A guide to buying Medigap policies

Rail systems around the world warn you to “mind the gap” when boarding a train. It’s good advice for your Medicare coverage, too.

Medicare is comprehensive, but it doesn’t cover everything. There are copays, deductibles, and limits on hospitalization benefits. If you enroll in Medicare Advantage–the all-in-one managed care alternative to traditional Medicare–your out-of-pocket costs are capped. But if you elect traditional Medicare, you’ll probably want to buy a Medigap supplemental policy to close some or all of your gaps. Nearly 1 in 4 Medicare enrollees have a Medigap policy, according to the Kaiser Family Foundation.

What does Medigap cover, when should you buy it, and how much coverage do you need? Read on, or listen to a discussion I had recently about shopping Medigap with Christine Benz of Morningstar.

What Is Medigap?

Medigap is commercial insurance that closes gaps in traditional fee-for-service Medicare Parts A (hospitalization) and B (outpatient services).

The coverage level varies by the policy type you purchase. Policies come in an alphabet soup of lettered plan choices, currently including A, B, C D, F, G, K, L, M, and N. The most popular–accounting for more than half of all policies sold–are plans C and F, which are the most comprehensive.

By law, the benefits offered by Medigap plans must be uniform across the country. That is, a C plan in Ohio must offer the same benefit features as a C plan in California. Premium prices for the same plan, however, can vary quite a bit from state to state, and even from carrier to carrier within a local market.

Medigap offers the peace of mind that comes with making your healthcare expenditures more predictable. This year, for example, the Part A deductible is $1,316 and the daily coinsurance charge for longer hospital stays (61 to 90 days) is $329. In the unlikely event of a very long hospital stay, Medicare stops paying after 90 days, and after you exhaust a lifetime reserve of 60 days. The Part B deductible this year is $183.

What Does Medigap Cover?

The most comprehensive Medigap policies–C and F–cover 100% of Part A coinsurance charges and hospital costs up to an additional 365 days after Medicare benefits are exhausted. These plans also cover 100% of Part B co-insurance or copayment amounts, hospice care co-insurance, skilled nursing facility co-insurance, and deductibles for Part A and Part B. Other plans provide less generous coverage. For example, plan K covers only 50% of Part B copays and various other deductibles. The chart below shows how some of the plan coverage differs. For the complete list of all Medigap plans and their coverage levels, download Medicare’s free guide to policies.

Two plans–F and G–cover what Medicare refers to as Part B excess charges. Medicare sets standard rates for all procedures that participating physicians must accept, but they also can be classified as “nonaccepting,” which means they can add surcharges to the patient beyond Medicare rates. Medigap coverage for excess charges meets these costs; starting in 2020, G plans will be your only option for buying this coverage.

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