The federal government sponsored Medicare insurance covers a large portion of possible hospital and medical expenses. However, it still leaves beneficiaries deductibles and cost shares to pay. Hospital deductible is around $1500 (year 2022) per benefit period, and there is a sizeable daily copay each day of stay. For outpatient services, after copays and an annual deductible, beneficiaries have to pay 20% of coinsurance that has no caps. Therefore, even with the original Medicare, participants can still potentially face large medical bills. Medigap is a supplement plan that will help pay for these out-of-pocket expenses.
Medigap plans are standardized into just a number of plans characterized by letters A, B, C, D, F, G, K, L, M, N. Plan A covers hospital coinsurance, part B copay and coinsurance, first 3 pints of blood (that’s not covered by original Medicare), hospice copay and coinsurance. All other plans include all plan A’s benefits and more, except for plan K and plan L which only have partial coverage. All carriers that offer Medigap must offer plan A.
The only difference between plan A and plan B is that plan B pays hospital deductibles in addition to all plan A benefits. (Note that plan A and plan B are not to be confused with part A and part B which are the original Medicare.)
All plans other than plans A and B cover 100% of skilled nursing facility coinsurance, except for plans K, L which cover 50% and 75% respectively. Plans K and L do have an annual maximum OOP. For 2021, the OOP limit of plan L is $3,110, and plan K has a limit of $6,220. Once the OOP limit is met, the plan pays 100% of Medicare covered services for the remainder of the calendar year.
Plans other than A, B, K, L cover 80% of emergency care outside of the U.S. Discontinued plans E, H, I, J also cover worldwide emergency care, if beneficiaries still have them. The plans cover foreign travel emergency care if it begins during the first 60 days of your trip, and if Medicare doesn’t otherwise cover the care. They pay 80% of the billed charges for certain medically necessary emergency care outside the U.S. after you meet a $250 deductible for the year. The coverage has a life-time limit of $50,000.
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.
Part F and part G are the only plans that cover part B excess charge which is the amount a non-participating provider charges in excess of the amount Medicare approved for the particular service. Legally, excess charge cannot exceed 115% of Medicare-approved charge. 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$2,370 in 2021 before your policy pays anything.
Plans C and F are not available to people who were newly eligible for Medicare on or after January 1, 2020 because a new law that went into effect that disallow Medigap plans to cover part B deductible.