What is a Medicare Supplement or Medigap plan?
A Medicare Supplement policy (or Medigap plan) works together with your original Medicare coverage, filling the “gaps” (deductibles, coinsurance, co-payments, and out-of-pocket costs) in your Medicare Part A (in-patient or hospital insurance) and Medicare Part B (out-patient or physician insurance) coverage. Medicare Supplements are offered by private insurance company (such as United HealthCare) and provide additional coverage to your original Medicare Part A and Part B coverage.
Is the Part B deductible a significant cost?
Not exactly. The annual Medicare Part B deductible is not a large amount of money for many people, but the Part B deductible can change (increase) year-to-year.
For example, the 2023 Medicare Part B deductible is $226 - down $7 from the 2022 Medicare Part B deductible of $233 - which was up $30 from the 2021 Medicare Part B deductible of $203 (which is a $5 more than the 2020 Part B deductible of $198).
So why exclude coverage of the Part B deductible from Medicare Supplements?
Industry expert John Gorman noted that: "MACRA found Medicare beneficiaries with first-dollar coverage were among the highest utilizers of health services anywhere. Most of MACRA, a rare exercise in healthcare bipartisanship, was about Medicare physician payment, but one tiny section banned the sale of Medigap plans that cover the Part B deductible, with a goal of giving seniors more 'skin in the game.'"
As background,...
In past years, Medigap Plan F was one of the most popular Medicare Supplements with a high monthly premium, but coverage of all Medicare deductibles, cost-sharing (co-pays and co-insurance), and out-of-pocket costs. Plan C usually has a slightly lower monthly premium as compared to Plan F, but does not cover excess Part B charges that can be added by some physicians - some people chose a Medicare Supplement Plan C to save on monthly premiums. And finally, the high-deductible Medigap Plan F has a very low monthly premium and an annual deductible that must be met before the Medigap plan pays out-of-pocket costs. The result of MACRA...
Starting January 1st, 2020, Medicare Supplement providers will no longer offer Medigap Plan C, Plan F, and High-Deductible Plan F to people newly eligible for Medicare benefits.
Can a person who already has one of these Medicare Supplements keep their plan?
Yes. People who are already enrolled in a Plan C, Plan F, or high-deductible Plan F before 2020 can keep their existing polices - although current Medigap members might expect that their monthly premiums will increase over time as the plan's "risk pool" shifts due to the loss of new, healthier plan members who usually keep monthly premiums lower.
What alternative Medigap plans are available beyond 2020?
Experts in the industry expect that many people entering the Medigap market after 2020 will simply choose alternative Medigap plans that do not cover the Medicare Part B deductible - and have a lower premium than these soon-to-be discontinued plans. Often the lower monthly premiums of the alternative Medigap plans offset the cost of the Medicare Part B deductible. For example, people who would have chosen a Medigap Plan F may choose the Plan G (with slightly lower premium - but providing no coverage of the Part B deductible).
People already enrolled in a Medigap Plan F, and who find their premiums increasing, may also wish to move to a Plan G offered by their same Medicare Supplement carrier since there should be no medical underwriting as Plan G offers less coverage (the Part B deductible) than Plan F.
John Gorman (in the article cited above), also predicts that many Medicare beneficiaries may move to Medicare Advantage PPOs as an alternative to a Medicare Supplement. Medicare Supplements vs. Medicare Advantage plans
As a reminder: a Medicare Supplement is not the same as a Medicare Advantage plan.
Medicare Supplements work together with your original Medicare coverage, filling the “gaps” (deductibles and co-payments) in your Medicare Part A (in-patient or hospital insurance) and Medicare Part B (out-patient or physician insurance) coverage. In short, Medicare Supplements provide coverage in addition to your original Medicare Part A and Part B coverage. Modern Medigap plans do not provide drug coverage and you will need to purchase a stand-alone Medicare Part D prescription drug plan (PDP) for your prescription needs (or have some other form of drug coverage - like VA drug coverage). Medigap plans are regulated by the state, and for the most part, Medigap plan coverage is standardized across the country (with a few state exceptions, such as Massachusetts, Minnesota, and Wisconsin).
Medicare Advantage plans act as administers of your original Medicare Part A and Part B coverage. Medicare Advantage plans must offer coverage at least as good as your original Medicare and often add additional benefits like (limited) vision, dental, hearing and/or wellness programs (such as Silver Sneakers) - some plans may also add transportation services and nutrition assistance. Medicare Advantage plan may include drug coverage (and are called MAPDs) - or the Medicare Advantage plan may come without drug coverage (MAs). Medicare Advantage plans may also be designed for people with specific economic or physical needs and are called Special Needs Plans (SNPs).
To read more about how a Medigap policy compares to a Medicare Advantage plan, please see our Frequently Asked Questions on this site
Finding a Medicare Supplement...
If you are searching for a Medigap plan in your area please call or visit a local insurance agent - telephone the company offering or sponsoring the Medigap plan (such as United HealthCare or AARP) - or call a Medicare representative at 1-800-633-4227 (1-800-Medicare) or visit (https://www.medicare.gov/find-a-plan/questions/medigap-home.aspx) - or visit your local SHIP office and speak with a SHIP volunteer.
And the official word from the Centers for Medicare and Medicaid Services (CMS)...
"Starting January 1, 2020, Medigap plans sold to people new to Medicare won’t be allowed to cover the Part B deductible. Because of this, Plans C and F will no longer be available to people who are new to Medicare on or after January 1, 2020.
–If you already have either of these two plans (or the high deductible version of Plan F) or are covered by one of these plans prior to January 1, 2020, you will be able to keep your plan. If you were eligible for Medicare before January 1, 2020 but not yet enrolled, you may be able to buy one of these plans.
–People new to Medicare are those who turn 65 on or after January 1, 2020, and those who first become eligible for Medicare benefits due to age, disability or ESRD on or after January 1, 2020."
(from the CMS document "2019 Choosing a Medigap Policy: A Guide to Health Insurance for People with Medicare")
As reference to MACRA...
Here is the actual language from the Medicare Access and CHIP Reauthorization Act of 2015 (04/16/2015 Public Law No: 114-10):
TITLE IV--OFFSETS
Subtitle A--Medicare Beneficiary Reforms
Sec. 401. Limitation on certain medigap policies for newly eligible Medicare beneficiaries.
Section 1882 of the Social Security Act (42 U.S.C. 1395ss) is amended by adding at the end the following new subsection:
"(z) Limitation on Certain Medigap Policies for Newly Eligible Medicare Beneficiaries.--
"(1) In general.-- Notwithstanding any other provision of this section, on or after January 1, 2020, a medicare supplemental policy that provides coverage of the part B deductible, including any such policy (or rider to such a policy) issued under a waiver granted under subsection (p)(6), may not be sold or issued to a newly eligible Medicare beneficiary.
"(2) Newly eligible medicare beneficiary defined.--
In this subsection, the term `newly eligible Medicare beneficiary' means an individual who is neither of the following:
"(A) An individual who has attained age 65 before January 1, 2020.
"(B) An individual who was entitled to benefits under part A pursuant to section 226(b) or 226A, or
deemed to be eligible for benefits under section 226(a), before January 1, 2020.
‘‘(3) TREATMENT OF WAIVERED STATES.—In the case of a State described in subsection (p)(6), nothing in this section shall be construed as preventing the State from modifying its alternative simplification program under such subsection so as to eliminate the coverage of the part B deductible [$185 in 2019, up from the - compare to the 2015 Medicare Part B deductible of $147] for any medical supplemental policy sold or issued under such program to a newly eligible Medicare beneficiary on or after January 1, 2020.
‘‘(4) TREATMENT OF REFERENCES TO CERTAIN POLICIES.—
In the case of a newly eligible Medicare beneficiary, except as the Secretary may otherwise provide, any reference in this section to a medicare supplemental policy which has a benefit package classified as ‘C’ or ‘F’ shall be deemed, as of January 1, 2020, to be a reference to a medicare supplemental policy which has a benefit package classified as ‘D’ or ‘G’, respectively.
‘‘(5) ENFORCEMENT.—The penalties described in clause (ii) of subsection (d)(3)(A) shall apply with respect to a violation of paragraph (1) in the same manner as it applies to a violation of clause (i) of such subsection.’’.
[emphasis added]
** And a Special Thanks to Robert L. for his well-timed correction
Additional sources include:
https://www.gormanhealthgroup.com/blog/big-changes-to-medigap-in-2020-a-seismic-event-in-senior-markets-now/
https://www.medicare.gov/your-medicare-costs/medicare-costs-at-a-glance
https://www.medicare.gov/pubs/pdf/02110-medicare-medigap-guide.pdf
https://www.cms.gov/Medicare/Health-Plans/Medigap/index.html