Medicare Supplement Plans: Pros, Cons & Are They Worth It?

Medicare Supplement (Medigap) covers the out-of-pocket costs Original Medicare leaves behind: the Part A and Part B deductibles, the 20% Part B coinsurance, and hospital costs, with no yearly limit of its own. For many people on Original Medicare it is worth it, you get predictable costs and the freedom to see any doctor who accepts Medicare, in exchange for a monthly premium and no built-in drug coverage.

As you explore your Medicare options, the amount of options available to you may feel overwhelming. Whether in your Initial Enrollment Period, or in the Annual Enrollment Period, considering your options is highly important. You want to ensure your health needs are covered to the fullest extent available.

However, sometimes Medicare Supplemental Plans are required to cover your needs where Medicare does not. Many retirees turn to Medicare supplemental insurance, also known as Medigap, to get this coverage. Medigap coverage can be invaluable to some, helping cover out-of-pocket costs for care.

While Medicare supplemental coverage can be a great option for many retirees, there are still some potential downsides. Benefits and costs between all plans and policy types should be considered. Looking at the pros and cons of Medicare Supplement can help you make an informed decision for yourself.

Lets look at the pros and cons of Medicare supplement plans to see what’s right for you.

Do I really need supplemental insurance with Medicare?

Medicare supplemental insurance (Medigap) is not required, but for many people it is worth it. Original Medicare (Parts A and B) leaves you responsible for deductibles, the 20% Part B coinsurance, and hospital costs, with no annual out-of-pocket maximum. A Medigap policy fills those gaps, so a single hospital stay or an ongoing course of treatment doesn’t turn into an unpredictable bill.

You most likely need supplemental coverage if you:

• Are enrolled in Original Medicare (not a Medicare Advantage plan) and want protection from large, unexpected costs.
• Have chronic conditions or expect frequent care, where the 20% coinsurance adds up quickly.
• Travel often and want emergency coverage outside the U.S.
• Want the freedom to see any doctor who accepts Medicare, without networks or referrals.

You may not need a separate Medigap policy if you already have a Medicare Advantage plan (you can’t use both at once), or if you have other coverage such as retiree, employer, or Medicaid benefits. Not sure which situation applies to you? A Medicare Advocate can review your coverage with you at no cost.

Pros of Medicare supplemental insurance

Some of the pros of Medicare Supplemental Plans include:

Comprehensive coverage

The biggest, and most obvious, advantage to Medicare Supplement is fuller coverage. Original Medicare (Parts A and B) only cover so much. Sometimes, fee-for-service add-ons are required to get more coverage. If your out-of-pocket costs are high, Medigap can offer more financial security.

Some of the expenses that Medigap policies may cover include:

• Medicare Part A deductible: The amount you pay before Medicare Part A begins to cover costs of covered services.
• Medicare Part B deductible: The amount you pay before Medicare Part B begins to cover costs of covered services.
• Medicare Part A coinsurance and hospital costs: A cost-sharing amount that you pay for Part A covered services once your deductible is met.
• Medicare Part B coinsurance and copayments: A cost-sharing amount that you pay for Part B covered services once your deductible is met.
• Other costs: Such as emergency medical care while traveling, excess charges, and more.

Medigap policies are standardized into different plans (such as Plan G, Plan N), and different plans cover different costs. Coverage in Medigap can vary between the types of plans. The extent of coverage can also vary depending on the specific Medicare supplemental insurance plan you choose.

Review your Medicare supplemental insurance options here.

Guaranteed renewal

Medigap policies are guaranteed to renew each year. Your policy cannot be canceled by the insurance company, as long as you pay your premiums on time. Many seniors benefit from peace of mind, knowing that they cannot be dropped by their Supplement plan.

No referral requirement

On some Medicare Advantage plans, a referral is required from your Primary Care Provider to get specialty care. This can delay your access to treatment. However, on Original Medicare and with Medicare Supplement, referrals are not required. You can consult with specialists directly without needing approval from your Primary Care Provider.

Freedom to choose providers

Any doctors that accepts Medicare will accept your Medicare Supplemental insurance. Medigap policies give you a lot more flexibility in choosing a provider. In Medicare Advantage plans, you often must stick to a network of doctors that work with the insurance provider. If flexibility is something you require, Medicare Supplement is the way to go.

Travel coverage

For those who love to travel and often find themselves outside of the U.S, many Medigap plans cover emergency care. This allows you to travel easy knowing you are covered.

Cons of Medicare supplemental insurance

While the benefits above sound great, Medigap is not without it’s downsides. Here are some cons you can expect from Medicare Supplement Plans:

Premium costs

Medigap plans have their own premium costs, separate from your Part A (if applicable) and Part B premiums. This can add up to a high monthly payment that can put a lot of financial pressure on some individuals. While Medigap coverage can help a lot with costs of care, the high premiums may not be worth it for everyone.

Limited prescription drug coverage

Medicare Supplemental Plans do not cover prescription drugs. To get coverage for your prescriptions, you’ll need to enroll in a Medicare Part D plan. For some Medicare Beneficiaries, having multiple plans can be confusing and costly. Medicare Advantage plans bundle your Part A, B, often Part D and extra benefits all into one plan and provider.

No extra benefits

Medicare Advantage plans often include additional benefits such as dental, vision and hearing coverage. Some can even offer monthly grocery and gym membership allowances. Medigap policies offer none of the like, focusing solely on medical coverage. If you’re looking for extra health-related benefits, Medicare Supplement may not be the right choice for you.

Enrollment period restrictions

Access to Medigap policies can be restricted based on a couple of factors. Sometimes, to purchase a Medigap policy, you will need medical underwriting, an assessment of your current Medical health. Health Underwriting may result in higher premiums, or even denial of coverage, if you have pre-existing health conditions. To skip the medical underwriting, you must enroll during your Medigap open enrollment period.

State variations

Medicare Supplemental coverage is standardized at a federal level. However, costs and access can vary between states. For some, Medigap plans may not be best choice based solely off of where you live. Review the plans in your area as you consider what is right for you.

Frequently asked questions

What does Medicare Supplement (Medigap) cover?

Medigap covers the gaps in Original Medicare: the Part A and Part B deductibles, the 20% Part B coinsurance, hospital costs after Medicare's limits, and, on some plans, emergency care while traveling abroad. It does not cover prescription drugs, so most people pair it with a separate Part D plan.

Do I need Medicare Supplement insurance with Original Medicare?

It is not required, but it is worth it for many people. Original Medicare has no annual out-of-pocket maximum, so a single hospital stay or an ongoing course of treatment can leave you with large, unpredictable bills, and Medigap caps that exposure. You would not add Medigap if you have a Medicare Advantage plan (you cannot use both at once) or other coverage such as retiree, employer, or Medicaid benefits.

What are the pros and cons of Medicare Supplement compared to Medicare Advantage?

Medigap's main advantages are broad access (any doctor who accepts Medicare, with no networks or referrals), predictable costs, and guaranteed renewal. Its drawbacks are a higher monthly premium and no drug or extra benefits. Medicare Advantage often has low or $0 premiums and bundles drug, dental, and vision coverage, but limits you to a provider network. You can only have one or the other.

Conclusion

The choice between Medicare Supplement and Medicare Advantage plans should be based off of your needs. Both options can be offer valuable coverage for your healthcare needs during retirement. The pros and cons of Medicare supplement should be weighed. If flexibility and security is what your health needs, Medicare Supplement may be right for you. Medicare Advantage may be right if lower premiums and bundled and extra benefits are what you need.

If you need help navigating your health options, get in touch with a Medicare Advocate. We are here to ensure you get the coverage best suited to you. Even if all you need is some questions answered, give us a call! We are here to be your advocate!