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How to Fill Medicare Coverage Gaps

Compare medigap, Medicare Part D and Medicare Advantage Policies to limit out-of-pocket costs and cover additional medical services.

Medicare covers the bulk of your medical expenses, but you must pay deductibles and co-payments for hospital stays and doctors’ services; fees for doctors who charge more than Medicare pays; the cost of prescription drugs and other expenses, including dental; and care in a foreign country.

You can add coverage with both a supplemental, or medigap, policy and a Part D prescription-drug policy, or with a Medicare Advantage plan. In most cases, medigap policies only fill holes in the coverage Medicare already offers; Medicare Advantage may offer extra services, such as vision or dental care. Most people choose the medigap/Part D route. With that combination, you’ll typically pay higher total premiums than with Medicare Advantage but have fewer out-of-pocket costs, and you can go to any doctor or facility that is covered by Medicare. You’ll also have to pick up separate dental coverage (see our story Pay Dental Bills With Less Pain).

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Medigap policies are sold by private insurers and come in 10 standardized versions. The most popular is Plan F, for its good balance of coverage and cost. (For details, see Medicare.gov's Choosing a Medigap Policy.)

Every medigap plan with the same letter must provide the same coverage, but the price can vary enormously by insurer—for example, from $1,529 to $3,667 per year for a 65-year-old Colorado man who buys a Plan F policy, according to Weiss Ratings. Look at the plans with the lowest premiums.

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If you’re healthy, consider going with a high-deductible version of Plan F (the only plan that offers this option). You’ll pay $2,180 of Medicare-covered costs before the medigap plan pays anything, but premiums are lower, ranging from $348 to $1,075 per year for the 65-year-old man described above, according to Weiss. Another lower-cost option is Plan N, which provides coverage similar to that of Plan F but with a few more out-of-pocket expenses, including a $20 co-pay for each doctor visit and $50 for each emergency-room visit. For Plan N, the 65-year-old man would pay from $1,081 to $2,419 per year.

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You can compare prices by using the Medigap Search tool at www.medicare.gov or at most state insurance department sites (get links at www.naic.org). Or, for $99, you can get a personalized report from Weiss Medi­gap (Kiplinger readers have access to a 30-day offer of $49, ending October 26, at weissmedigap.com/kiplinger).

Choose your medigap policy carefully. In most states, insurers can reject you or charge more because of your health if more than six months has passed since you signed up for Part B.

You’ll also need to get a Part D drug policy, which costs $33 a month, on average.

Medicare Advantage. These plans provide both medical and drug coverage through a private insurer. They tend to have lower premiums than medigap/Part D but also higher co-pays and more restrictions. The average cost is $38 per month above the cost of Part B, although some plans charge no premium beyond that of Part B.

As for coverage, the plan can’t offer less than would be available through Medicare. You’ll be restricted to a network of doctors and facilities and may have much higher costs (or no coverage at all) if you go out of network. You may also need a referral to see a specialist.

Look for plans that include your key doctors in the network, and compare the out-of-pocket costs for your usual medical care and prescription drugs (for cost estimates, use Medicare.gov's Medicare Plan Finder tool). Also look at star ratings, which rank plans according to customer service (five is the highest rating). For best values based on typical costs for people in good, fair and poor health, go to www.medicarenewswatch.com.

You can switch Medicare Advantage policies during open enrollment (October 15 to December 7, 2015, for 2016) or anytime for a five-star policy.

See Our Slide Show: 11 Common Medicare Mistakes

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