Do I Need Supplemental Insurance With Medicare?

As advantageous as the Federal Medicare program is, it only covers a part of your health care costs. When enrolled in the Medicare Part A and Part B plan, you will still be required to pay several out-of-pocket costs, such as deductibles, coinsurance, or copayments for medical services.

To help reduce costs associated with Original Medicare coverage, many individuals decide to add a Medicare supplement insurance policy to their existing Medicare plan. Such policy, otherwise known as the Medigap policy, can provide Original Medicare beneficiaries with several advantages, including setting a limit on your out-of-pocket expenses. Is it worth your money, though? That’s the question we’ll try to answer in the following paragraphs.

If you’re new to Medicare and want to learn whether supplementing your insurance plan with additional coverage might be a good option, this guide will provide you with all the information you need.

What Is a Medicare Supplement Insurance Plan?

As stated, Original Medicare, which consists of Part A and Part B, doesn’t cover all health care costs. You will still be required to pay your monthly premiums, annual deductibles, coinsurance, copayments, and other medical-related expenses. Original Medicare also has several coverage gaps, including the lack of hearing, dental, and vision coverage.  Please see my article “Does Medicare Cover Dental?” for details on what dental and vision services Medicare covers and how to improve on it.

All these out-of-pocket expenses can quickly add up and put you under pressure, which is something you’d want to avoid when your health and savings are at stake. To help cover these gaps and expenses, you can opt for supplemental coverage for your Medicare plan. Medigap coverage can help pay the remaining health care costs your current Medicare plan doesn’t cover.

What’s important to note here is that Medigap plans don’t add any additional coverage to your existing health insurance plan. They only cover the costs that Original Medicare plans don’t cover for the services approved by Medicare. Your Medicare supplement plan will work hand-in-hand with your Medicare insurance, guarding you against unexpected medical expenses that tend to increase as you get older.

Also, unlike the standard Medicare plan, Medigap policies aren’t offered by the government but by private insurance companies. The only difference between them, however, is the monthly premium amount. The plan benefits are standardized by the federal government, ensuring you receive the same coverage regardless of the insurance company. What will vary is the value of premiums you’ll be required to pay once enrolled in the Medigap policy. These can vary by as much as 300% for the same plan.

What Are the Benefits of Medicare Supplement Plans?

There are twelve standardized Medigap plans – A, B, C, D, E, F, G, K, L, M, and N (since 2020, plans C and F are no longer eligible for new Medicare beneficiaries). Plans F & G both also have high deductible options. Each offers slightly different benefits, although there are several mutual out-of-pocket costs all these policies cover, including:

• Medicare Part A coinsurance and hospital costs up to a period of 365 additional days after using up Medicare benefits;
• Medicare Part A deductible
• Medicare Part B coinsurance and copays (the 20 percent);
• The first three pints of blood each calendar year;
• Part A hospice care coinsurance or copay payments;
• Skilled nursing facility care coinsurance.

Several Medicare supplement plans also cover some medical care when traveling outside the United States. That can be a significant advantage if you travel abroad a lot.

A Medigap plan covers the copays, deductibles and coinsurance left as your responsibility by Original Medicare.  For prescription coverage  you need to enroll in a Medicare Part D prescription drug plan.

Do You Need Medigap Insurance?

Answering the question given in the title – do I need Medicare supplement insurance? That depends. A Medigap plan can limit your maximum potential out of pocket costs for outpatient and hospital coverage, protecting you from unexpected health care costs. This can prove to be exceptionally beneficial as your doctor visits become more frequent with age.

Essentially, adding supplemental insurance to your Medicare health coverage is an excellent idea if:

• Wish to limit your financial risk without limiting your insurance coverage. With some plans, you can experience multiple hospital stays, doctor visits, and other medical services with as little as a few hundred dollars in out-of-pocket costs;
• Your personal financial situation doesn’t allow you to cover additional expenses Medicare plans don’t cover;
• You often travel abroad and want insurance coverage for emergency medical care outside the United States standard Medicare options don’t typically provide.

Still, despite its numerous benefits, you might be wondering whether Medicare supplement insurance is worth it. After all, Medicare medical insurance isn’t free. Wouldn’t then Medigap only add another expense to the tally? Not really.

Sure, your Medicare supplement insurance plan requires you to pay premiums. However, in exchange, it will cover the gaps in insurance that standard Medicare coverage doesn’t, saving you significant amounts of money in the long run. A study by the Kaiser Family Foundation found that, on average, people with a Medicare supplement plan received benefits greater than their premium cost. If they do, however, opting for Medicare supplement insurance is an excellent idea.

How to Enroll In a Medicare Supplement Plan?

One of the benefits of working with an independent Medicare insurance broker is our ability to help you shop for your plan through all the major insurance companies. We can help you find the right plan for your needs and your budget with an insurance company known for its price stability. To apply for Medigap coverage, you must be enrolled in Medicare Part A and Part B.

As for how and when to apply, the best time to sign up for Medicare supplement insurance is during your six-month Medicare Supplement Open Enrollment Period (OEP). The OEP starts the month you’re 65 and enrolled in Medicare Part B. During these six months, no private insurance company can deny you a coverage plan or raise your premium due to your health conditions.

If you don’t apply for Medigap during the Open Enrollment Period, you can still apply for a policy but may need to qualify medically. Absent any state rules to the contrary, an insurance company can deny you a policy or charge you more based on your health history.

Once you enroll in a Medicare supplement plan, you’ll be charged premiums paid directly to the insurance company in addition to your standard Medicare Part B premium. You’ll also be eligible to pay for Medicare Part D prescription drug coverage.

Medicare Supplement Insurance vs. Medicare Advantage Plans

Medigap is your only solution for covering gaps in the Original Medicare. Another option you can opt for is to trade in your Original Medicare for Medicare Advantage Plans. 

Such plans must offer at least the same benefit categories as Medicare Part A and B without a supplement, although many Advantage plans also provide additional covered health care costs. For instance, as opposed to Medigap plans, a Medicare Advantage plan can offer prescription drug coverage, vision and hearing coverage, and wellness programs.

However, the key difference is that while Medigap works as supplemental insurance to your original Medicare plan, Medicare Advantage plans are a private replacement for the federal Medicare program. It’s also important to note here that these two policies can’t work together. You can either enroll in Medigap or Medicare Advantage, not both at the same time as they work as Medicare supplements, often covering the same costs and gaps.

Which one is better? That depends on your individual circumstances. For example, Medigap grants you more freedom of choice than Medicare Advantage. It’s also a better option if you often travel outside the US. As for the costs, the Medicare supplement typically has higher premiums, but you pay very little for medical services. The Medicare Advantage plan typically has lower premiums, but you pay much more when you need healthcare. 

Key Takeaways – Do I Need Medicare Supplement Insurance?

While Original Medicare pays and covers numerous medical care costs, it has several coverage gaps and no maximum out-of-pocket financial exposure. It does not offer peace of mind. That’s especially true as you get older and your medical bills and doctor visits are likely to increase. To ensure you get all the medical help you need without making a dent in your personal finance, you may consider getting supplemental insurance to your Original Medicare plan.

As reviewed above, Medicare supplement insurance (Medigap) can prove to become an invaluable help when taking advantage of Original Medicare benefits. Medigap policy supplements Medicare Part A and B, covering numerous expenses standard Medicare plans don’t, adding an extra layer of support to your health insurance.

Do you need it, though? The answer is likely yes. While it’s not compulsory, Medicare supplement insurance can prove to be a lifesaver (literally). Of course, the final decision will depend on your current circumstances. However, given how fast things can change, especially after you’re 65, investing in a Medigap plan will provide you and your loved ones with peace of mind that your health needs are fully covered.

FAQs

What is Medicare insurance?

Medicare is a federal health insurance program for individuals who are 65 or older, younger people with specific disabilities, and people with End-Stage Renal Disease. Medicare is divided into three separate plans, Part A, B, and D, each covering specific health care services. Essentially, Medicare Part A is hospital insurance, Part B outpatient medical insurance, and Part D prescription drugs coverage.

However, while Original Medicare covers numerous services, there are several coverage gaps. Individuals can then opt for Medicare Advantage or Medigap. Both policies are offered by private insurance agencies that are licensed to sell Medicare-related policies. The two policies operate on monthly premiums, covering expenses Medicare Parts A and B don’t.

How much does Medicare supplement insurance cost?

That will depend on an insurance company. While the plan benefits are standardized, plan premiums can vary greatly. That is where we can help.  We have years of experience and know which companies offer the best price stability. We compare Medigap plans based on their history of rate increases. Essentially, you want to enroll in a Medigap plan with competitive rates and a low rate trend.

As for the services covered, Medigap plans are federal government-standardized. That said, you can expect all Medigap insurers to offer identical supplemental coverages. The only difference is the amount you’ll be charged to pay.

How does Medigap work?

Medicare supplement insurance covers some of the expenses Original Medicare plans don’t. Supplemental insurance policies are sold by licensed insurance agencies. To become eligible for Medigap, you’ll need to be at least 65 years old and be enrolled in Medicare Part A and B.

How does it work? Medicare coordinates the billing and claims between your Original Medicare coverage and supplemental insurance plans. The provider will bill your Medicare first. Then Medicare will electronically communicate the bill to the Medigap insurance company. Next, depending on your coverage plan, your medical provider will bill you for any remaining health care costs, for example, the Part B deductible. For more, I suggest reading the Plan N review and Plan G blog posts on this site.

Also, mind that Medigap doesn’t expand your coverage plan. It merely covers Original Medicare expense gaps.

Can I have Medigap and Medical Advantage at the same time?

No, you can’t have Medigap and Medical Advantage simultaneously. In essence, having both would mean you have to pay for duplicate coverage, which doesn’t make any financial sense. An insurance agent won’t even sell you Medigap or Medicare Advantage if you’re currently enrolled in one and have no plan to cancel your current coverage.

For instance, if you want to start your Medicare supplement insurance, you will need to leave your Medicare Advantage plan. You’ll then start your Medigap the day after your Advantage plan ends.

How can Medicare supplement insurance help me?

Getting Medicare supplement insurance will provide you with numerous benefits, covering expenses and gaps Original Medicare fails to cover. One of the most significant advantages of Medigap is that you can see any medical provider in the U.S. or its territory and that no insurance company has a say in your coverage. Your medical care is between you and your doctor. Some coverage plans also include emergency medical coverage outside the United States. Other than that, Medigap offers freedom of choice as there are several plans you can opt for, each covering specific services.

Can I cancel my Medigap coverage?

Only you can cancel your insurance. As long as you keep paying your premiums, the coverage is renewable for the rest of your life. No one can cancel your coverage or change your benefits.