If you are on Medicare or approaching Medicare eligibility, you may be wondering whether Medicare supplement plans are worth it. Medicare covers a significant portion of health expenses, but it lacks coverage for prescriptions, copayments, and deductibles, which can leave you with high out-of-pocket costs. 

Medicare supplement plans help to cover the gaps in the original Medicare plan giving you better protection. However, since Medicare supplement plans come at an additional cost, it is important to understand how they work and whether they are worth the extra cost.

What is a Medicare Supplement plan?

A Medicare Supplement plan, also known as Medigap, is health insurance that is sold to cover some or all of the out-of-pocket expenses that Original Medicare does not cover. Some of the costs covered by Medicare supplement plans include:

• Deductibles for Medicare Part A and Part B coverage*
• Coinsurance payments for Medicare Part B coverage
• Coinsurance payments to hospitals
• Coinsurance payments for skilled nursing facilities and hospice care
• Up to three pints of blood for medical procedures
• 80% of the approved cost for emergency medical expenses incurred during foreign travel 

*Since January 1, 2020, Medigap plans aren’t allowed to cover the Part B deductible. So Plans C and F (including high-deductible Plan F) are not available to people new to Medicare starting on January 1, 2020.

A Medicare supplement plan is only available with Original Medicare. This means it is only available if you are on Medicare parts A and B. If you have Medicare Advantage, Part C, you are not eligible for Medigap.

When is a Medicare Supplement plan worth it?

To limit your out-of-pocket medical expenses

If you do not have supplemental medical coverage from an employer or a public program like Medicaid, a Medicare supplement plan is worth considering to avoid the risk of incurring high out-of-pocket costs.

One of the major gaps in coverage left by original Medicare is the no cap on out-of-pocket expenses such as deductibles, coinsurance, and co-payments. These costs can be significantly high, especially if you suffer from chronic conditions or need to be hospitalized for a long time. A Medicare supplement plan will step in to cover some of these costs limiting your medical expenses. 

Depending on the type of policy you purchase, your Medicare supplement plan can cover the 20% coinsurance cost, the Part A hospital deductible, and the Part B deductible (please note that since January 1, 2020, Medigap plans aren’t allowed to cover the Part B deductible. So Plans C and F (including high-deductible Plan F) are not available to people new to Medicare starting on January 1, 2020.). 

To get better coverage

One of the key advantages of a Medicare supplement plan is that it may cover you for emergency medical care when you are traveling outside the U.S. This means if you travel frequently or have homes in different locations, having a Medicare supplement plan will give you better protection and options where you receive coverage. Medigap may also give you options in terms of the providers available to you. 

How much do Medicare Supplement plans cost?

Medigap plans are sold by private insurance companies. This means that although coverage benefits are standardized across providers, the cost of your Medicare supplement plan can vary depending on the insurer, where you live, and other factors.

Medicare supplement plan prices will also depend on the type of plan that you choose. There are ten different types of Medicare supplement plans, plans A – N, each with varying levels of coverage. For instance, Medigap Plan A would cost an average of $75 monthly for a 65-year-old non-smoker, while Plan G would cost an average of $130 per month. The more comprehensive the Medigap plan you opt for, the higher the monthly premiums would be.

Plan G is the most comprehensive Medigap policy available to newly-eligible Medicare beneficiaries, with average costs ranging from $110 to $130 per month, depending on the insurance company. You can see a comparison of plans here.

When is the best time to purchase a Medigap Policy?

The best time to buy your Medicare supplement plan is during the enrollment window, which is six months from when you reach 65 and enroll in Medicare A and B. Federal regulations stipulate that Medigap coverage is guaranteed during this enrollment window.

If you do not purchase a Medigap plan during the initial enrollment window, the insurance company can decline your application if you are in poor health or charge you higher rates. Unlike original Medicare and Medicare Advantage, Medicare supplement plans do not have an annual open enrollment period. Some states may have their own regulations on enrollment for Medigap. 

Are there gaps in Medigap coverage?

Medicare supplement plans cover some of the expenses not covered by original Medicare, but there are some exceptions. Your Medigap plan will not cover the following.

• Long-term care in a nursing home
• Vision and dental care
• Hearing aids
• Private-duty nursing care
• Prescription drugs.

If you purchased a Medigap plan before 2006, you may have prescription coverage, but any plans sold after 2006 do not include coverage for prescription drugs.

It is also important to note that Medicare supplement plans are not suitable for everyone. Medigap is not necessary if you have any of these health insurance plans.

1. Medicare Advantage plan
2. Self-purchased individual or family medical insurance plan
3. Medicaid
4. Employer or union health insurance plan 

Facts you should know before purchasing Medigap

1. When you enroll for Medigap, you will pay a separate monthly premium to the private insurance company for the policy in addition to the premium you pay to Medicare for Part B coverage.
2. If you buy Medigap during the 6-month period after you enrolled in Medicare Part B, companies must sell you a Medigap policy at the best available rate, regardless of your health status, and cannot deny you coverage. Even if you have health problems, you can buy any policy the company sells for the same price as people with good health. But after this period, you might be subject to a health questionnaire, and your premiums as well as your ability to get coverage will be dependent on your answers.
3. After this enrollment period, you might not be able to buy a Medigap policy, and if you’re able to buy one, it may cost more due to past or present health problems.
4. Medigap only covers one person. You will need to buy separate policies if you want coverage for yourself and a partner or spouse.
5. All Medigap policies are guaranteed renewable regardless of whether you have health issues. As long as you pay your premiums, the insurance company cannot cancel your Medigap policy.
6. You are not eligible for Medigap if you have a Medicare Advantage Plan.
7. All Medigap policies sold after January 1, 2006, do not include prescription drug coverage. If you want a plan with prescription coverage, you should opt for Medicare Part D.
8. Medigap plans cover pre-existing conditions, but there is a 6-month waiting period. 

Conclusion

When you have Original Medicare plus a Medicare Supplement plan, the bulk of your medical expenses will be covered upfront. This limits the risk of incurring high out-of-pocket costs that can pose a significant financial burden to you and your beneficiaries. The extra cost of Medigap is, therefore, for most people, a justified expense, especially if you do not have supplemental health coverage from an employer or assistance programs like Medicaid. 

Questions about Medicare?

Shoot us an email at medicare@hihella.com.