Millions of seniors depend on Medicare for healthcare coverage in retirement. But unfortunately, coverage under Medicare isn’t necessarily comprehensive, and it’s also far from free. Premiums aside (those come into play with Medicare Parts B and D), Medicare enrollees are subject to deductibles, coinsurance, and copayments that can really put a strain on their income. Many turn to Medigap to help ease that burden.
Also known as supplement insurance, Medigap, as the name implies, is an insurance plan of sorts designed to bridge the gap between what Medicare pays for and what seniors need to pay for out of pocket. Medigap isn’t a single plan, but rather a variety of plans of which you can choose the one that’s best for you. You can purchase a Medigap policy from any insurance company in your state that’s licensed to sell one. But whether that’s a worthwhile expense will depend on your specific needs.
Picking up the slack
You might assume that your out-of-pocket costs under Medicare will be minimal, but actually, many seniors find that they’re quite substantial. Under Part A, which covers hospital care, you’ll be liable for a $1,364 deductible for each benefit period under which you’re receiving inpatient services. You’ll also pay $341 in coinsurance per day of care once you’re in the hospital between 61 and 90 days (coinsurance won’t come into play during your first 60 days).
Then there’s Part B, which covers doctor visits and diagnostics. You’ll need to meet a $185 annual deductible, and from there, you’ll typically pay 20% of the Medicare-approved amount of the treatment you’re getting.
A Medigap plan, meanwhile, might come in and pick up the tab for some or all of your deductibles, coinsurance, and copays, thereby saving you money on what could be some pretty exorbitant costs. So is Medigap worth it? It depends on the plan you get, and the extent to which you think you’ll rack up expensive bills. If your health is relatively strong going into retirement, then you might hold off on getting a Medigap plan and see how your first few years under Medicare shake out. That said, applying when you’re older puts you at risk of getting stuck with a higher rate for coverage, though this isn’t always the case.
Medigap’s job is to fill a financial hole, so to speak, when you rack up costly bills under Medicare. It won’t, however, cover services that Medicare itself won’t pay for. For example, Medicare will not pay for dental care, vision services, hearing aids, and long-term care. That being the case, Medigap won’t pay for these services, either. On the other hand, if you’re left with a $100 bill after receiving a Medicare-covered service, that’s where Medigap might come in.
If you know you’ll want a Medigap plan as soon as your Medicare coverage kicks in, research your plan options before your initial Medicare enrollment window, and then apply right after your Medicare coverage kicks in. You must be enrolled in Medicare Parts A and B to be eligible for a Medigap plan.
Finally, keep in mind that if you’re choosing Medicare Advantage over original Medicare, you won’t be able to sign up for Medigap. That said, it pays to explore your options for getting an Advantage plan, because in doing so, you might snag more affordable coverage than what you’d get under traditional Medicare, thereby negating the need for supplemental insurance in the first place.