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Do I Need Supplemental Insurance With Medicare?

5 mins read
Our goal is to give you the tools and confidence you need to improve your health and finances. Although we may receive compensation from our partner insurance companies, whom we will always identify, all opinions are our own. CoverRight Inc. and CoverRight Insurance Services Inc. (NPN: 19724057) are collectively referred to here as "CoverRight".

Even though Medicare offers comprehensive healthcare coverage, it will not cover all your medical expenses. There are cost-sharing mechanisms in Medicare that make you liable for out-of-pocket costs like copays, coinsurance, and deductibles. That is why supplemental insurance can be beneficial in some instances. 

This article provides thoughtful insights to help you make informed decisions about Medicare coverage in general and supplemental insurance in particular.

Understanding Medicare Coverage

The question of supplemental coverage is better addressed once you have an accurate understanding of the fundamentals of Medicare. 

Original Medicare comprises two main components: Part A (Hospital Insurance) and Part B (Medical Insurance). 

Part A covers inpatient hospital stays, skilled nursing facility care, hospice care, and limited home health care services. Part B covers outpatient medical services, preventive care, doctor visits, and durable medical equipment. 

Senior citizens aged 65 and older and some younger individuals with covered diseases and disabilities rely on Medicare as a critical component of the social safety net. It gives beneficiaries and their families the peace of mind that comes with having a  dependable health insurance option. 

Limitations and Gaps in Medicare Coverage

Despite all its benefits, Original Medicare has some limitations that beneficiaries must be aware of.

Identifying Services Not Covered By Medicare

Certain services, such as dental, vision, and hearing care, are not covered by Original Medicare. This can leave some beneficiaries with significant financial liabilities. 

There are also gaps in coverage of prescription drugs (covered under Medicare Part D) which can be critical for managing chronic conditions. Plan D only covers a specific set of medications, which means the beneficiary must pay for any excluded drugs either out-of-pocket or through an additional insurance plan. 

High Out-Of-Pocket Expenses With Original Medicare

Another concern with Original Medicare is the potential for high out-of-pocket costs. While Medicare covers significant healthcare expenses, beneficiaries are still responsible for copayments, coinsurance, and deductibles. 

These costs can add up quickly, especially for individuals with chronic health conditions or those requiring frequent medical care.

Under Medicare Part B, for instance, the government only covers 80% of the cost of a covered service, leaving you responsible for the remaining 20%. Let’s say you need surgery that costs $10,000, in which case you will owe $2,000 in copayment while Medicare takes care of the remainder. 
Adding Medicare supplemental insurance can assist you in paying for expenses like these.

Potential Financial Risks Without Supplemental Insurance

Individuals who solely rely on Original Medicare can face several financial risks. Here are some of them: 

  1. Limited Coverage for Foreign Travel: Travelers without supplemental insurance have to bear the total cost of any medical emergencies during an international trip.
  2. High Out-of-Pocket Medical Costs: These costs can quickly accumulate, especially for individuals who require frequent medical care, hospitalizations, or specialized treatments.
  3. No Out-of-Pocket Maximum: Unlike many private health insurance plans, Original Medicare does not have a cap on annual out-of-pocket costs. This means there is no limit to what you may have to spend in any given year. 
  4. Limited Coverage for Prescription Drugs: Some specialty drugs can be costly, making it difficult for Original Medicare beneficiaries without supplemental insurance to afford them.

What is Medicare Supplemental Insurance (Medigap)?

Private insurance companies provide Medicare Supplement insurance, often called Medigap, to fill some gaps in Original Medicare coverage.

Medigap policies cover copayments, coinsurance, and deductibles, reducing the financial burden on beneficiaries. These plans also include costs related to emergency medical coverage when traveling outside the US and a host of other out-of-pocket expenses. 

Under federal law, all Medigap plans must offer the same coverage and benefit options regardless of the insurance provider. This is true for all U.S. states except Massachusetts, Minnesota, and Wisconsin, where Medigap policies are standardized differently.

The primary purpose of Medigap is to provide peace of mind and protect against unpredictable and high out-of-pocket costs. It does not cover prescription drugs and dental care.

How Does Medigap Work With Original Medicare

Medigap plans are standardized across 10 coverage tiers. You must have Original Medicare to purchase a Medigap policy.

Medigap coverage works with both Original Medicare and Medicare Part D Prescription Drug plans. Whenever you receive a service or drug under these plans, Medigap coverage kicks in to take care of any applicable deductibles or copayments. Check your Medigap plan details to understand the extent of coverage and exclusions, if any. 

Key Advantages of Supplemental Insurance

The following are the main advantages of having a supplemental insurance package as part of your Medicare plan. 

Filling the Gaps in Medicare Coverage 

Medigap plans are vital to filling gaps left by Original Medicare. These policies cover the cost of deductibles, copayments that would otherwise have to be paid by the beneficiary.

Predictable and Manageable Healthcare Costs 

With Medigap coverage, beneficiaries can enjoy the comfort of predictable and manageable healthcare costs. The standardized nature of Medigap plans makes it easier to compare options and choose a plan that best suits individual needs.

Access to a Broader Network of Healthcare Providers 

Medigap policies offer the freedom to choose from a wide network of healthcare providers, including specialists, without needing referrals. This flexibility allows beneficiaries to receive the care they need from their preferred doctors and hospitals.

Medicare Advantage (Part C) as an Alternative

Medicare Advantage, also referred to as Medicare Part C, is a private insurance option many Medicare beneficiaries prefer over Original Medicare (Part A and Part B) coverage.. 

Medicare Advantage plan benefits

Part C plans include all the benefits of Original Medicare plus additional services such as fitness programs, wellness benefits, and dental, vision, and hearing services. 
Consult your doctor to determine which additional benefits are most crucial to your healthcare needs.

Comparing Medigap and Medicare Advantage

Medicare Advantage Plans and Medicare Supplement plans are completely different entities. 
Medigap policies supplement Original Medicare by filling some of its gaps.

On the other hand, Medicare Advantage plans are federally mandated private insurance that provides all the benefits of Original Medicare but with additional coverage options.  

You can sign up for either a Medicare Advantage plan or a Medigap insurance plan, but not both.

Pros and cons of choosing Medicare Advantage 

When choosing between Medicare Advantage and Medigap plans, beneficiaries must also consider their healthcare needs, financial situation, and personal preferences. Here’s a chart that lays out the pros and cons of both plans:

MedigapMedicare Advantage 
Pros1. Comprehensive Coverage: Standardized coverage for expenses not covered by Original Medicare.
2. Freedom to Choose Providers: Beneficiaries can choose from a broad network of healthcare providers without needing referrals.
3. Predictable Costs: Makes budgeting for healthcare expenses more manageable.
1. All-in-One Coverage: Includes all benefits of Original Medicare with additional coverage options. 
2. Out-of-Pocket Maximums: Annual out-of-pocket maximum limit that caps what beneficiaries need to pay for covered services.
3. Potential Cost Savings: Some Medicare Advantage plans have lower premiums than Medigap plans, offering potential cost savings.
Cons1. Higher Premiums: Comparatively higher monthly premiums than Medicare Advantage plans.
2. Separate Prescription Drug Plan: Beneficiaries with Medigap may need to enroll in a separate Part D plan for prescription drug coverage.
1. Network Restrictions: Limits beneficiaries to specific healthcare providers and hospitals.
2. Potential Out-of-Pocket Costs: Beneficiaries may be liable for copayments and coinsurance for certain services despite the annual cap on out-of-pocket costs.

Reach out to CoverRight for more information on Medicare Supplement insurance. We provide concierge services to help you navigate Medicare complexities with ease.  

Frequently Asked Questions

Is Medigap necessary if I have Medicare Advantage?

You can buy either a Medigap or a Medicare Advantage plan, but not both. 

Can I switch Medigap plans or enroll in one later?

Medigap beneficiaries have guaranteed issue rights and open enrollment periods when they can switch or purchase Medigap plans without underwriting. Outside these periods, insurers may use medical underwriting, potentially leading to higher premiums or denial of coverage based on pre-existing conditions.

Can non-Medicare plans supplement my Medicare?

Some individuals may have access to non-Medicare insurance, such as employer-sponsored plans or retiree coverage. While these plans can complement Medicare, the way they interact with Medicare and the benefits they provide can vary. 

What if I cannot afford supplemental insurance?

For beneficiaries facing financial challenges, various state and federal programs such as Medicaid and Medicare Savings Programs offer assistance in paying Medicare premiums and other healthcare costs.

Richard Chan

Richard is the Founder of CoverRight and based in New York. He is passionate about empowering consumers to take control of their health and finances. Prior to starting CoverRight, Richard had extensive experience working in financial services with over 8 years' experience in consumer lending and investment banking.

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