Is Medicare Supplement Insurance Right for You?

Every day, approximately 10,000 people in the United States celebrate their 65th birthday, adding to the nation’s ever-growing population of more than 54 million seniors.

The majority of these older people over the age of 65 will have access to Medicare. Of all Medicare beneficiaries, 54.5% are enrolled in Original Medicare, which consists of Medicare Parts A and B.

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The facts about Original Medicare

Medicare Part A is hospital insurance. It covers hospital care, home health care, skilled nursing care, surgery and other hospital health services.

Meanwhile, Medicare Part B covers a range of medically necessary and preventive services—including lab tests, vaccines, clinical tests, ambulances, durable medical equipment, mental health and other outpatient services.

However, there is a long list of things that are not covered by Original Medicare — such as long-term care, dental care, vision care, foot care, hearing aids, and more. In addition, Medicare Part A and B come with cost-sharing fees and other out-of-pocket costs that you will have to cover yourself.

For example, although you likely won’t have to pay a monthly premium for Medicare Part A, you’re still responsible for the $1,556 deductible per benefit period and any copayments related to hospital stays.

Likewise, Part B comes with monthly premiums of at least $170.10 (and up to $578.30, depending on your income) — in addition to a $233 annual deductible and a 20% coinsurance split. These are all the costs you have to pay out of pocket before Original Medicare pays anything.

What is Medicare Supplemental Insurance?

For these reasons, a March 2022 report from the Department of Health and Human Services (HHS) estimated that 32.9% of Original Medicare enrollees also have Medicare Supplemental Insurance.

Commonly known as Medigap insurance, Medicare Supplements are private health plans purchased by yourself that provide coverage for health services not included in Original Medicare. Depending on the Medigap plan you purchase, you may also get coverage for some or most of your out-of-pocket costs related to Medicare Parts A and B.

You can shop for a Medigap plan at Medicare.gov, contact your State Health Insurance Assistance Program (SHIP), or buy directly from health insurance companies such as UnitedHealthcare (UNH 0.57%), Humana (HUM 0.80%)or Anthem (now Elegance) (PRINCIPLE 2.39%).

No matter where you get your Medigap insurance, all plans are standardized and you can choose from eight different plans, labeled A through N. There used to be 10 plans, but Medigap Plans C and F have been discontinued and are not available to beneficiaries who eligible for Medicare as of January 1, 2020.

Some benefits are common to all supplemental insurance plans. For example, each Medigap plan covers Medicare Part A coinsurance costs and extends hospital coverage for an additional 365 days after Medicare benefits are exhausted. However, coverage for other items such as skilled nursing coinsurance fees or the Part B deductible will vary depending on the Medigap plan you choose.

As a result, it’s difficult to say how much your Medigap plan will cost, as pricing will vary widely depending on your plan type, insurance provider, state, age, marital status, and other factors. Generally speaking, however, premiums for Medicare supplement insurance range between $50 and $500 per month, while the national average monthly premium is around $150.

Do you need Medicare supplemental insurance?

Although Medicare supplement insurance is not cheap, it may be suitable for seniors who expect to be heavy users of health care services. Medigap can also be useful if you want coverage for services that Medicare does not cover.

In short, Medigap can generally help reduce your out-of-pocket health care costs. Some Medigap plans—like Plans K and L, for example—limit annual out-of-pocket costs for covered services to $6,620 and $3,310, respectively, in 2022.

Of course, it’s not surprising that Medigap plans with more comprehensive coverage will also come with higher monthly premiums, so you need to carefully weigh the trade-offs between higher premiums and more comprehensive coverage.

However, not all Medicare beneficiaries need a self-purchased Medigap plan. In fact, the same HHS report notes that a small majority — about 51.1 percent of beneficiaries — do not have Medigap insurance.

That’s because they have something else forms of supplemental coverage such as Medicaid, Tricare, or an employer-sponsored retiree insurance plan. If you’re part of this group and already have supplemental coverage, you probably don’t need to buy a Medigap plan with your own money.

On the other hand, about 15.9% of Original Medicare enrollees do not have any supplemental coverage. If you are healthy and think you won’t need to use many health care services, you can go without Medigap insurance. After all, it doesn’t have to, and avoiding a buy-your-own add-on plan can mean saving thousands of dollars a year.

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