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How to Pick a Medigap Policy for Your Medicare Plan

Medigap policies close gaps left by Medicare Part A hospital insurance and Part B medical insurance. These policies cover the Medicare Part A coinsurance fees and Medicare Part B copayment. Medicare recipients -- those over 65 or those who receive Medicare because of a disability -- must pay all copayments, deductibles and coinsurance fees not covered by Medicare. Out-of-pocket expenses can wreak havoc on your monthly budget without supplemental help. Understanding the plans, expenses and pricing will help you choose a plan that fits your budget.

  1. Plans

    • Private insurance companies can offer 10 Medicare-approved Medigap policies labeled Plan A through D, F, G and K through N. Each plan covers 100 percent of Medicare Part A hospital coinsurance and up to 365 hospital stay days after Medicare coverage ends. Every plan provides 50 to 100 percent of Part A hospice copay and coinsurance, Medicare Part B 20 percent co-pay and coinsurance fees, and the first three pints of transfused blood. These plans are not available in all states. Massachusetts, Minnesota and Wisconsin provide different Medigap plans. Contact a state's insurance department for more information.

    Out-of-Pocket Expenses

    • Some plans charge mandatory out-of-pocket expenses before full insurance benefits start. For example, Plan F has a mandatory $2,070 deductible for medical services, plus a $250 deductible for foreign travel emergencies. Plans K and L have mandatory out-of-pocket expenses of $4,660 and $2,330 for 2012, respectively. Once you meet the out-of-pocket limit, both plans cover 100 percent of medical expenses for the remainder of the year. Plan K pays 50 percent of Medicare Parts A and B copayments, coinsurance and transfused blood costs before you meet the out-of-pocket cap.

    Pricing

    • Although the federal government mandates Medigap coverage, insurance companies set premium prices. Generally, companies use three basic pricing methods. Attained age premiums increase as you age and can become expensive. Issue age premiums allow you to purchase a plan based on your age at the time of purchase. Older customers receive higher rates, but once purchased, premiums remain fixed. Community-rated or no-age-rated premiums are the same for all customers under the same plan letter, regardless of age. Rates are subject to increase based on inflation, Medicare premium changes, copayment and coinsurance increases.

    Medicare Select

    • Medicare Select is a managed care Medigap plan. You can purchase a Medicare Select plan under one of the 10 standardized plans. Select plans offer the same benefits as a traditional Medigap plan with an exception. Under a managed care plan, you must receive care from an in-network provider to enjoy benefits. Normally, in-network providers charge lower service fees, which makes this plan more affordable than a standard Medigap plan.

    Medicare Advantage

    • Medicare Advantage or Medicare Part C is not a Medigap plan. It is a managed care plan offered by Medicare-approved private insurance companies. All Advantage plans must provide Medicare Part A and B coverage. Most plans also include Medicare Part D prescription coverage. Medigap functions as a supplement to Medicare, while Medicare Advantage is a bundled plan that includes Medicare Part A and B and sometimes Part D coverage. If you enroll in an Advantage plan, you cannot purchase a Medigap policy.

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