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Understanding Extra Medicare Benefits Beyond Original Coverage

Medicare provides basic health insurance for people age 65 and older, as well as some younger people with disabilities or end-stage renal disease. However, Original Medicare—which consists of Part A (hospital insurance) and Part B (medical insurance)—doesn't cover everything. Many beneficiaries don't realize that additional coverage options exist to help reduce out-of-pocket costs and fill coverage gaps.

This guide provides information about the various ways to supplement or expand Medicare coverage beyond what Original Medicare offers. Understanding these options helps you make informed decisions about your healthcare coverage based on your personal health needs and financial situation.

The main categories of extra coverage include Medigap policies (also called Supplemental Insurance), Medicare Advantage plans (also called Part C), and prescription drug coverage through Part D. Each option works differently and covers different services. For example, Original Medicare covers hospital stays and doctor visits, but beneficiaries pay deductibles and coinsurance amounts. Medigap policies help pay these out-of-pocket costs. Medicare Advantage plans often bundle hospital, medical, and prescription drug coverage into one plan, sometimes including dental or vision benefits.

According to the Centers for Medicare & Medicaid Services, approximately 28 million beneficiaries have Medigap coverage, while about 28 million are enrolled in Medicare Advantage plans. This means roughly one-third of all Medicare beneficiaries use some form of supplemental coverage. The remaining beneficiaries either rely solely on Original Medicare or have coverage through a former employer.

Practical Takeaway: Before exploring specific plans, understand that you have choices beyond Original Medicare. The guide walks through what each option covers, what it costs, and how to think about which might match your situation.

How Medigap Policies Work and What They Cover

Medigap, or Supplemental Insurance, is a policy sold by private insurance companies that helps pay for costs that Original Medicare doesn't cover. These costs include deductibles, coinsurance, and copayments. Medigap does not cover services that Medicare doesn't cover, such as dental work, vision care, or hearing aids (with limited exceptions).

There are currently 10 standardized Medigap plans, labeled A through N. Each plan offers a different combination of coverage. For example, Plan A is the most basic and covers certain hospital coinsurance and copayments. Plan G covers most of the same items as Plan A, plus the Part B deductible. Plan N has lower monthly premiums but may have higher out-of-pocket costs when you visit the doctor.

The standardization means that Plan G from one insurance company covers the same things as Plan G from another company—the difference is only in price and customer service. This makes it straightforward to compare costs between insurance companies. According to data from the Kaiser Family Foundation, average Medigap premiums range from around $100 to $300 per month, depending on the plan and your location.

Medigap policies do not include prescription drug coverage. If you want drug coverage with a Medigap policy, you must purchase Medicare Part D separately through a standalone prescription drug plan. You can change Part D plans each year during the annual enrollment period, but Medigap plans work differently—you may face medical underwriting if you switch plans outside certain time windows.

Timing matters when purchasing Medigap. When you first turn 65 and enroll in Medicare Part B, you have a six-month period called the "Medigap Open Enrollment Period." During this time, insurance companies cannot deny you coverage or charge you more based on pre-existing conditions. If you purchase Medigap outside this window, some companies may charge higher premiums or refuse coverage based on your health history.

Practical Takeaway: If you're considering Medigap, research the 10 plan options to understand which combination of covered costs matches your expected healthcare needs. Compare prices from multiple insurance companies, as the same plan varies significantly in cost.

Medicare Advantage Plans as an Alternative to Original Medicare

Medicare Advantage, also called Part C, is an alternative to Original Medicare. Instead of receiving coverage through the government program, you enroll with a private insurance company that contracts with Medicare. The insurance company agrees to provide all the benefits that Original Medicare covers, usually with lower out-of-pocket costs for routine care.

Medicare Advantage plans often include benefits that Original Medicare doesn't offer, such as dental, vision, hearing, or gym memberships. Some plans offer transportation services to medical appointments or meal delivery programs. These extra benefits vary by plan and by region. According to the Kaiser Family Foundation, about 51% of Medicare beneficiaries are now enrolled in Medicare Advantage plans, a significant increase from prior years.

However, Medicare Advantage plans typically operate with networks. This means you generally must receive care from doctors, hospitals, and other providers within the plan's network. If you see an out-of-network provider without authorization, you may pay higher costs or the plan may not cover the service at all. Some plans offer out-of-network coverage for emergencies, but coverage varies.

Medicare Advantage plans also often have different cost structures than Original Medicare plus Medigap. Instead of paying a monthly premium for Medigap on top of your Part B premium, you pay one premium for your Medicare Advantage plan. Many Medicare Advantage plans have $0 premiums, meaning you pay only your Part B premium. However, you may pay copayments or coinsurance when you receive care. Some plans have annual out-of-pocket maximums—if your costs reach this limit, the plan covers remaining covered services at no cost for the rest of the year.

Medicare Advantage plans must include prescription drug coverage (Part D is built in), so you don't purchase a separate drug plan. However, the formulary—the list of covered medications—may differ from other drug plans, and you may need prior authorization before the plan covers certain drugs.

Practical Takeaway: Compare the trade-off between lower monthly premiums (or no premium) and potential higher costs when receiving care. If you prefer seeing the same doctors and hospitals consistently, check whether your preferred providers are in the plan's network.

Prescription Drug Coverage Under Medicare Part D

Medicare Part D provides prescription drug coverage. If you have Original Medicare and a Medigap policy, you must purchase Part D through a standalone Prescription Drug Plan (PDP). If you have a Medicare Advantage plan, drug coverage is included. If you don't have drug coverage and you should have it based on your income and resources, you may face a permanent penalty if you later enroll.

Part D plans are offered by private insurance companies and vary by region. Each plan has a formulary—a list of covered medications organized by tier, or category. Medications in lower tiers typically cost less out-of-pocket, while those in higher tiers cost more. If your medication isn't on the formulary, you may need to pay out-of-pocket or request an exception from the plan.

Part D has several cost phases. The plan covers part of your drug costs after you pay a deductible (up to $505 in 2024). As you continue to use drugs, you enter the "donut hole," a coverage gap where you pay a larger share of drug costs. Once your total out-of-pocket spending reaches a threshold (about $5,030 in 2024), you enter "catastrophic coverage," where the plan covers most costs and you pay a small copayment. The exact amounts change annually.

Part D premiums, deductibles, and formularies change each year. You have an annual opportunity, from October 15 to December 7, to review plans and switch if you find a plan with lower costs for your specific medications. This annual review is important because a plan that was affordable one year might become expensive if your medications change or if the plan's costs increase.

According to AARP research, beneficiaries who don't review their Part D coverage annually may pay hundreds of dollars more per year than they would with a better-matched plan. The Social Security Administration sends a notice each October highlighting ways to review your coverage.

Practical Takeaway: List your current medications and review Part D plans annually during the enrollment period. Use the Medicare Plan Finder tool on Medicare.gov to compare how much each plan would cost for your specific medications and find plans that offer the best value for your prescriptions.

Special Circumstances and Coverage Considerations