Do You Really Need Medicare Supplemental Insurance

Do I Need A Medicare Supplement Insurance Plan When I Retire

Basically, Medicare Supplement insurance plan may provide protection from high out-of-pocket medical costs resulting from numerous hospital visits or doctor visits. So, you might want to consider a Medicare Supplement insurance plan to supplement your Medicare Part A and Part B coverage, especially if one or more of the following situations applies to you now or after your retirement:

• You travel extensively outside the United States and would like insurance coverage for emergency medical care abroad, which Medicare Part A and Part B might not provide. Some Medicare Supplement insurance plans provide foreign travel coverage . These plans may pay 80% of covered emergency medical costs when youre outside the country, up to plan limits.
• Youre likely to have multiple hospital stays during the course of a year.
• You expect to have frequent doctor visits or medical services.

You pay a premium for any Medicare Supplement insurance plan, but the plan in turn may cover your hospital costs and other out-of-pocket expenses. So you might need to do some math to figure out whether your out-of-pocket costs under Original Medicare would likely be higher than your Medicare Supplement premium costs. If so, a Medicare Supplement insurance plan might save you money.

On the other hand, if you dont typically have many doctor or hospital visits, you might want to consider a Medicare Advantage plan, discussed later in this article.

Do I Really Need A Medicare Supplement

David Belk, a doctor and anti-supplement activist says, If you have Medicare and buy a supplemental policy with your own money, you are effectively giving an insurance company your money so that they can keep it.

Wow. This statement is moving. For those who have had a Medicare Supplement Policy for years, it slaps you in the face with regret.

And for those who may not be on Medicare and have yet to purchase Medicare Supplement Insurance, it frees you. It justifies a decision that will save you money on premium month to month.

However, it is not entirely true. He has a point, butultimatelyit represents a fundamental misunderstanding of what insurance is.

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. 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.

Read Also: What Is Medicare Plan C

Most Dont Rely On Original Medicare Alone

So for low-income Medicare beneficiaries, public programs are available to fill in the gaps in Medicare coverage. And 30% of Medicare beneficiaries receive employer or union-sponsored benefits that supplement Medicare. But what about the rest of the population?

Is Original Medicare enough coverage on its own? Most Medicare beneficiaries dont think so: Only 19% of Original Medicare beneficiaries have no supplemental coverage .

If youve got significant funds that you wouldnt mind using to pay out-of-pocket expenses, you could get by with just Original Medicare. The main risks are the fact that it doesnt have a cap on out-of-pocket costs, and it doesnt cover outpatient prescription drugs .

Discuss your coverage options with a licensed Medicare advisor at

Supplemental Coverage Among Beneficiaries With Basic Medicare

In that situation, unless you have some type of employer-sponsored insurance or you get extra coverage from Medicaid, the option for mitigating your out-of-pocket costs is a Medigap policy.

Those supplemental policies, which are sold by private insurance companies, either fully or partially cover cost-sharing aspects of Parts A and B, including deductibles, copays and coinsurance. They also limit what you’ll pay out of pocket each year.

Yet about 19%, or 6.1 million, who stick with basic Medicare have no extra coverage, according to a 2018 study from the Henry J. Kaiser Family Foundation.

That’s risky, experts say. While Part A is free for most beneficiaries, it comes with a $1,364 deductible per benefit period. And although Part B comes with a low $185 per-year deductible, you typically pay 20% of the remainder for most doctor services including while you’re a hospital inpatient as well as outpatient therapy and durable medical equipment such as wheelchairs or walkers.

“That 20% is after your deductible, and there’s no limit to how much you’d pay out of pocket,” said Elizabeth Gavino, founder of Lewin & Gavino in New York and an independent broker and general agent for Medicare plans.

“If you have a heart attack, need multiple surgeries and hospital visits, you could literally end up bankrupt,” she said.

More from Personal Finance:Here’s how your income stacks up against your neighbor’s

You May Like: Does Medicare Part B Pay For Hearing Aids

Is Medicare Part D Worth It

If youre going with a Medigap plan rather than Advantage, prescription drugs wont be covered. Therefore, its advised that you enroll in a Part D plan. If you delay enrollment, you could face a penalty for the life of your policy.

If you dont take any medications, you might wonder why you would enroll in such a plan today. In reality, it can easily be worth it, considering the money you could save on future penalties.

Helping Pay Medicare Deductibles Co

In order to help pay for deductibles, co-payments, and co-insurance related to your Medicare policy, you can purchase an additional Medigap policy from a private insurance agency. Medigap policies also require a monthly premium that must be paid in addition to your Medicare premium, but can help offset the larger costs of health care services . Medigap policies are sold by private agencies but are regulated by the government and must be guaranteed to be renewable in other words, they cannot be cancelled if your health declines. They must also not duplicate your existing coverage.

Medigap policies often exclude many of the same services as Medicare , so it is important to carefully review what is and is not covered. You can purchase varying degrees of Medigap coverage based on what you are able and willing to pay for your monthly premium for example, some Medigap policies will help pay for medical expenses you may incur when traveling outside of the U.S. You also have a right to cancel a policy within a certain amount of time if you are not happy with the policy.

Also Check: Does Medicare Pay For Eyeglasses For Diabetics

What Are The Benefits Of Medicare Advantage

Most Medicare Advantage plans are a form of managed care, primarily HMO and PPO plans. These types of plans favor healthy people.

In fact, the whole idea behind HMO plans is keeping people healthy to reduce costs. When you are healthy, the other advantage of Medicares private health plans really comes into play. That being their extra benefits.

Unlike Original Medicare, with or without Medigap coverage, Medicare Advantage plans can add additional benefits. The most common extra benefit is a prescription drug plan . But plans also add routine dental, vision, and hearing benefits, too.

Prescription drug coverage can add up quickly. Basic Part D prescription drug coverage, which youll need to buy if you keep your Original Medicare, can be as low as $20 but average about $34 per month. That gives beneficiaries that enroll in a Medicare Part CMedicare Part C is Medicare’s private health plan option. Also known as Medicare Advantage, Medicare Part C plans are a type of Medicare health plan offered by companies that contract with Medicare to provide all… plan with Part D coverage a $408 benefit .

With basic dental and vision plans costing between $35 and $50 per month, insurance plans with these extra benefits offer healthy people greater cost savings.

Because You Dont Buy Insurance For Things You Expect Rather You Buy It For Things With A High Dollar Amount Of Risk And A Low Probability Of Happening

You cant insure what is high risk and high probability. Take Alex Honnold, for example. He spends his waking hours climbing steep ravines with no safety harness. For hours a day, he is one missed footing away from plummeting to his doom. Do you think he is going to be able to get life insurance? Its almost laughable. This is a high risk, high probability scenario. Of course no insurance company will take a chance on him!

You can insure against a low risk, low probability scenario, but why would you want to? Do you want pet insurance for your grandsons gerbil? Obviously not. Even a low-premium insurance plan wouldnt be worth it. What did you pay for it? 30 bucks? Maybe fifty if its some hypoallergenic, exotic breed? Either way, its not a high enough risk.

Recommended Reading: How Do I Cancel Medicare Part A

How Medicare Advantage Plans Work

First, it will help to review a few basics. Medicare comes in four parts, with Part A covering inpatient hospital care, and skilled nursing. Theres no premium if you or your spouse have earned at least 40 Social Security credits.

Part B covers doctor services and outpatient hospital care. You have to pay a monthly premium for this coverage, which is $170.10 in 2022, with a deductible of $233. High earners pay more.

The other parts of MedicarePart C, aka Medicare Advantage, and Part D, prescription drug coverageare optional and offered by private insurers.

Medicare Advantage is an all-in-one managed care plan, typically an HMO or PPO. Advantage plans provide the benefits of Part A and B, and most also include Part D, or prescription drug coverage. Some offer extra benefits not available through Original Medicare, such as fitness classes or vision and dental care.

If you opt for Medicare Advantage, you typically continue to pay your Part B premium as usual, but you will pay little or no additional premiums for your coverage. You generally have copays or coinsurance, but once you reach your out-of-pocket limit, the plan will pay 100 percent of your medical costs covered under Medicare for the rest of the year. The out-of-pocket limit does not apply to prescription drugs or extra benefits.

With Medigap, youll pay more in monthly premiums compared with Advantage plans . Youll also have a bit more work choosing your Part D plan.

Coverage Gaps In Original Medicare

People can receive Medicare benefits in one of two ways: Original Medicare or Medicare Advantage.

Original Medicare, also known as traditional Medicare, consists of Part A and Part B. At age 65, you can automatically be enrolled or manually enroll in Original Medicare.

Original Medicare has several out-of-pocket costs, including monthly premiums, annual deductibles and copayments for doctor services.

Unlike Medicare Advantage, there is no yearly out-of-pocket maximum in Original Medicare.

These gaps in Original Medicare insurance can quickly add up, especially if youre in poor health or on a fixed budget.

2022 Original Medicare Out-of-Pocket Costs at a Glance

• 20 percent of all Part B services, including doctor visits, durable medical equipment and outpatient therapy
• $1,556 Part A hospital deductible for each benefit period
• $233 Part B deductible
• $170.10 monthly Part B premium

Most people dont pay a monthly premium for Medicare Part A. But if you didnt work enough before turning 65, you may face this extra fee, which can cost up to an additional $499 a month.

There are also several coverage gaps in Original Medicare. For example, vision, dental and hearing are not covered unless deemed medically necessary.

Medigap, also known as Medicare supplement insurance, can help pay some of the remaining health care costs Original Medicare doesnt cover.

Don’t Leave Your Health to Chance

Medigap policies are sold by private insurance companies.

Medigap Plan Coverage Highlights

Read Also: How Is Medicare Part B Penalty Calculated

Medicare Part A: How Much Will A Hospitalization Cost You

Lets say youre hospitalized and all you have is Medicare Part A. How much do you owe the hospital?

If the hospitalization lasts 60 days or less, the answer is $1,484 nothing more. This is an important point: For any hospitalization lasting 60 days or less, you will only owe the hospital $1,484 even if your hospital bill exceeds one million dollars! The doctor who see you in the hospital will bill you separately, but those bills are covered by your Part B benefits .

As an example, below you can see a copy of a bill that a patient of mine gave me a few years ago. This bill is for someone who was hospitalized for about four weeks. As you can see, the total amount billed was over $700 thousand and, yet, the patient still only has to pay $1,260 which was the Medicare Part A deductible in 2015.

Figure 1: Hospital Bill

Should you expect to ever be hospitalized for more than 60 days? No!

The average hospital stay in the US is 5-6 days and that number has been going down each year for more than a decade. Even people who need major surgery like a liver transplant or open heart surgery are usually home in about 7 days. I cant say that 60-day hospitalizations never occur in the U.S., but theyre about as rare as jackpot lottery winners.

Why Buy More Insurance

As noted above, Medicare isn’t a blanket insurance policy. This means it does have holes in it. Original Medicare, as the government calls what we now know as Parts A and Band Medicare prescription drug coverage, Part Dpays most of your expenses.

But it’s far from all of the costs you may face if you become seriously ill or get injured. Even routine services come with copayments and deductibles. This is where Medigap insurance kicks in.

Read Also: How Long Does Medicare Pay For Home Health Care

What Are The Different Types Of Medicare

There are four types of Medicare: A, B, C, and D. Part A covers payments for treatment in a medical facility. Part B covers medical services including doctor’s visits, medical equipment, outpatient care, outpatient procedures, purchase of blood, mammograms, cardiac rehabilitation, and cancer treatments. Part C, also known as Medicare Advantage, seeks to cover any coverage gaps. Part D covers prescription drug benefits.

What Are The Gaps In Original Medicare

As you may well know by this point, it is impossible to ignore the existing gaps in Original Medicare coverage. For a federal program that has so many coverage policies, there are two main forms of coverage where it usually fails to provide benefits.

The main areas where Medicare falls short are:

• prescription medication coverage

Don’t Miss: What Age Do You Enroll In Medicare

What Do Medicare Supplement Plans Not Cover

Medigap policies do not extend coverage beyond Original Medicare.

For instance, they do not cover dental and vision care, hearing aids and non-skilled home care.

Except for plans written before 2006, Medigap also does not cover prescription drugs. Separate plans, called Medicare Part D, are available through private insurers approved by the federal government.

Lastly, Medigap does not cover private-duty nursing or long-term care. Such coverage would have to come from a standalone long-term care insurance policy.

What Do Medicare Supplement Plans Cover

Medigap policies cover the following out-of-pocket costs:4

• Part A coinsurance and hospital costs up to an extra 365 days after Medicare benefits are used up.
• Part B coinsurance or copays.
• Blood .
• Foreign travel emergency .
• Above out-of-pocket limits.

The Part B excess charge is little understood but essential to know. Doctors who accept Medicare assignment agree to rates set by Medicare for covered services. Those who dont can charge up to 15% more than the Medicare-approved amount.

Unless you have a Medigap plan that covers excess charges, you will be responsible for those charges. The alternative? To only use participating doctors, although thats not always easy in an emergency or surgery involving many doctors.

Also, Original Medicare does not cover you outside the U.S. But some Medigap policies do.

Recommended Reading: Does Medicare Cover Parkinson’s Disease

So This Begs The Questionwhat Does A Supplement Cover Is It Something That Is Low Probability And High Risk

Wellthere are varying coverage levels, but even the lowest premium plans cover Medicares scariest coverage gap: the unlimited out-of-pocket spending limit.

Sure, a lot of them cover nickel and dime copays and coinsurance costs that virtually eliminate hassle and reduce costs, but this is just icing on the cake. The real substance of a Supplement Plan is that it puts a cap on your potential out-of-pocket spending.

Are Medigap Plans Worth The Cost In All States

The federal government regulates the benefits of all the plans, but it doesnt have any influence on their costs. The plan rates vary in different insurance companies and states. For example, Medigap costs are different in Louisiana than they are in South Dakota.

The insured should consider comparing different companies to avoid overpaying for what they need. Comparing prices includes checking how insurance companies price their policies as well as the features that would contribute to increased rates.

Remember that the cost also varies from one letter plan to another So, if you find a Plan G cheaper than a Plan F, you should see what both companies are offering the Plan G and Plan F for, then you can make the best decision.

Don’t Miss: When Do Medicare Premiums Start