Is a Medigap Health Insurance Policy for You?

Updated on February 7, 2020
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Many people don't want to buy Medigap Insurance policies because they think they're too expensive. Learn the facts here before you decide.

There is a great deal of confusion about Medigap policies. This often keeps people from buying them, but this decision can be a huge financial mistake if the circumstances are right.

Here are some basic facts:

  • Medigap policies are not stand alone insurance contracts. They can only be purchased if you also have Original Medicare parts A and B.
  • Medicare parts A and B cover inpatient and outpatient care up to 80% of their cost.
  • Medigap covers up to another 20%.
  • The only two standalone plans offered by the US government are Original Medicare or Medicare Advantage plans.
  • Advantage plans are all inclusive, which means you cannot add anything else to them. Many think they are supplements, but they are not. They must be used "as is".

You can have a Medicare Advantage Plan or an Original Medicare Plan with additional coverage, but you cannot have both.

If you want the additional coverage, you will have to pay extra for it.

Reasons why everybody over 65 should buy a Medigap Policy
Reasons why everybody over 65 should buy a Medigap Policy | Source

What Is Medigap?

This type of coverage is provided by private insurers but is overseen and regulated by the government.

Its purpose is to pay approximately 20% of Medicare approved expenses. . So, if Medicare approves $100 of a bill, they pay $80 and my supplement pays the other $20. I pay nothing.

Medicare policies pay about 80% of your medical bills, but they also charge for deductibles, co-insurance and other costs.

Medigap policies pay for those extra charges in addition to the other 20% that Medicare does not pay.

If you have a supplement, you will pay nothing for deductibles, hospital stays of less than 60 days or doctor’s visits and other services as long as you use a Medicare provider.

For example, I recently had an emergency situation. I was taken to a local hospital emergency room where they ran a few tests, gave me pain medication and kept me under observation for eight hours.

They then put me in a room overnight for further observation. Several doctors and specialists stopped by to check me out, but since the emergency had passed, I was released.

The bill was more than $16,000. I could have been billed for $3200, but I paid nothing.

2019 Medigap Plan Pricing

Costs Can Vary Greatly

Many people avoid buying these policies because they can be expensive, and the costs are in addition to what you pay for Medicare coverage. They also can rise from year to year.

Although each insurer is required by law to offer the same supplement plans, each company charges differently, and each plan is priced differently as well.

However, it is important to choose a company that charges fairly and will be there for you in the future if problems arise. Companies do go out of business, and when they do, you don’t want to get stuck with an insurance problem!

You can find a list of the basic plans and what they cover here. (The attached video, although slightly outdated, still gives a good overview of what these plans can cost. Some are clearly more reasonably priced than others.)

The best way to find out what you will pay is to:

  1. use to learn which companies offer these plans in your area and then call the ones you like to find out what your costs might be or
  2. contact an insurance agent that represents them and get the information from him.

Our family chose the United Health Care plan J (which is no longer offered) when we turned 65. It costs us approximately $4,000 extra per year but has saved us more than a hundred thousand dollars in medical bills.

From what I have heard, Plan F is the next best plan that is available, but it may not be the one that works best for you.

The more you pay, the better your coverage will be.

When to Enroll in a Medigap Plan

If you purchase a supplement within the six months of your 65th birthday, companies must sell them to you and may not charge or require waiting periods even if you have any pre-existing conditions.

You can also purchase them during a Medigap open enrollment period under the same circumstances. Enrollment periods occur once each year. However, the longer you wait to buy one of these policies, the more it will cost.

If you buy at any other time and have a previously existing condition, companies can refuse to sell you a policy, sell you one but make you wait for coverage for six months or a year, or charge a good deal more for your coverage.

Never assume that you don’t have a condition that will cause you a problem because a something as simple as acne can be cause for exclusion or higher costs.

In short, if you decide to buy a supplement plan, the best method is to:

  • do so at the same time as when you sign up for Medicare,
  • pick a plan that is affordable and will give you the best benefits, and
  • buy from a stable company that provides the best pricing.

If you don't buy a Medigap policy and then get hit with a major illness, you can be hit with staggering expenses.
If you don't buy a Medigap policy and then get hit with a major illness, you can be hit with staggering expenses. | Source

What Can Happen If You Don't Enroll

Having a Medigap policy can make a huge difference in your finances because although you may be healthy right now, you might not be so lucky in the future.

Healthcare costs are skyrocketing and are one of the main reasons why people file for bankruptcies.

Unfortunately, problems occur when you least expect them or are least financially prepared to deal with them.

  • I met an older gentleman a few years ago whose wife had been rushed to the hospital. She spent three weeks there as a patient, and then passed away.
  • He didn’t have a supplement, so his portion of her bill was $28,000. He was shocked when the bill arrived because he had assumed that Medicare would cover everything.
  • He had no money to pay the bill and was soon going to file for bankruptcy.

This is a sad but common story that happens to people who think they won’t need the extra insurance coverage or simply don’t want to pay for it because they think it’s too expensive.

Does Everybody Need This Policy?

Medigap is expensive, no doubt about it.

However, for most people, it is the one thing that can stand between having major financial problems due to health problems and not having to worry about the cost of care.

Our Medigap policies have jointly cost us approximately $40,000 over the past ten years, but they have saved us more than $100,000, not to mention allowing us to avoid the stress and worry of how we were going to pay our medical bills.

For us, this coverage has been a good deal, but only you can decide if Medigap will work in your situation.

People with few health issues often feel that the cost is not worth the payback, and for some this turns out to be true. However, it only takes one major illness or accident to put someone in the position of having to pay tens of thousands of dollars for medical care because prices are high and in some cases medical care can go on for months if not years. There are also many associated costs such as

  • physical therapy,
  • follow up doctor visits
  • imaging and
  • ambulance services.

For instance, where I live an ambulance ride to the hospital costs around $700. When the entire cost of the ride is approved by Medicare, it will cost the patient $156. For those with supplements, it costs nothing. It's important to remember, also, that one illness can create several ambulance rides.

If you never need an ambulance ride, there is no problem, but if you do, bills can add up quickly.

Other Benefits

In addition to relieving patients of potentially huge expenses, Medigap Policies have other benefits.

  1. They remove the majority of financial stress from families that are hit with major hospital bills, which makes recovery easier.
  2. They assure medical people of payment and thus avoid legal difficulties related to payment.
  3. They make it easier for patients to access the best specialists and hospitals regardless of where they are located and thus help patients to get the best possible care.

Worrying about money keeps people from seeking care and can make them sicker, so when these issues are set aside, patients simply do better.

The Bottom Line

If you get lucky, you may never need a Medigap policy, but the truth is that there's no way to know if or when you'll be sick enough to require major care.

You shouldn't bet your financial future on a roll of the dice.

I fell very ill this year and needed a good deal of care. When the bill summary came it was 117 pages long! I have no idea about the total costs because I was too sick to try and figure it out, but I was sure happy that my Medicare and Medigap policies paid every cent of it.

Think about this story when deciding about buying a Medigap policy, and you'll understand why you need one!

Do you think buying a Medigap Policy is a good idea?

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This content is accurate and true to the best of the author’s knowledge and does not substitute for diagnosis, prognosis, treatment, prescription, and/or dietary advice from a licensed health professional. Drugs, supplements, and natural remedies may have dangerous side effects. If pregnant or nursing, consult with a qualified provider on an individual basis. Seek immediate help if you are experiencing a medical emergency.

Questions & Answers

  • I just turned 66. I take no drugs; I haven't been to a doctor for 6.5 years. I was on disability, but I was on my husband's ins. I have never used Medicare. I was enrolled in Medicare A, and I didn't have to get part B until after 2012 when my husband's health got too bad for him to work, but I've never used it at all. I didn't get to enroll last year when I turned 65. Is it too late for me to get it? I may take ibuprofen 3 or 4 times a year.

    You will have to call Medicare, 800-633-4227 and ask them about this. There is an open enrollment period every year during which you likely will be able to add Part B and a drug plan to your Part A coverage, but you need to call them to find out when this will take place and what you need to do. Even though you have never used your Part A, you are still enrolled, so you'd only be adding Part B, etc.

  • Does a supplemental insurance policy replace Medicare?

    No. A supplemental (Medigap) policy is one you purchase in addition to your Medicare policy that pays some or all of what Medicare does not cover.

© 2017 Sondra Rochelle


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