Is Medicare Supplement Insurance Right for You?

Every day, approximately 10,000 people in the United States celebrate their 65th birthday, joining the ever-growing population of more than 54 million seniors in the country.

The vast majority of these adults over age 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 number of medically necessary services and preventive services, including laboratory tests, vaccines, clinical research, ambulance services, durable medical equipment, mental health care, and other outpatient services.

However, there is a long list of things that are not covered by Original Medicare, including long-term care, dental care, vision care, foot care, hearing aids, and more. In addition, Medicare Parts A and B include cost-sharing charges and other out-of-pocket costs that you will have to pay on your own.

For example, even though you probably 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 copayments associated with hospital stays.

Similarly, Part B includes monthly premiums of at least $170.10 (and up to $578.30, depending on your income), plus an annual deductible of $233 and a 20% coinsurance. 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) estimates that 32.9% of original Medicare enrollees also have Medicare supplemental insurance.

Commonly known as Medigap insurance, Medicare Supplements are self-purchased private health plans that provide coverage for health services that are not 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 buy 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%), human (BURN 0.80%)or Anthem (now Elevation) (PRINCIPLE 2.39%).

Regardless of 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 are not available to beneficiaries. who became eligible for Medicare on or after 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 coinsurance for skilled nursing care or the Part B deductible, will vary depending on the Medigap plan you choose.

As a result, it’s hard to say how much your Medigap plan will cost, as prices will differ significantly based on plan type, insurance provider, state, age, marital status, and other factors. Generally speaking, however, Medicare supplement insurance premiums range from $50 to $500 per month, while the national average monthly premium is around $150.

Do you need Medicare Supplement Insurance?

Although Medicare supplement insurance is not cheap, it may be suitable for seniors who anticipate being heavy users of health care services. Medigap can also be helpful 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, such as Plans K and L, for example, cap annual out-of-pocket expenses for covered services at $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 tradeoffs between higher 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 small majority—about 51.1% of beneficiaries—do not have Medigap insurance.

That’s because they have others forms of supplemental coverage such as Medicaid, Tricare, or an employer-sponsored retiree insurance plan. If you’re in 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 additional coverage. If you’re healthy and don’t think you’ll need to use many health care services, you can go without Medigap insurance. After all, it’s not required, and avoiding a self-purchased supplement plan can mean saving thousands of dollars a year.

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