Understanding Medicare Supplemental Insurance

What is Medicare supplemental insurance?
Supplemental insurance helps cover the costs that Medicare does not. Medicare covers up to 80 percent of the cost of healthcare bills and services, so many seniors choose to buy supplemental insurance to avoid paying the remaining 20 percent out of pocket.

Do you need supplemental insurance with Medicare?

Copayments, deductibles and coinsurance are all among the things that private insurance may cover in what is called “Medigap” insurance, or the amount that Medicare doesn’t cover. Supplemental insurance is sold by private insurance companies and can help pay for some of these extra costs. For example, Original Medicare does not cover a person if they travel outside the U.S., but your supplemental insurance may.

How does supplemental insurance work with Medicare?

If you are enrolled in Medicare and also have supplemental senior health insurance, both insurers are called “payers.” With Medicare, your supplemental insurer decides on a coordination of benefits for which payer will be the primary and which will be designated as the secondary. The primary payer covers its costs on your healthcare first and the secondary payer covers their remaining share on the bills after.

The secondary payer only covers its amount on bills that exceed the costs of the primary payer. A secondary payer doesn’t necessarily cover all other costs. It is important to note that the primary payer may not actually be the first to pay on the bills in time. If Medicare is the secondary payer, it may make a conditional payment and then recover an amount from the primary payer after. This usually happens when a primary payer doesn’t pay or claim a bill promptly, resulting in a doctor’s office to bill Medicare.

What is covered?

Supplemental insurance plans may vary in what they cover and their limits. For Medigap policies, a person must be enrolled in both Part A and Part B of Medicare. Usually Medigap supplemental insurance will cover 20 percent of the remaining costs of Part A deductibles and coinsurance for hospital stays and a portion of the bills from Part B doctor visits and services.

You cannot have a Medigap policy if you are enrolled in a Medicare Advantage Plan. Medigap policies do not cover prescription drug plans or out of pocket costs for Part D Medicare prescription drug plans. Most supplemental plans also do not cover long term care costs like basic living needs and private-duty nursing. Vision, dental and hearing care are also not covered.