Every day, about 10,000 people in the United States celebrate their 65th birthday, adding to the nation’s ever-growing population of more than 54 million seniors.
The vast majority of these adults 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.
The facts on 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 variety of medically necessary and preventive services — including lab tests, vaccines, clinical research, ambulance services, durable medical equipment, mental health care and other outpatient services.
However, there’s a long list of things that Original Medicare doesn’t cover — like long-term care, dental care, vision care, foot care, hearing aids, and more. Additionally, Medicare Parts A and B both come with cost-sharing fees and other out-of-pocket costs that you will have to cover yourself.
For example, even though you likely 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 comes with monthly premiums of at least $170.10 (and up to $578.30, depending on your income) — in addition to a $233 annual deductible and a 20% coinsurance split . These are all 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 care services not covered by 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 purchase a Medigap plan at Medicare.gov, contact your State Health Insurance Assistance Program (SHIP), or purchase directly from health insurance companies such as United Healthcare (UNH 0.57%), Humana (HUM 0.80%)or Anthem (now Hight) (PRINCIPLE 2.39%).
No matter where you get 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 no longer available. available to beneficiaries who became eligible for Medicare starting 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 fees for skilled nursing care or the Part B deductible will vary depending on the Medigap plan you choose.
As a result, it is difficult to say how much your Medigap plan will cost since the price will vary significantly based on your plan type, insurance provider, condition, age, marital status and other factors. In general, however, premiums for Medicare supplement insurance range between $50 and $500 per month, while the national average monthly premium hovers around $150.
Need Medicare Supplemental Insurance?
While Medicare supplement insurance isn’t cheap, it may be right 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 health care costs. Some Medigap plans — like Plans K and L, for example — cap annual out-of-pocket costs 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 need to carefully weigh the trade-offs 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 part of 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 supplemental coverage. If you are healthy and do not think you will need to use many health care services, you can go without Medigap insurance. After all, it’s not mandatory, and avoiding an add-on plan purchased on your own could mean saving thousands of dollars a year.