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Nov. 24, 2020, 8:01 a.m. EST

Are Medicare Supplement plans worth it?

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When you first enroll in Medicare , you may be surprised to find that your medical and hospital insurance isn’t completely free. While Medicare covers a large portion of your healthcare costs, it doesn’t cover everything. You will still have to pay out-of-pocket expenses like deductibles, copayments, and coinsurance.

To help offset the cost, 23.5% of Medicare beneficiaries —approximately 14.1 million people—purchase Medicare Supplement insurance, also known as Medigap. But are Medicare Supplement plans worth it?

Here’s what you need to know to make an informed decision.

Under Original Medicare, which includes Medicare Part A and Medicare Part B, you get coverage from the federal government for hospital and medical expenses. However, you still have out-of-pocket costs that aren’t covered by Medicare.

For example, your Medicare Part B deductible is $198 for 2020. After you meet your deductible for the year, you typically pay 20% of the Medicare-approved amount for doctor services, outpatient therapy, and durable medical equipment. Medicare Supplement plans would help cover the 20% you’re responsible for paying.

Medicare Supplement plans, or Medigap policies, are insurance plans sold by private insurance companies. You pay the insurance company a monthly premium for your Medigap plan, in addition to the Part B premium you pay to Medicare.

Some Medigap plans cover additional services that Original Medicare doesn’t, such as coverage when you are traveling outside of the United States.

Insurance companies can refuse to sell Medigap policies to applicants with preexisting health conditions in specific circumstances. The good news is you may qualify for a guaranteed issue policy if you meet certain criteria. For example, you can qualify for one of the available guaranteed issue Medicare Supplement plans if your employer-sponsored health plan covers your costs after Medicare pays, and if the plan is ending.

Medicare doesn’t cover any of the costs of a Medigap policy. For this reason, you may wonder if Medigap is worth it. Medicare Supplement plans aren’t the right choice for everyone.

With most Medigap policies, the insurance company gets your Part B claim information from Medicare, and they will pay the doctor directly.

Each insurance company sets its own pricing for its Medigap plans. Medigap policies are generally priced in one of three different ways:

The cost of Medigap plans can vary widely. The price of your Medigap premiums is dependent on several factors, including age, gender, tobacco use, location, deductible amounts, and if the plan you choose uses medical underwriting.

Depending on what plan you choose, your Medigap premium could range between $51 and $1,130 per month in 2020.

Medigap plans can often have a steep monthly premium. Are these plans worth the money?

When deciding whether or not Medigap insurance is worth the expense, consider your typical out-of-pocket costs. Original Medicare doesn’t have an out-of-pocket maximum, which means going without a Medigap policy can pose a huge financial risk. If you need recurring care for a chronic condition or have a single major health emergency, you could be on the hook for thousands of dollars .

Keep in mind Medigap policies don’t include prescription drug coverage. If you want coverage for prescription medications, you’ll need to purchase a separate Medicare Part D plan and pay an additional monthly premium.

An alternative to Medigap is enrolling in a Medicare Advantage plan , also known as Medicare Part C . When evaluating your options, consider that you can’t have a Medigap policy and a Medicare Advantage plan.

Medicare Advantage plans combine your Part A and Part B benefits. They also typically include prescription drug coverage and may cover other services Original Medicare doesn’t, like hearing aids or glasses. With Medicare Advantage plans, you may have a monthly premium you’ll pay in addition to your Medicare Part B premium.

If you decide you want to switch to a Medicare Advantage plan , you’ll have to cancel your Medigap policy first.

Are Medicare Supplement plans worth it in 2020? Depending on your health care needs, a Medigap policy can be a worthwhile investment. If you decide to get a Medigap policy, the best time to enroll is during the six-month Open Enrollment Period .

If you’re about to turn 65, your Medigap Open Enrollment period starts the first day of the month that you turn 65. During that time, you can purchase any Medigap policy sold in your state, even if you have health issues (some companies call these preexisting conditions).

You can use Medicare’s Plan Finder tool to view available policies in your state, review your coverage options, and compare costs. Call a licensed Medicare professional at 844-475-4253 to determine your next steps and find the best plan for your healthcare needs.

Related: Find the best Medicare plan for you

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