Supplemental Health Insurance Policy for Medicare Patients

Medicare is a federally funded health insurance program for the disabled and those 65 or over. Medicare provides hospital and medical coverage, but there are significant out-of-pocket costs. Many Medicare beneficiaries look to supplemental health insurance to help cover these gaps. There are Medicare Supplement policies (also known as Medigaps) and Medicare Advantage plans. There are also Part D plans, which provide prescription coverage. If you have additional insurance through a current or former employer, though, you may not need a supplemental plan at all.

Medicare Basics

• Medicare has two main parts: Part A, which covers hospitalization and hospice, and Part B, which covers doctors services, lab tests and durable medical equipment. If you're hospitalized and use Part A, you're responsible for a deductible of more than $1,000. Part B covers any doctors you see and had a calendar year deductible of more than $100 and 20 percent coinsurance after that.

Medicare Supplements

• Medicare Supplements, or Medigap plans, are for those who only have Medicare, and no other health insurance. Plans are lettered A-G and K-N, and each plan covers part of the out-of-pocket costs in original Medicare. Plan A, for example, covers Part A's coinsurances for hospitalization and hospice and Part B's coinsurance. You are still responsible for the Part B deductible and the co-pay for skilled nursing care. Plans K and L are lower premium cost sharing plans. They cover a percentage of coinsurances, rather than the whole thing. Medigaps are regulated by the federal government, so a Plan A from one company, for example, has the same benefits as a Plan A from another company.

Part D Plans

• Part D is Medicare's prescription drug benefit. It's a bit of a misnomer, as Part D is actually administered through private companies and not through Medicare itself. Part D plans have to meet minimums set by the federal government, but everything else varies from company to company. Each company sets its own premium, deductible, co-pays and prescription drug list. If you purchase a Medicare Supplement plan, you should purchase a Part D plan. If you purchase a Medicare Advantage plan, your prescription coverage may be included.

Medicare Advantage Plans

• Medicare Advantage, or MA, plans are Part C of Medicare. Again, calling it Part C is a bit misleading as it's also offered entirely through private companies. In fact, MA plans pay in place of Medicare, although you do retain all your rights as a Medicare patient. MA plans usually work with a network and have a monthly premium, co-pays and possibly deductibles. The advantage of MA plans for a Medicare patient is that the premiums are lower than Medigap plans. You may incur higher out-of-pocket costs, though, so it's important to make a careful comparison.