What supplemental insurance does and why you might need it

Supplemental insurance, also called Medigap, covers costs that Original Medicare leaves you responsible for — copayments, coinsurance, and deductibles. Medicare pays its share of a doctor visit or hospital stay, but you still owe the rest. Supplemental insurance picks up those gaps, which is why there is no single "best" plan. The right one depends on how much out-of-pocket cost matters to you and which doctors and hospitals you use.

Original Medicare (Part A for hospital care and Part B for doctor visits) covers a large share of most medical bills, but not all of it. For example, if you go to the hospital, Medicare Part A covers most of the cost after you pay a deductible. If you see a doctor, Part B covers 80 percent of the approved amount after you meet your annual deductible. You are responsible for the rest. Supplemental insurance reimburses you for those out-of-pocket amounts.

Key Takeaways

  • Supplemental insurance covers the copayments, coinsurance, and deductibles that Original Medicare does not pay, reducing your out-of-pocket costs.
  • There are ten standardized Medigap plans (A, B, D, G, K, L, M, N, and two others), each covering a different combination of costs, and the same plan letter covers the same benefits no matter which insurance company sells it.
  • Plan G and Plan N are the most common choices today because Plan F (which used to be the most popular) is no longer available to people newly may be able to access for Medicare.
  • You can buy supplemental insurance only during specific windows — your initial enrollment period when you turn 65, or during the annual open enrollment period — and some states have additional enrollment rights.
  • The monthly premium you pay varies by insurance company and by your age and location, so comparing quotes from multiple insurers is necessary to find the lowest price for the same plan letter.

The ten standardized Medigap plans and what each covers

The federal government sets the benefits for each Medigap plan, so a Plan G from one insurance company covers exactly the same costs as a Plan G from another. What differs is the monthly premium. The ten plans are labeled A, B, D, G, K, L, M, N, and two others. Each plan covers a different combination of the costs Medicare leaves you responsible for.

Plan G is the most comprehensive option available to people who became may be able to access for Medicare on or after January 1, 2020. It covers your Part B deductible, copayments and coinsurance for hospital and doctor visits, blood transfusions, skilled nursing facility coinsurance, and foreign travel emergency care. You pay a monthly premium, and then most of your remaining costs are covered. Plan N is less comprehensive but usually costs less per month. It covers copayments and coinsurance for most services, but you pay a small copayment for doctor visits and emergency room visits, and you are responsible for the Part B deductible.

Plan A is the most basic option. It covers hospital coinsurance and copayments, skilled nursing facility coinsurance, blood transfusions, and part of your hospice care copayment, but not your Part B deductible. Plans B, D, K, L, and M each cover different combinations of these same costs. If you were may be able to access for Medicare before January 1, 2020, you may also be able to buy Plan F, which covers everything Plan G covers plus the Part B deductible.

Plan G versus Plan N: the two most common choices

Plan G and Plan N account for the majority of supplemental insurance sales today. Plan G costs more per month but covers more of your out-of-pocket costs. Plan N costs less per month but leaves you responsible for small copayments at the doctor and emergency room. Which one saves you money overall depends on how often you see doctors and use the emergency room.

If you rarely see doctors or use the emergency room, Plan N's lower monthly premium may mean you pay less overall, even though you owe copayments when you do go. If you see doctors frequently or have chronic conditions that require regular visits, Plan G's higher premium may be offset by the fact that you have no copayments for those visits. The difference in monthly premium between Plan G and Plan N varies by insurance company and location — sometimes it is $20 a month, sometimes $50 or more. You need to get quotes from multiple insurers to know which plan costs you less in your situation.

Plan G also covers your Part B deductible, which is the amount you must pay out of pocket before Medicare starts paying for doctor visits. Plan N does not. If you use doctor services regularly, that deductible adds up.

When you can buy supplemental insurance

You have the strongest enrollment rights during your initial enrollment period, which is the six-month window that begins the month you turn 65 and are enrolled in Medicare Part B. During this period, you can buy any Medigap plan without medical underwriting — the insurance company cannot deny you or charge you more based on your health history. This is the best time to buy, because you have the most options and the lowest risk of being turned down.

If you miss your initial enrollment period, you can still buy supplemental insurance during the annual open enrollment period, which runs from October 15 to December 7 each year. During this window, you can switch to a different Medigap plan or buy one for the first time. However, the insurance company may use medical underwriting, meaning they can deny you or charge you more if you have pre-existing conditions.

Some states have additional enrollment rights. For example, a few states allow you to buy supplemental insurance at any time without medical underwriting. Check with your state insurance commissioner's office or your State Health Insurance information Program (SHIP) to learn what rights you have in your state.

How premiums are set and why they vary so much

Insurance companies set their own premiums for each Medigap plan, so the same Plan G can cost $100 a month from one company and $150 from another. Premiums also vary based on your age, your location, and whether you are a man or woman. Some companies use age-based pricing, which means your premium increases as you get older. Others use community rating, which means everyone in your area pays the same premium regardless of age. A few use issue-age rating, which bases your premium on your age when you first buy the plan and then increases it over time.

Your location matters because insurance companies price plans differently in different states and regions. A Plan G in rural Montana may cost less than the same plan in a major city. Your gender can also affect the price — some companies charge different premiums for men and women, though this is becoming less common.

Because premiums vary so widely, comparing quotes from at least three insurance companies is essential. You can get quotes by calling insurers directly or by using the Medicare Plan Finder tool on Medicare.gov. Write down the plan letter (such as Plan G) and compare the monthly premium, the deductible (if any), and any other out-of-pocket costs.

Supplemental insurance versus Medicare Advantage: which route to take

Supplemental insurance works with Original Medicare — you keep your Medicare card and see any doctor or hospital that accepts Medicare. Medicare Advantage (Part C) is a different route. It is an alternative to Original Medicare offered by private insurance companies. With Medicare Advantage, you get your hospital and doctor coverage through the private plan instead of through Original Medicare, and you do not need supplemental insurance.

The trade-off is that Medicare Advantage plans usually have lower monthly premiums but higher out-of-pocket costs when you use care. Many have network restrictions, meaning you can only see doctors and hospitals in the plan's network (except in emergencies). Some require referrals to see specialists. Supplemental insurance with Original Medicare gives you more freedom to see any doctor or hospital that accepts Medicare, but you pay higher monthly premiums.

If you travel frequently or want to see any doctor without restrictions, Original Medicare with supplemental insurance is usually the better choice. If you want the lowest monthly premium and do not mind network restrictions, Medicare Advantage may be better. You cannot have both supplemental insurance and Medicare Advantage at the same time.

How to compare plans and choose one

Start by deciding which plan letter makes sense for your situation. If you see doctors frequently or want the most comprehensive coverage, Plan G is usually the best choice. If you are willing to pay small copayments to save on your monthly premium, Plan N may be better. If you rarely see doctors, Plan A or Plan D might be enough.

Once you have chosen a plan letter, get quotes from at least three insurance companies. Call the companies directly or use the Medicare Plan Finder. Write down the monthly premium for each company. Multiply the monthly premium by 12 to see the annual cost. Then estimate how much you will spend on copayments and coinsurance in a typical year based on how often you see doctors. Add the annual premium to your estimated out-of-pocket costs to get your total annual cost. The company with the lowest total is usually the best choice.

You can also contact your State Health Insurance information Program (SHIP) for free, one-on-one help comparing plans. SHIP counselors can review your situation and help you understand which plan makes sense for you. To find your state's SHIP, search "SHIP" plus your state name online, or call 1-800-MEDICARE.

What happens if you switch plans later

You can switch to a different Medigap plan during the annual open enrollment period (October 15 to December 7) or during your state's open enrollment period if your state has one. When you switch, your new plan's coverage begins on January 1 (if you enroll during the federal open enrollment period). You will need to contact your new insurance company to start coverage and cancel your old plan.

If you switch plans outside of an open enrollment period, the new insurance company may use medical underwriting and can deny you or charge you more based on your health. This is why it is important to choose carefully the first time. If you realize you chose the wrong plan, wait for the next open enrollment period to switch rather than switching outside the window and risking denial or higher premiums.

Frequently Asked Questions

Can I have supplemental insurance and Medicare Advantage at the same time?

No. You can have either Original Medicare with supplemental insurance, or Medicare Advantage, but not both. If you have Medicare Advantage and buy supplemental insurance, the supplemental plan will not pay anything because Medicare Advantage is not Original Medicare.

What if I do not buy supplemental insurance when I turn 65?

You can still buy it later during the annual open enrollment period (October 15 to December 7) or during your state's open enrollment period. However, if you buy it outside your initial enrollment period, the insurance company may deny you or charge you more based on your health history. The longer you wait, the higher the risk.

Does supplemental insurance cover prescription drugs?

No. Supplemental insurance covers copayments and coinsurance for doctor visits and hospital care, but not prescription drugs. You need a separate Medicare Part D plan (prescription drug coverage) for that. You can have both supplemental insurance and Part D at the same time.

Will my supplemental insurance premium increase as I get older?

It depends on how the insurance company prices its plans. Some use age-based pricing, which means your premium increases every year as you age. Others use community rating, which means your premium stays the same regardless of age (though it may increase for everyone in your area). Ask the insurance company which method they use before you buy.

Can I use my supplemental insurance with any doctor or hospital?

Yes, as long as the doctor or hospital accepts Medicare. Because supplemental insurance works with Original Medicare, you can see any provider that accepts Medicare patients. You do not have to use a network like you would with Medicare Advantage.