Is Medicare Supplement Insurance Right for You?

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

The vast majority of these older adults aged 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.

Image source: Getty Images.

The facts on Original Medicare

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

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

However, there’s a long list of things that aren’t covered by Original Medicare — like long-term care, dental care, vision care, foot care, hearing aids, and more. Additionally, Medicare Parts A and B both come with cost-sharing charges and other out-of-pocket costs that you’ll have to foot on your own.

For instance, even though you most likely won’t have to pay a monthly premium for Medicare Part A, you’re still responsible for the $1,556 deductible charged per benefit period and all co-pays associated with inpatient stays.

Similarly, 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 costs that you must pay out of pocket before Original Medicare pays anything.

What’s Medicare supplement insurance?

For these reasons, a March 2022 report by the Department of Health and Human Services (HHS) estimates that 32.9% of Original Medicare enrollees also have Medicare supplement insurance.

Commonly known as Medigap insurance, Medicare supplements are self-purchased private health plans that provide coverage for healthcare services that aren’t included in Original Medicare. Depending on the Medigap plan you purchase, you may also receive coverage for some or most of the out-of-pocket costs associated with Medicare Parts A and B.

You can shop for a Medigap plan on, get in touch with your State Health Insurance Assistance Program (SHIP), or buy directly from health insurance companies like UnitedHealthcare (NYSE: UNH), Humana (NYSE: HUM), or Anthem (now Elevance) (NYSE: ANTM).

No matter where you get your Medigap insurance, all plans come standardized, and you can choose from eight different plans lettered A through N. There used to be 10 plans, but Medigap plans C and F have been discontinued and aren’t available to beneficiaries who became eligible for Medicare beginning on January 1, 2020.

Some benefits are common to all supplement insurance plans. For example, every Medigap plan covers Medicare Part A coinsurance costs and extends hospital coverage for an additional 365 days once Medicare benefits are exhausted. However, coverage for other items like coinsurance charges for skilled nursing care or the Part B deductible will vary depending on the Medigap plan you opt for.

As a result, it’s difficult to say how much your Medigap plan will cost since pricing will differ significantly based 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 stands at around $150.

Do you need Medicare supplement insurance?

While Medicare supplement insurance isn’t cheap, it may be right for seniors who anticipate being heavy users of healthcare services. Medigap could also come in handy if you want coverage for services that Medicare doesn’t cover.

In short, Medigap can generally help you lower your out-of-pocket healthcare costs. Some Medigap plans — like plans K and L, for instance — limit annual out-of-pocket spending on covered services to $6,620 and $3,310, respectively, in 2022.

Of course, it’s no surprise that Medigap plans with more comprehensive coverage will also come with higher monthly premiums, so you should carefully weigh the trade-offs between heftier premiums and more comprehensive coverage.

That said, not all Medicare beneficiaries need a self-purchased Medigap plan. In fact, the same HHS report notes that a slim majority — about 51.1% of beneficiaries — don’t have Medigap insurance.

That’s because they have other forms of supplemental coverage like 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 have no supplemental coverage whatsoever. If you’re healthy and don’t think you’ll need to use many healthcare services, you can go without Medigap insurance. After all, it’s not compulsory, and eschewing a self-purchased supplement plan can mean saving yourself thousands of dollars per year.

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