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Supplemental Insurance with Medicare: Is it Essential for Your Needs?

Do You Really Need Supplemental Insurance With Medicare? 

The value of supplemental insurance depends on how you receive your Medicare benefits and what types of healthcare services you need. Medicare Supplement Insurance helps people with Original Medicare pay some of their remaining healthcare costs, such as copayments and coinsurance. This coverage can be worthwhile, especially if you have ongoing health needs and worry about budgeting for out-of-pocket expenses.

While Medicare supplement plans can provide added coverage, they come at an additional cost. It’s important to weigh the benefits against the cost to determine if a supplement plan is right for you. In this article, we’ll break down the pros and cons of Medicare supplement plans and help you decide if they’re worth the investment.

The Growing Popularity of Medicare Supplement Insurance 

Medicare Supplement Insurance (Medigap) is increasingly popular among people with Original Medicare because it helps fill the “gaps” in Medicare Part A and Part B. As of December 2021, 40.9% of all Original Medicare enrollees had Medicare Supplement Insurance, up from 33.7% just five years earlier. 

This supplemental coverage helps people with Medicare budget for medical expenses and shield themselves from high cost-sharing expenses. Research shows that, compared to people without Medicare Supplement Insurance, beneficiaries with this coverage are about three times less likely to have trouble paying medical bills.

How Medicare Supplement Plans Work 

Medicare Supplement Plans are designed to complement enrollees’ Original Medicare coverage. These plans must offer standardized benefits to make it easier for consumers to compare policies. They’re regulated at the state level, so the types of standardized plans available to you vary depending on where you live.

In most states, there are ten standardized Medigap plans labeled with letters: Plans A, B, C, D, F, G, K, L, M, and  N. Plans with the same letter cover the same set of benefits, no matter which insurer sells them. Massachusetts, Minnesota, and Wisconsin are the only states that standardize their Medigap policies differently.

Whichever standardized plan you choose, it works alongside Original Medicare to pay for covered healthcare services. Original Medicare pays for its portion first; then, the Medigap plan pays its share of the remaining costs.

Eligibility Criteria

Consumers become eligible to buy a Medigap plan when they’re both 65 and older and enrolled in Medicare Part A and Part B. Some states extend Medigap eligibility to Medicare beneficiaries under 65.

Medigap plans only work with Original Medicare. People who are enrolled in Medicare Advantage are not eligible to buy a Medigap policy unless they’re switching back to Original Medicare.

What Do Medigap Plans Cover? 

Coverage varies from one standardized plan to another. All ten lettered plans help enrollees pay coinsurance or copays for Part A hospital care, Part A hospice care, and Part B services. They also add an extra 365 lifetime reserve days once Medicare’s hospital benefits are exhausted. It is important to note that plan F is no longer available to new Medicare recipients.

However, outside of those benefits above, these plans differ significantly:

BenefitsPlan APlan BPlan CPlan DPlan FPlan GPlan
Plan MPlan N
Part A coinsurance and hospital costs for up to 365 additional days after Medicare benefits are disbursedYesYesYesYesYesYesYesYesYesYes
Part B coinsurance or copaymentYesYesYesYesYesYes50%75%Yes100% coinsurance; but copays may still apply
Part A hospice care coinsurance or copaymentYesYesYesYesYesYes50%75%YesYes
Part A deductibleNot coveredYesYesYesYesYes50%75%50%​Yes
Part B deductibleNot coveredNot coveredYesNot coveredYesNot coveredNot coveredNot coveredNot coveredNot covered
Part B excess chargeNot coveredNot coveredNot coveredNot coveredYes100%Not coveredNot coveredNot coveredNot covered
Out-of-pocket limitN/AN/AN/AN/AN/AN/A$6,940 in 2023$3,470 in 2023N/AN/A
Blood (first three pints)YesYesYesYesYesYes50%75%YesYes
Skilled nursing facility care coinsuranceNot coveredNot coveredYesYesYesYes50%75%YesYes
Foreign travel exchange up to plan limitsNot coveredNot covered80%80%80%80%Not coveredNot covered80%80%

Is Medigap Worth It? When It May Save You Money

Medigap plans charge a separate monthly premium, but this additional cost is well worth it for some beneficiaries. Original Medicare does not limit members’ annual out-of-pocket spending, so without supplemental coverage, people who experience serious or recurring health issues may face significant medical bills.

However, paying an additional premium for Medigap may not always make financial sense. For instance, some beneficiaries choose to forgo Medigap because they’re generally healthy and rarely seek medical care or because they already have supplemental coverage.

  • Lower out-of-pocket costs
  • Standardized plan design
  • Nationwide coverage
  • Guaranteed enrollment period
  • Monthly premiums
  • Difficult to switch plans
  • Few coverage options

Benefits of Medicare Supplement Plans 

Medicare Supplement Plans offer many potential benefits for people with Original Medicare. These include:

  • Lower out-of-pocket costs: Medigap plans cover part or all of the remaining costs in Original Medicare, such as copayments, coinsurance, and deductibles. This helps protect enrollees from high healthcare costs.
  • Standardized plan design: By law, Medigap insurers can only sell standardized plans. This makes it easier for consumers to compare their coverage options.
  • Nationwide coverage: Medigap plans generally do not have network restrictions, so enrollees can use them with any doctor who takes Medicare anywhere in the United States. 
  • Guaranteed enrollment period: Medicare beneficiaries get a one-time Medigap Open Enrollment Period when they cannot be denied a Medicare Supplement Plan, even if they have health issues.

Drawbacks of Medicare Supplement Plans 

While there are many advantages of Medigap plans, this supplemental coverage also has some drawbacks to consider, including:

  • Monthly premiums: Medigap enrollees pay premiums in addition to their Medicare Part A and/or Part B premiums. This cost is a strain on some enrollees’ budgets.
  • Difficult to switch plans: Outside of the Medigap Open Enrollment Period, insurers use medical underwriting to process applications. People with health issues may find it difficult or impossible to switch Medigap plans if their needs change.
  • Few coverage options: While Medigap standardization makes it easier to compare policies, it also limits beneficiaries’ plan options. In most states, insurers are only allowed to sell the ten plans.

See It In Action

Consider a 65-year-old woman who enrolls in Medigap Plan G. Her monthly premium is $250, which she pays in addition to her Part B premium.

After experiencing a serious fall, she was admitted to the hospital for ten days. She’s responsible for the Medicare Part A deductible ($1,600) and 20% of the costs of the doctor services she receives in the hospital. Plan G fully covers these costs.

To recover from her hospitalization, she needs to stay in a skilled nursing facility for 30 days. The first 20 days are fully covered, but for days 21 through 30, the Medicare copayment is $200 per day. Fortunately, her Medigap plan covers 100% of the cost, $2,000 in total.

Medigap vs. Medicare Advantage

Medicare Advantage is a different way for people with Medicare to get their health benefits. Private insurance companies sell Medicare Advantage Plans that cover the same Part A and Part B benefits as the traditional government program. Often, these private plans include additional benefits, such as drug coverage or dental, vision, and hearing care.

Beneficiaries have the option to get their coverage through Original Medicare, with or without a Medigap plan, or through Medicare Advantage. Both options provide comprehensive health coverage, but depending on your individual needs, you may prefer one over the other. However, it’s important to remember you cannot access Medigap if you have Medicare Advantage.

Health Coverage Needs 

Consider your current and future health coverage needs to choose between Medigap and Medicare Advantage. Combining Original Medicare with Medigap may make sense for people with recurring health needs who worry about budgeting for out-of-pocket Medicare costs.

People who regularly use health services that Original Medicare does not cover, such as dental or hearing care, may prefer to enroll in a Medicare Advantage Plan that includes these benefits.

Network and Travel Needs 

Before deciding on Medigap or Medicare Advantage, consider your travel plans. Medigap provides the same nationwide coverage as Original Medicare, so it appeals to people who travel frequently. The lack of network restrictions also makes it easier for people with health issues to see out-of-area specialists.

Medicare Advantage Plans typically limit coverage to a network of providers in a defined service area. They may be a good option for people who travel infrequently and do not mind getting care from doctors who accept the plan.

Prescription Drug Needs 

The availability of prescription drug coverage is another key difference between Medigap and Medicare Advantage. Medigap policies do not cover prescription drugs. However, Original Medicare enrollees who want drug coverage can join a standalone Part D drug plan.

The vast majority of Medicare Advantage Plans include coverage for prescription drugs. This appeals to people who want to get their Medicare benefits and drug benefits through a single plan.

Should You Get Medicare Supplement Insurance?

Medicare Supplement Insurance is the right choice for some people with Medicare, while others find they’re better served by other coverage options. 

Consider Medigap If… 

  • You do not have other supplemental coverage: Original Medicare does not cap consumers’ spending on copayments, coinsurance, and deductibles. People who use it as their only insurance may face high out-of-pocket costs, especially if they have serious or ongoing health concerns.
  • You worry about budgeting for out-of-pocket Medicare costs: Medigap plans cover some or all of beneficiaries’ deductibles, copayments, and coinsurance. This helps make healthcare spending more predictable. 
  • You want coverage that works nationwide: Medigap is accepted by any doctor, provider, or hospital that takes Medicare. This makes it an appealing supplement for people who travel frequently.

Consider Skipping Medigap If… 

  • You already have supplemental coverage: Many beneficiaries can access other health insurance that works with Original Medicare, such as Medicaid or retiree health coverage from an employer. These plans help cover costs that Original Medicare does not.
  • You cannot afford Medigap premiums: Lower-income beneficiaries who need help with out-of-pocket Medicare costs may be eligible for assistance through their state’s Medicaid program.
  • You want coverage for dental, hearing, or vision care: Original Medicare does not cover these routine services, nor do Medigap plans. Many Medicare Advantage Plans include these supplemental benefits.

How to Enroll in Medicare Supplement Insurance

Insurers sell Medigap policies year-round, but typically, the best time to enroll is during the Medigap Initial Enrollment Period. This 6-month window starts the month you’re both 65 and enrolled in Part B. During this period, you can buy any Medigap policy for sale in your state without medical underwriting.

Whenever you choose to sign up for Medigap, the enrollment process is fairly simple:

  1. Choose a standardized plan: Each standardized Medigap plan covers a specific set of benefits. To choose the right plan for your situation, consider your current and future health needs.
  2. Compare policies in your area: Search for insurers that sell the plan you want, and remember that each policy with the same letter covers the same benefits. The only differences are the monthly premiums and the insurers’ customer service.
  3. Contact the insurer to apply: Insurers accept applications through their websites, by phone, or by mail. Consumers have the option to apply on their own or get help from an insurance agent or broker.

Alternatives for Supplementing Original Medicare

If you want to supplement your Original Medicare coverage, buying a Medigap policy is not your only option. Private insurance companies sell a variety of standalone plans that work alongside Original Medicare, such as:

  • Medicare Part D (Drug Coverage): Part D plans add prescription drug coverage to Original Medicare. They cover both generic and name-brand medications.
  • Hospital indemnity insurance: These plans pay a set dollar amount when a person is hospitalized. The amount ranges from $100 to $3,000 a day and can be used to pay for Medicare Part A deductibles or other costs.
  • Critical illness insurance: These plans pay a lump-sum benefit when a person is diagnosed with a serious illness covered by the policy, such as cancer or stroke. Funds help plan members pay for expenses not covered by Medicare.
  • Long-term care insurance: These plans help pay for ongoing care in a nursing home, assisted living facility, or adult day care center, services generally not covered by Original Medicare.

Putting It All Together

Determining whether you are the right person to enroll in Medigap depends on your personal circumstances. Before applying, consider your current and future health needs, your budget for medical expenses, and any other health insurance plans you have.

Buying a Medigap plan is a good option for some Medicare beneficiaries, including those who do not have other supplemental coverage and who want help paying for their remaining costs in Medicare. On the other hand, Medigap coverage may not be the right choice for some consumers, including those who already have supplemental coverage from another source. 

For help deciding if Medigap is worth it in your situation, talk to a trusted insurance agent.

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You’re just a few steps away from seeing your Medicare plan options.

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