About 41% of original Medicare beneficiaries had Medicare supplemental insurance, or Medigap, in 2021, according to a February 2023 report summarizing enrollment data from AHIP, a national health insurance trade association. For the other 59%, Medicare has some “gaps” that can be costly.
“There are many gaps in Medicare that a beneficiary would have to pay if they do not have Medigap,” Kelly Jo Greiner, director of the Minnesota Health Insurance Assistance Program, said in an email. “This can add up to thousands of dollars a year.”
Although it is not mandatory, you may want to purchase a Medigap policy to fill some of the gaps in Medicare Part A and/or Part B. (Medigap does not work with Medicare Advantage policies.)
Discount (discounts
Medicare Part A has a deductible of $1,632 in 2024, which you owe before Medicare starts paying for inpatient hospital care.
“Just one hospital stay, you’ll pay a deductible of $1,632 — so, very quickly, your costs can add up,” says Joan Giardini Russell, CEO of Giardini Medicare, an independent insurance agency.
Most Medigap plans cover the Part A deductible. And plans with premiums of less than $136 per month can put you ahead based on this feature alone.
(New Medicare members can’t buy Medigap plans that cover Part B for the relatively smaller $240 deductible in 2024, so you’ll still owe that amount out of pocket.)
Coinsurance and copayments
After you meet your deductible, there are out-of-pocket costs for many Medicare services. For example, you pay a 20% coinsurance for most medically necessary outpatient services covered by Part B.
The Medicare Part A copayment begins after your 60th day in the hospital. It starts at US$408 per day in 2024 and becomes more expensive for longer stays.
All Medigap policies include at least some coverage for coinsurance and copayments for Part A and Part B. If you use a lot of health care, this coverage could mean a big out-of-pocket savings.
Borders outside the pocket
Unlike many other types of insurance, Medicare Part A and Part B do not have maximum out-of-pocket caps. There is no limit to what you could owe with the addition of copayments and coinsurance.
“Original Medicare without Medigap would be risky because we need Medigap to cover the maximum out-of-pocket expenses,” Michael Diop, a certified financial planner in Savannah, Georgia, said in an email.
Purchasing a Medigap policy is one way to put a limit on your annual costs. Paying more up front for insurance premiums can pay off by limiting your future out-of-pocket spending.
Is MediGap worth the cost?
You can expect to pay $100 to $150 per month or more for the most popular Medigap plan, Plan G, when you sign up at age 65. Premiums can rise based on plan type, age, location, and sometimes health condition.
This is a big extra cost – is it worth it?
Giardini-Russell compares Medigap to car insurance, which you pay for every month, even though you hope you don’t need it. “It’s often about psychology and peace of mind,” she says. “Are you willing to pay $150 a month for peace of mind?”
“We tend to hear from beneficiaries that they are very satisfied with their policy,” Greiner said. Medigap is worth it if you’re able to pay your Medigap premiums along with your Medicare Part B premiums and your Medicare Part D prescription drug plan, according to Greiner.
If Medigap isn’t affordable, you may want to look into programs that can help with medical care costs, such as Medicare Savings and Extra Help subsidies.
People who can’t afford Medigap premiums can also consider Medicare Advantage, according to Diop. Medicare Advantage plans are bundled alternatives to original Medicare sold by private insurance companies. They have limits out of their pocket, but there are trade-offs to consider, such as limited provider networks.
Time limits for registration
The best and easiest time to purchase a Medigap policy is when you turn 65. Medigap’s six-month open enrollment period begins when you turn 65 and are enrolled in Medicare Part B.
During this period, insurance companies cannot use medical underwriting to charge you additional fees or deny coverage based on your health or medical history. After that, obtaining a Medigap policy may be more expensive or even impossible.
So, if you want to buy for peace of mind, don’t miss your best opportunity. You can compare options on Medicare.gov, shop online, or work with an agent or broker to find the best policy for you.
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