Medicare Supplement Insurance

Medicare Supplement plans which are also known as Medigap cover what Original Medicare does not and they are offered by private insurance companies.

Part D is known as Medicare prescription drug coverage that is offered by private insurance companies. Medicare Part D prescription drug plans help lower the cost of prescriptions by having the members paying copayments instead of paying the full price of prescribed drugs.

How do you get Part D?

There are two ways you can get Part D prescription drug coverage:
  • Join a Medicare Advantage plan that includes prescription drug coverage.
  • You can join a stand alone Part D plan if you are on Original Medicare and/or Medigap plan.

Medicare Part D Coverage Phases

There are four phases of coverage in Medicare Part D prescription drug coverage. The coverage gap (known as Donut Hole) is a confusing subject among Medicare beneficiaries. Understanding all of the stages of Part D coverage will help you fully understand the coverage gap.

The Annual Deductible

This is the first phase and you are responsible for prescription costs until you meet the deductible. Medicare updates this Part D deductible every year. During this stage you are responsible for paying 100% of the retail cost of your drugs until the deductible amount has been reached. Once you’ve met your plan’s deductible, you will move to the next phase, which is the Initial Coverage. If your plan has no deductible then you will automatically skip this stage and start in the Initial Coverage phase right away.

Initial Coverage

This is the phase once your deductible has been met. Your plan helps you cover the costs of your prescriptions. You are responsible for the costs of any copayments or coinsurance amounts laid out by the plan, while your plan pays its share of the cost. During this phase, Medicare adds the amounts that both you and Part D plan have paid to come up with the total drug costs.

Out-of-Pocket Cap

Once you reach $2,000 in out-of-pocket drug costs in a calendar year, your plan covers 100% of covered drug costs for the rest of the year. This cap was established by the Inflation Reduction Act and took effect in 2025.

Essential things to know about Medicare Part D Prescription Drug Coverage

  • The best time to sign up for Part D is when you first become eligible for Medicare, even if you don’t take any prescribed medications as delaying enrollment can result in a Part D late enrollment penalty. Other than during Initial Enrollment Period, you can also join or change your existing Part D prescription drug plan during Medicare Annual Enrollment Period (AEP) between October 15 – December 7 each year and your changes will take effect on January 1 of the following year. There are also General Enrollment Period and Special Enrollment Period available.
  • The average monthly premium for Part D prescription coverage is $34.50 (varied by plan). Premiums may vary depending on the plan. You pay this in addition to the Part B premium. If you’re in a Medicare Advantage (Part C) plan with drug coverage, the monthly premium may include an amount for drug coverage. If you have a higher income, you might pay more for your Medicare Part D prescription drug coverage due to Part D-IRMAA.
  • When it comes to filling your prescription, you want to make sure that you do so at one of your drug plan’s “preferred” pharmacies to receive the lowest advertised copayment or coinsurance.

Frequently Asked Questions

No, they are not the same. You leave Original Medicare when you sign up for Part C, while Medigap/Medicare Supplement plans work with Original Medicare to provide you more comprehensive benefits than Original Medicare has to offer.

  • Medicare Advantage PPO comes with a limited network of providers. You will still have an option to see out-of-network providers, however you will pay higher coinsurance. Medicare Supplement (Medigap) has no network; it gives you freedom to choose any provider in the US that accepts Medicare assignment.
  • Unlike Medicare Advantage PPO, most Medicare Supplement plans don’t have copayments or coinsurance. However the Medicare Supplement monthly premium is generally higher than Medicare Advantage PPO.
  • Most Medicare Advantage PPO plans do include Medicare Part D (Prescription Drug), while Medicare Supplement plans don’t.

Once you enroll in Medicare Part B, you will have a six-month window to enroll in Medigap insurance without having to answer health questions and go through medical underwriting. Once this window has passed, you can still enroll in a Medigap plan anytime, but you must pass medical underwriting.

After your visit or procedure, your provider sends the bill to Medicare, then your Medigap plan covers out-of-pocket costs that you are responsible for after Medicare has paid their portion of your medical costs. You could have low to zero out-of-pocket costs, depending on what letter Medigap plan you choose.

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