Jeffrey Wade
Medicare and supplemental insurance for retirees can be a complex topic, with retirees potentially facing significant financial consequences if they do not understand how their insurance works. Medicare is the primary payer, covering costs up to its limit, after which a secondary payer must cover the remaining balance. Supplemental insurance, or Medigap, is extra insurance that retirees can purchase to cover out-of-pocket costs not covered by Medicare. While retirees may be offered health coverage by their former employers, it is important to understand how this retiree coverage works with Medicare to ensure that medical costs are covered.
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What You'll Learn
Medicare and retiree coverage
Medicare is a health insurance program for people aged 65 and over, but it can also cover younger people with disabilities or those with specific health conditions, such as End-Stage Renal Disease. Medicare consists of several parts, including Part A (Hospital Insurance) and Part B (Medical Insurance).
Retiree coverage can work alongside Medicare to provide additional benefits. Your employer or union may offer retiree coverage for you and/or your spouse, which can include extra benefits or limits on payouts. It's important to understand how your retiree coverage works with Medicare, and you can do this by contacting your employer's benefits administrator and asking for a copy of your plan's benefit booklet.
If you have both Medicare and retiree coverage, each type of coverage is called a "payer". The "primary payer" pays up to its coverage limit and then sends the remaining balance to the "secondary payer". If the secondary payer doesn't cover the remaining balance, you may be responsible for the remaining costs.
You can also purchase Medicare Supplement Insurance, known as Medigap, from a private health insurance company to help pay your share of out-of-pocket costs in Original Medicare. Medigap policies can also provide coverage when travelling outside the US, but they generally do not cover long-term care, vision, dental, hearing aids, private-duty nursing, or prescription drugs.
It's worth noting that retiree health insurance has become less prevalent over the past decade, with Medicare-eligible retirees reporting lower enrollment rates.
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Medicare Supplement Insurance (Medigap)
Medicare Supplement Insurance, also known as Medigap, is extra insurance that retirees can buy from a private health insurance company. This insurance helps cover out-of-pocket costs in Original Medicare (Part A and Part B). Generally, to buy a Medigap policy, you must already have Original Medicare, which includes Part A (Hospital Insurance) and Part B (Medical Insurance).
Medigap fills in some of the gaps in Medicare coverage, such as coinsurance and deductibles. It's important to note that Medigap policies don't cover everything, and there may be some out-of-pocket costs associated with them. Additionally, the cost of Medigap policies can vary, so it's essential to compare prices and understand the coverage before purchasing.
If you have retiree coverage from your employer or union, it may limit how much it pays towards your out-of-pocket costs. In some cases, it might only start paying after your out-of-pocket expenses reach a certain maximum amount. Therefore, it's crucial to understand how your retiree coverage works with Medicare. You can speak to your job's benefits administrator to clarify how your retiree coverage and Medicare will coordinate benefits.
Additionally, you can contact your State Health Insurance Assistance Program (SHIP) for free advice on whether to purchase a Medigap policy if you have retiree coverage. They can provide personalized counselling to help you understand your coverage options and make informed decisions about your health insurance choices. Remember that Medicare typically pays first after retirement, so understanding the coordination of benefits between your retiree coverage and Medicare is essential.
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Medicare Part A and Part B
Medicare Part A
Medicare Part A covers inpatient hospital stays, home health care, and some skilled nursing facility care. It is not entirely free, and for full coverage, one must pay a monthly premium and meet a deductible. The monthly premium for Part A in 2024 is $505 if an individual has less than 30 quarters of Medicare-covered employment, and $278 if an individual has 30 to 39 quarters of Medicare-covered employment. In 2025, these figures will be $518 and $285, respectively. Most people do not pay a monthly premium for Part A because they or their spouse have 40 or more quarters of Medicare-covered employment.
Medicare Part B
Medicare Part B covers doctor visits, outpatient therapy, and durable medical equipment. It is optional and requires the payment of a monthly premium and deductible. The monthly premium for Part B in 2025 is $185 for individuals with an income of $106,000 or less and couples with a joint income of $212,000 or less. The premium increases depending on the income bracket and whether taxes are filed independently or jointly. Part B also covers some preventive services like exams, lab tests, and screening shots to help prevent, find, or manage a medical problem.
Medicare Advantage Plans
Medicare Advantage Plans, also known as Part C, are offered by private health insurance companies. These plans cover and pay for services instead of Original Medicare, and they must provide the same coverage as Original Medicare. They can also offer extra benefits, such as vision, hearing, and dental services, which are not covered by Original Medicare.
Prescription Drug Coverage
Prescription drug coverage, also known as Part D, is provided only through private insurance companies that have contracts with the federal government. It is never provided directly by the government, unlike Original Medicare. Part D provides a much wider range of coverage of vaccines and outpatient prescription drugs than Part B.
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Medicare and other insurance
Medicare is a federal program that provides health insurance coverage for people aged 65 and older, as well as some younger people with disabilities. It is important to understand how Medicare works with other types of insurance, such as retiree coverage, group health plans, or Medicaid.
When you have Medicare and other health insurance, each type of coverage is called a "payer". The order of payment, known as "coordination of benefits", determines which insurance pays first. In most cases, Medicare pays first after you retire, and your retiree coverage fills in some of the gaps in Medicare coverage, such as coinsurance and deductibles. However, it is essential to check with your benefits administrator to understand the specifics of your retiree coverage and how it coordinates with Medicare.
Medicare has two main parts: Part A (Hospital Insurance) and Part B (Medical Insurance). You can choose to receive your Medicare coverage through Original Medicare or Medicare Advantage. Original Medicare allows you to see any doctor or hospital that accepts Medicare nationwide, and you pay for services as you receive them. Medicare pays part of the cost, while you pay your share. To help with these out-of-pocket costs, you can purchase Medicare Supplement Insurance, also known as Medigap, from private insurance companies. Medigap policies can fully or partially cover Medicare Part A and Part B cost-sharing requirements, including deductibles, copayments, and coinsurance. Federal law provides guaranteed issue protections for Medigap policies during a one-time, six-month open enrollment period for individuals aged 65 and older when they first enrol in Medicare Part B.
Medicaid, a federal-state program, provides supplemental coverage for Medicare beneficiaries with low incomes and modest assets. In 2022, 19% of all Medicare beneficiaries received supplemental coverage through Medicaid. Additionally, employer or union-sponsored retiree health plans can provide coverage alongside Medicare Advantage plans. In 2022, 18% of Medicare Advantage enrollees had coverage from a union or employer-sponsored retiree health plan.
If you have questions about how your Medicare coverage coordinates with other insurance, you can contact the Benefits Coordination & Recovery Center or seek free advice from your local State Health Insurance Assistance Program (SHIP).
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Medicare drug coverage
If you are enrolled in Original Medicare, you can still get drug coverage through a separate Medicare drug plan. However, this may not be possible without losing your current health coverage, depending on your specific plan. For example, if you are in a Health Maintenance Organization or Preferred Provider Organization and join a separate drug plan, you will be disenrolled from your Medicare Advantage Plan and returned to Original Medicare.
If you have retiree coverage, your benefits may be similar to those offered by Medicare Supplement Insurance (Medigap). Medigap is extra insurance that can be purchased from a private company to help pay your share of costs in Original Medicare. You can contact your local State Health Insurance Assistance Program (SHIP) to receive free advice about whether to buy a Medigap policy.
If you have Medicare and other health insurance, each type of coverage is called a "payer." In some cases, your employer or union may offer retiree coverage that limits how much it will pay. For example, it might only start paying your out-of-pocket costs once they reach a maximum amount. You can contact the Benefits Coordination & Recovery Center at 1-855-798-2627 (TTY: 1-855-797-2627) if you have questions about who pays first or if your coverage changes.
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Frequently asked questions
Medicare Supplemental Insurance, also known as Medigap, is extra insurance that can be purchased from a private health insurance company to help pay your share of out-of-pocket costs in Original Medicare. Medigap policies often cover costs when travelling outside the US, but generally do not cover long-term care, vision, dental, hearing aids, private nursing, or prescription drugs.
To purchase a Medigap policy, you generally need to have Original Medicare, which includes Part A (Hospital Insurance) and Part B (Medical Insurance). You may not be able to buy a Medigap policy, or you may have to pay more, if you do not buy it within 6 months of getting Parts A and B.
Medicare and retiree coverage can work together, with Medicare typically paying first. Retiree coverage may function similarly to a Medigap policy, filling in some of the gaps in Medicare coverage, such as deductibles and coinsurance. However, retiree coverage may not pay medical costs during periods when you were eligible for Medicare but did not sign up for it.
