Are Supplemental Medicare Plans Worth It?

Are Supplemental Medicare Plans Worth It

Are Medicare Supplement plans worth the monthly premium? It depends on your Medicare costs.

In contrast to most insurance plans out there, Medigap plans do not cover health care or medical expenses directly. Instead, Medicare Supplement Insurance plans cover out-of-pocket costs that are associated with original Medicare coverage. This includes things like your Part B coinsurance, Part A copayments, and so on.

Whether you are new to Medicare or are a longtime beneficiary, you’ve probably heard of Medicare Supplement plans. Also known as Medigap plans, these popular plans are offered by private insurance companies and can help lower your out-of-pocket expenses under Original Medicare (Medicare Parts A and B).

There are a lot of details to keep in mind when it comes to Medigap plans, and we’ll cover everything you may want to know before making a commitment.

What are Medigap plans for?

Medigap plans are standardized in a very specific way. The costs may vary, but coverage will always be the same for each specific plan, no matter who you buy it from. We’ll go over the available plan options in the next section.

There are several categories that each Medigap plan may cover. Each plan covers a different set of these categories, and that is where the variety comes in. The categories are:

  • Part A coinsurance for inpatient hospital stays
  • Part B coinsurance for outpatient care
  • Blood (first 3 pints)
  • Part A hospice care coinsurance
  • Skilled nursing facility care coinsurance
  • Part A deductible
  • Part B deductible
  • Part B excess charge
  • Foreign travel exchange (up to plan limits)

There are ten plans in total, each of which offers a different combination of coverage for these categories. We’ll go through some of the details below, but you can find a comprehensive comparison of which plans cover which categories via

Who should purchase a Medigap plan?

Medigap plans aren’t for everyone, but they can be useful for any Medicare beneficiary. Because the plans offer coverage for out-of-pocket costs that every Medicare beneficiary must pay, the only thing that matters is the details.

We’ll go through the details regarding how to find out if a plan is worth it for you below, but for now, it’s good to keep in mind that every Medicare beneficiary should at least take a look at Medicare Supplement plans.

Which plans are available?

As we mentioned above, there are a total of ten Medicare Supplement plans that are currently available. Each plan is labeled by a letter, and the currently available plans are:

  • Plan A
  • Plan B
  • Plan C
  • Plan D
  • Plan F
  • Plan G
  • Plan K
  • Plan L
  • Plan M
  • Plan N

Note that these plans have nothing to do with the parts of Original Medicare. Plan A has nothing to do with Part A, etc.

Some plans are significantly more popular than others, and some plans offer much more comprehensive coverage. Notably, Plan G, Plan N, and Plan F are very popular plans and offer a lot of coverage. Other plans like Plan A and Plan B cover fewer categories but are likely to have cheaper premiums. In the end, each beneficiary's needs are unique.

Note that only Plan F and Plan C cover the Medicare Part B deductible. As a result of some new legislation, these plans are no longer available to anybody who became eligible for Medicare after January 1, 2020.

A note on high-deductible Medigap plans

In addition to the insurance policies we noted above, some plans also come in a high-deductible version. For now, this only applies to Plans F and G. If you choose to buy these plans in a high-deductible version, they will have their deductible that you must pay. They will only start covering your out-of-pocket costs afterward. These plans will usually have much lower monthly premiums as a result.

Medigap plan eligibility

To be eligible to buy a Medigap plan, you have to fulfill two criteria. First, you must of course be eligible for ordinary Medicare health insurance coverage. Second, you must be enrolled in Original Medicare, rather than a Medicare Advantage (Part C) plan.

Original Medicare refers to Medicare Part A and Medicare Part B. Medicare Advantage runs independently from these, and Medigap plans won’t provide any coverage for Medicare Advantage plans.

What about Medicare Part D plans?

You are still eligible for Medigap coverage if you have a Part D prescription drug plan. However, Medigap plans don’t help to pay for any of the out-of-pocket costs for your prescription drug coverage. They only apply to Parts A and B.

When can I enroll in a Medigap policy?

You can enroll in a Medicare Supplement plan during any Medicare enrollment period. This includes your Initial Enrollment Period, as well as the Open Enrollment Period each year. You can also change or purchase a plan during a Special Enrollment Period that is triggered by certain life events such as moving.

The best time to buy Medicare Supplement Insurance

Although there are many times during which you can purchase a Medigap plan, one of these is significantly superior to all others. When you first enroll in Medicare, there is a six-month period during which you can purchase Medigap without being subject to underwriting.

If you buy a Medigap plan outside of this period, then the insurance company isn’t obligated to sell the plan to you. However, during your first six months enrolled in Medicare, you can purchase any plan you like.

Note that this isn’t the same as your Initial Enrollment Period for Medicare, which is seven months long. That period lasts from three months before your 65th birthday month, that month itself, and three months after. Although there is some overlap, the Medigap enrollment period will last three months after your Medicare Initial Enrollment Period.

How can I know if a plan is worth it?

With a large number of Medigap insurance plans available on the market, it’s natural to wonder which plan is worth it. There is a simple type of calculation that you can do to figure this out. We’ll first describe it, then take a look at an example.

Medigap plans require you to pay a monthly premium, after which they will cover certain costs that you incur. If the monthly premium you pay is higher than the out-of-pocket costs that your plan covers, then the plan is not worth it.

To figure out if a given plan is worth it, you will need to know the monthly premium amount, as well as the cost of the out-of-pocket cost categories it covers. This second part can be more complex. The reason is that some fees, like coinsurance and copays, aren’t the same each year. You may pay $100 in copayments one year, and $1,000 the next. For this evaluation, try to get as accurate an estimate as you can be based on previous years.

Example scenario

John is enrolled in Original Medicare and has purchased a Medigap Plan D. Plan D covers the following categories:

  • Part A coinsurance
  • Part B coinsurance
  • Blood (first 3 pints)
  • Part A hospice care coinsurance
  • Skilled nursing facility care coinsurance
  • Part A deductible
  • 80% of Foreign travel exchange

Plan D often costs around $225 per month, although it can vary widely. This comes to $2,700 per year.

The only one of the costs that Plan D covers that is set each year is the Part A deductible. This comes to $1,632 in 2024. Assuming this deductible is met, Plan D will still need to cover more than $1,200 in Part B coinsurance fees, hospice or skilled nursing facility coinsurance fees, or foreign travel exchange costs to be worth it.

As you can see, the plan could be very well worth it if John has a lengthy stay in a skilled nursing facility or has high Part B coinsurance fees that year. On the other hand, it could end up being a waste of money if none of these fees are ever incurred.

For this reason, it is essential to evaluate your situation and expectations to decide which plan works for you. There is always some amount of uncertainty involved, and it will always be determined by your unique needs.

Which companies sell Medigap plans?

Many insurance companies, big and small, sell Medigap plans. You may find a plan that works for you from a company you already know well, like Humana, Blue Cross Blue Shield, or Aetna. On the other hand, you may find a great price for a plan from a local insurance company that you’ve never heard of before.

Key things to remember about Medigap

Choosing your first Medigap plan can seem like a complicated process. When you’re researching a plan, make sure you understand what healthcare costs you expect to have and how you can evaluate whether or not a plan will be worth it to purchase. Make sure to compare quotes from multiple companies, since the costs can vary widely. You can also talk to an independent insurance agent for more information.

Lastly, try to enroll during the first six months of your Medicare coverage if you can. This will ensure you get the best deal possible.

Additional resources

After retiring from a career as an executive travel counselor in 2006, Donna Frederick embarked on a second career as a licensed insurance agent. During that first year, many clients told Donna how overwhelmed they felt by Medicare, but that her assistance helped them finally understand the Medicare program. That experience inspired Donna to focus her efforts on educating her clients to ensure they fully understand their Medicare options. Today, Donna takes pride in providing outstanding customer service and going the extra mile to make sure each client knows all of their options and has a sound understanding of their Medicare plan, from costs to coverage and all points in between.


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