Medicare Supplement Insurance

Medicare Supplement Insurance, also commonly referred to as Medigap, is private insurance that pays part of what Original Medicare does not, principally deductibles, coinsurance, and copayments. The statute defines it by what it fills rather than by what it covers. Under 42 USC 1395ss(g)(1), a medicare supplemental policy is a health insurance policy offered by a private entity to people entitled to Medicare which "provides reimbursement for expenses incurred for services and items for which payment may be made under this subchapter but which are not reimbursable by reason of the applicability of deductibles, coinsurance amounts, or other limitations." The same provision expressly excludes a Part D prescription drug plan and a Medicare Advantage plan from the category. Three names are in circulation and all of them are official: the statute says "medicare supplemental policy," CMS titles its consumer page "Medicare Supplement Insurance (Medigap)," and Medigap is what almost everyone says, including CMS itself throughout medicare.gov. They mean the same product, and this page uses the CMS name with the common one alongside it.

The organizing fact about Medigap is standardization, and it makes shopping for one unlike shopping for any other insurance. Medicare states the rule plainly: "All Medigap policies are standardized. This means, policies with the same letter offer the same basic benefits no matter where you live or which insurance company you buy the policy from. There are 10 different types of Medigap plans offered in most states, which are named by letters: A-D, F, G, and K-N." And then the consequence, also in Medicare's own words: "Price is the only difference between plans with the same letter that are sold by different insurance companies." So the comparison a buyer has to make is narrow and unusually tractable. Compare Plan G against Plan G, and the only variables left are the premium, how the insurer sets and raises that premium, and the insurer's service record.

Three structural points sit underneath the letters. Only two of the lettered plans carry an annual out-of-pocket limit. Plans K and L pay a set percentage of most cost sharing and then pay everything once the enrollee reaches a yearly limit, which no other lettered plan has, because the others pay their stated benefits without a ceiling on the enrollee's spending. High-deductible versions of Plans F and G exist in some states, where the policy pays nothing until the enrollee has covered Medicare cost sharing up to a set deductible. And Medicare SELECT is a Medigap policy that uses a provider network, is usually cheaper for that reason, and carries a right to switch to a standard Medigap policy within 12 months. Every one of those thresholds is a dollar figure CMS resets annually, so the amounts belong on medicare.gov rather than on any page that can go stale.

Plans C and F are closed to most new beneficiaries, and the mechanism is worth understanding because it explains the oddity. Congress did not ban two letters. Under 42 USC 1395ss(z)(1), on or after January 1, 2020, a medicare supplemental policy "that provides coverage of the part B deductible" may not be sold or issued to a newly eligible Medicare beneficiary. Plans C and F happen to be the two lettered packages that cover the Part B deductible, so they are the two that disappear. Subsection (z)(2) defines a newly eligible beneficiary as someone who neither attained age 65 before January 1, 2020 nor became entitled to Part A on disability or end-stage renal disease grounds before that date, and (z)(4) deems references to Plans C and F to be references to Plans D and G for such a person. Medicare states the consumer form of the rule: "Plan C and Plan F aren't available if you turned 65 on or after January 1, 2020, and to some people under age 65." Someone who was already eligible before 2020 may still be able to buy them.

Three states are standardized differently. Medicare's own caution is explicit: "In Massachusetts, Minnesota, and Wisconsin, Medigap policies are standardized in a different way." The mechanism is 42 USC 1395ss(p)(6), which lets the Secretary waive the standardization requirements "in those States that on November 5, 1990, had in place an alternative simplification program." The statute does not name the states; Medicare does.

Buying it has a timing dimension this page deliberately leaves mostly to its own entry, but two points belong here. The federal open-enrollment window in 42 USC 1395ss(s)(2)(A) bars an issuer from denying a policy, conditioning it, or pricing it on health status for an application made before or during "the 6 month period beginning with the first month as of the first day on which the individual is 65 years of age or older and is enrolled for benefits under part B." Both conditions have to be true at once, which means someone who came onto Medicare under 65 through disability, or who delayed Part B while still working, does not have a window running at the moment they might assume. It also happens once and does not repeat annually. Separately, guaranteed issue and freedom from a pre-existing-condition exclusion are two different protections that people routinely merge: subparagraph (s)(2)(B) still permits an issuer to exclude benefits during the policy's first six months for a condition treated or diagnosed in the six months before it took effect, subject to credit for prior continuous coverage. Medicare also states that federal law "generally doesn't require insurance companies to sell Medigap policies to people under 65," while some states require it. Which states, and on what terms, is a question for a state insurance department rather than something to generalize about.

1. Enroll in Original Medicare first. Medigap sits on top of Parts A and B and generally cannot be bought without both. It is not available to someone in a Medicare Advantage plan, and it never pays that plan's cost sharing.

2. Pick a letter, which fixes the benefits. The lettered chart on medicare.gov shows exactly what each plan pays and where the two out-of-pocket limited plans and the high-deductible options sit.

3. Then shop the letter on price and pricing method. Insurers price the same letter very differently, and how the company sets premiums, whether by age at issue, by attained age, or on a community rate, determines how the premium behaves as the policyholder gets older, not just what it costs today.

4. Buy Part D separately if you want drug coverage. The statute excludes prescription drug plans from the Medigap category, so a Medigap policy does not cover outpatient drugs.

5. Pay both premiums. The Medigap premium is in addition to the Part B premium, which Medicare does not pay on the policyholder's behalf.

A hypothetical, and the arithmetic is the whole point of standardization. Two insurers in the same state both offer Plan G. Company A quotes $148 a month and Company B quotes $211. Because the letter is standardized, the benefits are identical: the same Part A coinsurance, the same Part B coinsurance, the same foreign travel emergency benefit, the same everything, with neither policy covering the Part B deductible. The difference is $63 a month, or $756 over a year, for the same contract. Nothing about the higher premium buys better coverage, though it may reflect a different rating method that changes how the premium moves later, which is the second question worth asking after price.

Pros

• Turns unpredictable Medicare cost sharing into a predictable monthly premium, which matters because Original Medicare has no annual out-of-pocket ceiling of its own.
• Standardization makes the comparison genuinely simple. Same letter means same benefits, so price is the comparison.
• No network. A Medigap policy pays wherever Medicare pays, which is most providers in the country.
• Several plans include a foreign travel emergency benefit, which Original Medicare almost never covers.

Cons

• It is a second premium on top of Part B, and premiums typically rise each year.
• It covers no prescription drugs, no dental, no vision, and no long-term care, so it fills Medicare's cost sharing rather than Medicare's coverage gaps.
• Outside the one-time federal window and the defined guaranteed-issue situations, an insurer may use medical underwriting and may decline the application outright.
• Plans C and F are unavailable to most people who became eligible for Medicare from 2020 onward.
• Only Plans K and L carry an annual out-of-pocket limit, so the other letters cap what Medicare charges rather than what the policyholder can spend.