you coverage—that means if you’ve got a preexisting condition, you can still get Medigap!

Your Medigap OEP runs six months from the first month you get Medicare Part B coverage. So if you got Part B in July, you’d have through December to sign up for a Medigap plan and you won’t be denied.

After your Medigap OEP ends, you have no guarantee of coverage. You’re allowed to buy a Medigap plan any time of the year, but insurance companies can decide not to sell you one. And if they do, it’s often more expensive.

There is one exception to this, and that’s if you qualify for what’s called guaranteed issue rights based on your circumstances. An example would be if you lost your coverage for reasons outside your control, like your plan ended or you moved and your plan doesn’t cover your new location. In these situations, insurers are still required to cover you.

Get Expert Help

Yes, that was a lot, we know. But it’s important for you get the plan you need so your retirement nest egg doesn’t suddenly get a hole blown in its side from medical expenses you thought were covered. Most people with Original Medicare need a Medicare supplement plan.

If you feel like turning on a marathon of The Andy Griffith Show and zoning out instead of dealing with this insanity, how about this: Call up the folks at Chapter and let them guide you through it. They know the right questions to ask and the plans to go with them—because they’re experts in Medicare. They’ll shop 24,000 plans to make sure you get the right one.

And they don’t just hand you a plan and wave you off into the sunset. They’ll check in every year to make sure your coverage is still working well for you, and they’ll help make adjustments if needed. If you’re confused about how to use your benefits, Chapter agents are there to help. And it’s free. Chapter makes money by getting you covered. So it’s kind of a no-brainer.

Get Medicare done—connect with Chapter!