Do I Need Supplemental Insurance if I Have Medicare? (2024)

Supplemental insurance is advisable for those with Medicare to help cover out-of-pocket costs and gaps in coverage, offering financial protection for deductibles, coinsurance, and other medical expenses not fully covered by Medicare.

Updated

Table of Contents

Key Takeaways

  • Medicare supplement plans (Medigap) cover Medicare's cost gaps.
  • Medigap eligibility at 65, with guaranteed acceptance.
  • Choose from standardized plans, balancing coverage and premiums.
  • Medigap vs. Medicare Advantage: Coverage and flexibility options.
  • Supplemental insurance aids in managing healthcare expenses.

When you enroll in Medicare, you'll likely see ads asking if you want to sign up for extra insurance. You might wonder why you would need supplemental insurance if you have Medicare.

However, while Medicare covers a large share of your health care bills, it will not pay for everything. That's where having some extra insurance can help. If you're wondering why you may need Medicare supplemental insurance and how to choose it, here's some information.

Why Do I Need Supplemental Insurance If I Have Medicare?

If you look at the Medicare website, they list out what you could owe out of pocket for needing care.1 You may be responsible for some sizable deductibles, co-payments and coinsurance costs.

For example, under Medicare Part B, the government pays for 80% of doctor services, and you pay the other 20%. So, if you had a $100,000 surgery, you would owe $20,000 yourself. Adding Medicare supplemental insurance can help you cover these large bills.

What Do Medicare Supplement Plans Cover?

Private insurance companies sell Medicare supplement insuranceto help cover these extra out-of-pocket costs. They are also known as Medigap policies because they fill in the Medicare coverage gaps.

Typically, you pay an insurance company a monthly premium, and they agree to pay for deductibles, coinsurance and other out-of-pocket costs from Medicare, according to your insurance policy terms. Note that these policies do not pay for prescription drugs. If you want insurance for your prescriptions, you could purchase an additional Medicare Part D plan.

How Do I Choose Medicare Supplement Insurance?

Insurance companies label Medigap plans with a letter (A through N) to show what benefits are included. For example, according to Medicare.gov, Medigap Plan F will pay for health care during foreign travel but Plan A will not.2

To make it easier for consumers, the government requires that insurance companies offer the same benefits for each type of Medigap policy. In other words, Medigap Plan G will offer identical coverage at every company. The premium could be different, but the benefits will be the same.

Each plan is a trade-off between the amount of coverage and the premium cost. Medigap Plan K might have a lower premium because it only covers 50% of the Medicare Part B coinsurance (the 80/20 split for doctor services). On the other hand, Plan C covers the entire Medicare Part B coinsurance but will likely charge a higher monthly premium.

Who Is Eligible for Supplemental Insurance?

Anyone who has Medicare Part A and Part B is eligible to apply for a Medicare supplement plan. However, you need to qualify for coverage with the private insurance company. When you first turn 65 and sign up for Medicare Part B, you have a Medigap open enrollment period that lasts six months.3 During this time, you could sign up for any Medigap plan in your area and the insurer must accept your application, even if you have preexisting health conditions.

After the open enrollment period, you can still try signing up for a policy, but the insurance company could ask you questions about your health for underwriting. If you have preexisting conditions, they could increase the premium or even deny giving you a policy.

Are There Any Other Considerations?

To keep your Medicare supplemental insurancecoverage, you need to pay premiums throughout the year. This is an additional cost during retirement. If you don't end up needing treatment, it's possible you could pay more in premiums than the value you'd get from the policy, similar to any health insurance program.

Keep in mind that these policies only cover medical bills. They do not provide coverage for prescription drugs, dental care, routine eye care or long-term care. Instead, you would need to pay for these out of pocket or have coverage in place through another insurance policy.

Are There Alternative Insurance Programs?

Besides Medigap, you could also cover your retirement health insurance costs through a Medicare Advantage plan. Medicare Advantage is private health insurance. Through this program, you would leave traditional Medicare and instead have the private insurer pay for your health care bills. The government also sets up regulations so the Medicare Advantage coverage must be similar to Medicare.

Medicare Advantage policies typically have a bit more flexibility than Medigap and can include extra benefits such as dental, vision and prescription drugs. They may also charge a lower monthly premium than Medicare supplement plans.

The downside of Medicare Advantage is that you would need to renew your policy each year during an annual enrollment period. The insurance company can change your benefits or even cancel the plan altogether during this time, so you may need to find a new one in such an event. The co-payments and deductibles can also be higher for Medicare Advantage than for Medigap.

The Bottom Line

As you figure out how to manage your retirement health care coverage, consider speaking with a financial representative. They can help you determine the next steps for managing health care costs in retirement.

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Sources

  1. Costs. https://www.medicare.gov/basics/costs/medicare-costs.
  2. Compare Medigap Plan Benefits. https://www.medicare.gov/health-drug-plans/medigap/basics/compare-plan-benefits.
  3. Get ready to buy. https://www.medicare.gov/health-drug-plans/medigap/ready-to-buy.
Do I Need Supplemental Insurance if I Have Medicare? (2024)

FAQs

Do I Need Supplemental Insurance if I Have Medicare? ›

If you have Original Medicare, a Medicare Supplement plan may help you cover the costs of your healthcare, therefore saving you money. This is because, while offering great coverage, Medicare Part A and Part B will not cover all of your healthcare costs, leaving you with expenses to cover.

Do you need a supplement if you have Medicare? ›

Supplemental insurance is advisable for those with Medicare to help cover out-of-pocket costs and gaps in coverage, offering financial protection for deductibles, coinsurance, and other medical expenses not fully covered by Medicare.

Why is it not a good idea to have supplemental insurance? ›

As is true for all supplemental policies, these plans are not adequate as stand-alone health coverage, as they can leave you with unlimited out-of-pocket costs in the event of a serious medical condition.

What happens if you only have Medicare? ›

With Original Medicare, you can:

Go to any doctor or hospital that takes Medicare, anywhere in the U.S. Find providers that work with Medicare. Join a separate Medicare drug plan (Part D) to get drug coverage. Buy a Medicare Supplement Insurance (Medigap) policy to help lower your share of costs for services you get.

Are Medicare supplemental plans worth it? ›

You continue to receive bills

Medicare supplemental insurance can help fill that gap. For example, if you still find yourself having to pay for deductibles, copays and more — even after you apply your other insurance types — then a supplemental plan could be worth it for you and your loved ones.

What is the downside to Medicare supplement plans? ›

Some of the most notable disadvantages include high monthly premiums, limited guaranteed enrollment periods, and a lack of additional benefits like vision, dental, or prescription drug coverage.

What does an average person pay for Medicare with a supplement? ›

The average Medicare Supplement plan costs in every state
StateMonthly CostRank from least expensive (1) to most expensive (51)
California$162.9345
Colorado$127.7629
Connecticut$227.0649
Delaware$150.9942
29 more rows
Oct 4, 2023

Is there a Medicare Supplement that covers everything? ›

With Medicare Supplement Plan F, you get the most complete coverage available. First, it includes all the benefits of Medicare Supplement Plans A, B and C. In addition, Plan F provides coverage for skilled nursing facility care, Medicare Part A and B deductibles, and international travel medical emergency help.

What is the main reason to purchase a Medicare Supplement insurance policy? ›

Medicare Supplement Insurance (Medigap) is extra insurance you can buy from a private health insurance company to help pay your share of out‑of‑pocket costs in Original Medicare, like copayments, coinsurance, and deductibles.

Why are Medicare supplemental plans so expensive? ›

Age: Medigap premiums are often based on the age of the enrollee. Older individuals may be charged more for a Medigap plan than younger individuals because they are considered to be at a higher risk for medical expenses. Location: The cost of Medigap plans can vary depending on the state in which the individual lives.

What are the 6 things Medicare doesn't cover? ›

Some of the items and services Medicare doesn't cover include:
  • Long-term care (also called. custodial care. Custodial care. ...
  • Most dental care.
  • Eye exams (for prescription glasses)
  • Dentures.
  • Cosmetic surgery.
  • Massage therapy.
  • Routine physical exams.
  • Hearing aids and exams for fitting them.

Is Medicare enough for health insurance? ›

Basic Medicare Coverage: Is That Enough? Summary: Original Medicare coverage generally has no out-of-pocket maximum and doesn't cover important things like prescription drugs. Additional coverage from private insurance companies can help meet your health-care needs.

Does Medicare cover 100% of hospital bills? ›

Medicare doesn't typically cover 100% of your medical costs. Like most health insurance, Medicare generally comes with out-of-pocket costs including copayments, coinsurance, and deductibles. As you'll learn in this article, Original Medicare (Part A and Part B) costs can really add up.

What percent of Medicare patients have supplemental insurance? ›

Medicare supplement insurance, also known as Medigap, covered 2 in 10 (21%) Medicare beneficiaries overall, or 41% of those in traditional Medicare (12.5 million beneficiaries) in 2021.

Why are people leaving Medicare Advantage plans? ›

Most individuals that dislike a Medicare Advantage plan usually have had a bad experience with in-network providers, plan authorizations for medical care, or having to wait a long time to have an appointment scheduled. Some of these concerns can be attributed to the healthcare provider.

What is the best Medicare package? ›

Here's an overview of our top picks:
  • Best for size of network: UnitedHealthcare Medicare Advantage.
  • Best for extra perks: Aetna Medicare Advantage.
  • Best for local support: Blue Cross Blue Shield Medicare Advantage.
  • Best for low-cost plan availability: Humana Medicare Advantage.

Why would you get a Medicare Supplement plan? ›

Medicare Supplement Insurance (Medigap) is extra insurance you can buy from a private insurance company to help pay your share of out-of-pocket costs in Original Medicare. What types of insurance aren't Medigap?

What is the difference between Medicare with a supplement and Medicare Advantage? ›

A Medicare supplement plan cannot terminate your coverage and is guaranteed renewable for life, as long as you pay your premium. Medicare Advantage plans can change benefits and networks, or even be discontinued, at the end of each year.

What's the difference between Medicare and Medicare supplemental? ›

Medicare Advantage and Medicare Supplement are different types of Medicare coverage. You cannot have both at the same time. Medicare Advantage bundles Part A and B often with Part D and other types of coverage. Medicare Supplement is additional coverage you can buy if you have Original Medicare Part A and B.

What is the difference between Medicare Part B and A supplement? ›

Medicare Supplement (Medigap) Plan B is not the same as Medicare Part B, which is part of Original Medicare (along with Medicare Part A). Medigap Plan B serves to fill in the gaps in coverage left by Original Medicare, Part A and Part B.

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