How Supplementary Insurance Works With Medicare

May 7th 2016
For older Americans, it's not unusual to have several health insurance policies. In addition to Medicare, many retirees have supplementary insurance provided by a former employer, the military or a Medigap policy. Understanding how these policies all work together to provide more coverage can help you anticipate future medical costs and identify potentially expensive gaps in your insurance.
It's important to know that Medicare does not pay for any medical expenses incurred outside of the United States. Therefore, if you intend to travel, it's important to have international coverage during your trip. Some Medigap policies offer travel insurance coverage. Employer and retiree health insurance policies are also good places to look for medical coverage in case of an emergency while traveling.
Employer Health Insurance and Medicare
For people over the age of 65 who are still employed, employer health insurance will still be responsible for the majority of that person's medical costs. Since the employee's work health insurance is billed first, the employer policy is considered the primary payer. In this situation, because Medicare is billed after the employee health insurance policy has been billed, Medicare is considered the secondary payer. Health insurance policies for employers with less than 20 workers may be billed differently.
Retiree Supplementary Health Insurance and Medicare
Once you retire, even if you retain health insurance from your former employer, Medicare becomes the primary payer for all of your medical costs. Retiree insurance can help reduce out-of-pocket costs by becoming the secondary payer. It may also pay for items that Medicare does not cover, such as eyeglasses or hearing aids. 
Medicare and Medigap Supplementary Insurance
Medicare is the primary payer for people over the age of 65 with Medigap insurance. However, depending on the specific policy, people with Medigap insurance can expect some substantial benefits. Six Medigap policies cover the entire Medicare Part A deductible, while three policies cover a portion of the fee. Most Medigap policies will also pay additional nursing fees if you require more than 20 days of care. Six Medigap policies also cover emergency medical expenses in a foreign country. Each of the 11 Medigap supplementary insurance plans has different, yet standardized, coverage specified by a government agency. Check your specific policy to understand the coverage it provides.
Medicare and Veterans' Benefits
For military veterans, there are no primary or secondary payers. The Department of Veterans Affairs will pay for approved medical care. Medical care that falls under Medicare's coverage umbrella will be paid only by Medicare. Under most circumstances, only one type of insurance will pay for a medical procedure. Veterans do not have a secondary payer to cover deductibles, co-insurance and other medical costs not covered by Medicare.
Medicare and Medicaid
People who have both Medicare and Medicaid coverage can expect Medicare to make medical payments first. Then, any applicable supplementary insurance, such as employee health insurance, will be billed for the remainder of the medical fees. Finally, Medicaid will pay a portion of the remaining fees. For people without supplementary insurance, Medicare and then Medicaid will be billed.
Conditional Payments from Medicare
Under some circumstances, Medicare will pay for your healthcare costs even if another insurance plan should pay the medical fees. This situation can occur during a car accident, when another person's insurance should cover all medical costs associated with the accident. If the other insurance company fails to pay within 120 days, your doctor has the right to bill Medicare. Medicare will pay the bill but will pursue payment from the other driver's car insurance policy as well. Conditional payments are most common when no fault or liability insurance is responsible for medical costs, not another health insurance policy. Medicare may also make conditional payments for worker's compensation claims.
Understanding how your insurance policies work together will help you plan your retirement's health insurance coverage. By instructing your doctor to bill Medicare and your supplementary insurance, you can substantially reduce your out-of-pocket expenses. It's also important to identify gaps within your combined insurance policies. Medical assistance while overseas, for example, is an expense that won't be covered by Medicare or some supplementary insurance policies.
  • Medicare does not pay for medical care outside of the United States.
  • Find out which policy is the primary payer and which is the secondary payer to help calculate coverage.
  • Understand that Medicare and VA benefits cannot be applied to the same medical procedure. 
  • Conditional payments may prevent out-of-pocket payments, but Medicare must be repaid once another insurance company assumes responsibility. 

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