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How does Medigap work?

by dentsma

How does Medigap work?

Medicare supplemental insurance — or Medigap — plans are policies that private health insurance companies sell to people with traditional Medicare. These policies help reduce Medicare’s out-of-pocket costs.

Examples of out-of-pocket costs include copayments, deductibles, and costs for blood transfusions.

Learning the amounts of these costs can help a person get the best value from their insurance plan.

Taking out a Medigap plan is one way of limiting these expenses and covering as many treatments as possible.

In this article, we explain what Medigap plans cover and how much they cost.

We may use a few terms in this piece that can be helpful to understand when selecting the best insurance plan:

  • Deductible: This is an annual amount that a person must spend out of pocket within a certain time period before an insurer starts to fund their treatments.
  • Coinsurance: This is a percentage of a treatment cost that a person will need to self-fund. For Medicare Part B, this comes to 20%.
  • Copayment: This is a fixed dollar amount that an insured person pays when receiving certain treatments. For Medicare, this usually applies to prescription drugs.What is a Medigap plan?
  • What is a Medigap plan?

  • Private health insurance companies sell and administer Medicare supplemental insurance, or Medigap. They partially cover traditional Medicare’s out-of-pocket costs.If a person has Medicare Advantage, they cannot also have a Medigap plan.

    Medigap policies cover the following out-of-pocket costs for people with traditional Medicare:

    • coinsurance
    • copayments
    • deductibles

    The Centers for Medicare & Medicaid Services mandate that Medigap policies must provide the same level of coverage, regardless of which company is administering them.

    Medigap policies range from A to N. The premium price is the key difference between them.

    Private insurance companies do not have to offer every Medigap policy, but the government does require that they at least offer Medigap Plan A.

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