Do I need a Medicare Supplement with Medicare?

While not mandatory, a Medicare Supplement, also known as “Medigap”, helps fill some of the gaps in Medicare Part A and Medicare Part B.

Medicare Part A has a deductible of $1,632 in 2024, which you owe before Medicare starts to pay for inpatient hospital care.

“With just one hospital stay, you’ll be out $1,632 for that Part A deductible — so, your out of pocket costs can add up fast,” says David Walls, of Florida Medicare Broker, an independent insurance agency in Ocala, Florida.

Most Medigap plans cover the Part A deductible. Although, new Medicare members can’t buy Medigap plans that cover Part B’s relatively smaller deductible of $240 in 2024, due to MACRA legislation passed in 2015, so you’d still owe that amount out of pocket.

After you have met your Medicare deductibles, there are additional out of pocket costs that the supplement can pick up. For example, after meeting the $240 Part B deductible, you will be responsible for 20% coinsurances for medical costs. Medicare Part A also has copays that kick in after 60 days in the hospital. These copays cost $408 per day, and get more expensive after your 90th day in the hospital.

If you have large health care needs, that coverage could be valuable.

Original Medicare by itself does not have a valuable feature that traditional insurance has – a maximum-out-of-pocket. That means there is no limit on what you could owe in copays and coinsurances throughout the year. Most insurance plan have a maximum-out-of-pocket in the range of $7,000 - $12,000.

“Original Medicare could get expensive real quick, because it lacks that out-of-pocket feature so common in most health insurance plans. Imagine having to pay 20% of a cancer treatment or open-heart surgery. This is where the Medigap plans value really comes in,” emphasizes David Walls.

Buying a Medigap plan is one way to put a cap on your yearly costs.

But is it worth it?

You can expect to pay between $160 - $225 per month in Florida for the most popular Medigap plan, Plan G, when you enroll at the age of 65. Premiums tend to go up based on the plan letter, age, and zip code.

“It really comes down to risk tolerance. Are you comfortable potentially pay 20% of a major, or even minor surgery? Is $180/mo worth the peace of mind to you?”

“Generally speaking, the people that have these [Medigap] policies tend to be very satisfied with them,” David Walls explains. Medigap is worth the cost if you can afford to pay the premiums along with your Medicare Part B premium, and a Part D prescription drug plan premium.

If it is not affordable, you may want to looking to a Medicare Advantage plan. These plan are offered by private insurance companies and are an alternative to Original Medicare. They must, by law, offer benefits that are at least equal to Original Medicare. They also have reasonable maximum-out-of-pocket limits, low or not monthly premiums, but have trade-offs, such as provider HMO or PPO networks.

The best and easiest time to buy a Medigap plan is during your Initial Enrollment Period. The 7 month window around your 65th birthday, 3 months before, the month you were born, and 3 months after.

During this time, insurance companies cannot ask you any medical information, and therefore cannot deny you coverage. The industry calls it “Guaranteed Issue”. The monthly premium, will also be the cheapest you will be able to get it.

Don’t miss your chance for peace of mind. In most cases, it is best to work with an agent or broker that can help you find a medigap plan that best fits your budget and needs. But also, don’t forget to ask about that Part D plan for prescription coverage!