Medicare facts: Coverage gaps

Key Points

  • Medicare doesn’t cover some of the biggest health care costs in retirement.
  • A high income surcharge increases the cost for higher earners.
  • Enrollment is not automatic and you will not be notified when it’s time to sign up.
  • Supplemental coverage (Medigap and Part D prescription drug plan) can help fill the gaps in Medicare Parts A and B coverage.

Don’t miss Medicare open enrollment: Oct. 15 – Dec 7

Medicare beneficiaries can make the following changes during open enrollment:

  • Change from basic Medicare to a Medicare Advantage plan, or vice versa.
  • Switch between Medicare Advantage plans.
  • Enroll in a Medicare Part D prescription drug plan, switch from one Part D plan to another or drop Medicare prescription drug coverage completely.

Many people don’t realize that Medicare doesn’t cover some of the biggest health care costs in retirement. In fact, six out of 10 people expect Medicare to cover most or all of their health care costs in retirement,1 and many may be surprised to discover gaps in coverage. Additionally, higher earners can pay up to three times more for monthly Part B premiums than those earning $85,000 or less ($170,000 or less for couples).

What does Medicare not cover?

  • The largest expense in retirement for many — long-term care — is not covered by Medicare.
  • Basic Medicare doesn’t cover vision, hearing or dental.

The different parts of Medicare

  • Part A: hospital insurance.  Covers hospital stays, certain procedures performed in the hospital, care at a skilled nursing facility and hospice care.
  • Part B: medical insurance.  Includes doctor visits, home health care services and laboratory tests.
  • Part C: Medicare Advantage.  Receive your Part A and Part B benefits — as well as additional services not covered by Medicare — by paying a monthly premium to a Medicare-approved private insurance company.
  • Part D: prescription drug coverage.  In 2016, once you and your plan have spent $3,310 on covered drugs, you’re in the coverage gap2, after which you’ll pay no more than 45% of the plan’s cost for covered brand-name prescription drugs.

Supplemental coverage: Medigap and Part D

Many people fill gaps in Medicare Parts A and B coverage by buying a supplemental policy called Medigap and a Part D prescription drug plan, or with a previously mentioned Medicare Advantage policy, which provides both medical and drug coverage from a private insurer.


  • This supplemental insurance is designed to cover Medicare deductibles, coinsurance and copays that would otherwise have to be paid out of pocket.
  • Medigap works only with Medicare (Parts A and B) and does not apply if you are enrolled in Medicare Advantage.
  • You must be at least age 65 to be eligible to purchase Medigap coverage, and you must purchase within six months after enrolling in Medicare Part B or there is no guarantee you will be able to get coverage.
  • There are 10 standard Medigap policies that vary in coverage from nursing care to overseas coverage.
  • These plans do not provide prescription drug coverage.

Medicare Advantage

  • These plans provide additional services that may include vision, hearing, dental and, often, health and wellness programs.
  • You pay a monthly premium, and copayments are usually less than the coinsurance and deductibles under Medicare Parts A and B.
  • Most include Medicare prescription drug coverage. Beginning Dec. 8, Medicare recipients can switch to a Five-Star Medicare Advantage plan.
  • Medicare uses a rating system to help you determine which Medicare Advantage and prescription drug (Part D) plan is best for you. The star ratings can be found in the Medicare Plan Finder tool or by calling 1.800.MEDICARE.