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As you can see, unless you're extremely wealthy, qualify for Medicaid, have a company medical retiree program, or choose a managed care plan under Medicare Advantage, you may need a Medicare supplemental policy to fill the gaps in traditional fee-for-service Medicare coverage. Just the 20% coinsurance alone can amount to a lot of money.

Although Medigap policies are issued by private insurers, Congress passed regulations to standardize plans and eliminate unfair marketing practices. There are 10 standardized plans from which to choose, although not all plans are available in all states. (The basic plan, Plan A, is available in all states.)

SUGGESTION: If you enroll in a managed care plan option (an HMO, PPO, or PSO) under Medicare Advantage, you do not need a Medicare supplemental plan since you may be paying twice for duplicate coverage. In fact, it is illegal for anyone to sell you a Medigap policy if you have a Medicare Advantage plan, unless you are terminating the Medicare Advantage plan and returning to traditional fee-for-service Medicare.

When Should You Purchase It?

The best time to buy a Medigap policy is as soon as your Medicare coverage begins. You cannot be refused, regardless of your health, if you purchase the policy within the first six months after you enroll in Medicare Part B. You must be issued the policy at standard rates. However, if you have a preexisting condition, coverage for that particular condition may be excluded for the first six months.

IMPORTANT NOTE: If you apply after the six-month period, you run the risk of being denied based on your health.

Which Plan Is Right for You?

There is no one plan that is right for everybody. The object is to make sure the plan you select is based on what you think you'll need and making sure you're not paying for insurance where the cost outweighs the benefit. For example, if all or most of your doctors accept on assignment, do you really need to have a plan that covers excess charges? Or, if you take prescription drugs only occasionally, does the additional added premium make sense? You still have to pay 50% of the cost of the drug.

What does make sense? You should definitely consider the Part A Deductible and the Skilled Nursing Facility Coinsurance as additional components of your policy. If you're planning to travel outside the U.S., you should consider purchasing Foreign Travel Emergency medical insurance.

Following are the Standard Medical Supplemental Insurance Plans (Medigap)

(1) Plans F and G also offer a high-deductible plan in some states. With this option, you must pay for Medicare-covered costs (coinsurance, copayments, and deductibles) up to the deductible amount of $2,340 in 2020 before your policy pays anything. (Plans C and F aren't available to people who are newly eligible for Medicare on or after January 1, 2020.)
(2) For Plans K and L, after you meet your out-of-pocket yearly limit and your yearly Part B deductible ($198 in 2020), the Medigap plan pays 100% of covered services for the rest of the calendar year.
(3) Plan N pays 100% of the Part B coinsurance, except for a copayment of up to $20 for some office visits and up to a $50 copayment for emergency room visits that don't result in inpatient admission.
(4) If you live in Massachusetts, Minnesota or Wisconsin the Medigap policies are standardized in a different way. You will need to see you State’s website for additional information.

SUGGESTION: Since all companies that issue Medigap policies must provide the exact same benefits per plan, it is important to compare companies based on price (which can vary widely), claims-paying ability, and service. For example, how long does it take the company to reimburse you? Some companies are much better than others in their claims turnaround time.

Be thorough when investigating different Medigap insurance providers. You can usually obtain helpful information from friends and family who already subscribe to a Medigap policy.

SUGGESTION: If you move to another state after you retire, you may need to change your Medigap plan.

Points To Remember When Shopping For a Medigap Policy

1. The Federal government does not issue nor does it sanction or endorse any Medicare Supplemental Insurance. Do not believe an insurance agent or company that has literature using any government guarantees or approval of its product.
2. Never cancel an existing policy until you are covered under the new plan.
3. Medigap policies are sold to individuals; if you are married, you must each have your own Medigap policy.
4. You can't be sold a Medigap policy if you already have one. Do not get confused between Medigap policies and hospital indemnity policies and/or specific illness policies. Policies that reimburse you a specific amount for each day you are in the hospital or pay benefits based on a specific illness (such as cancer) are unnecessary.
5. If you are already enrolled in a Medicare managed care plan, you cannot buy a Medigap policy, but may have the right to purchase a Medigap policy by returning to the original Medicare fee-for-service plan. While in the managed care plan, your care will be limited to the doctors and other service providers affiliated with the plans. (Some HMOs may offer point of service plans which will allow you to receive care outside the network, but it will cost you more.)
6. If you're on Medicaid, you don't need a Medigap policy and by law you can't be sold one.
7. Make sure the company is not just highly rated by one of the insurance ratings companies, but it also has a good track record in Medicare Supplemental Insurance. For example, a rating of A+ by A.M. Best will address the claim-paying ability and financial strength of the company, but not necessarily its experience with Medigap policies. Also, make sure the price you're paying is competitive.
8. Comparison shop. You can obtain Medicare supplemental insurance through a group plan, individually through a private carrier or a Health Maintenance Organization (HMO). All plans must be guaranteed renewable, which means the insurance company cannot drop you if your health worsens, as long as you pay your premiums on time. However, the company can increase prices, so be wary of companies that have extremely low initial rates.
9. You have a free look period. If you're not satisfied with the policy, you have 30 days to return it and receive a complete refund of your premium.