Medicare supplemental insurance pros and cons to know

As you approach retirement age, it's essential to plan for your healthcare needs — in addition to your financial stability. Medicare, the federal health insurance program for people aged 65 and older, covers a range of medical services, but it doesn't cover everything. 

To fill in the gaps, many retirees turn to Medicare supplemental insurance, also known as Medigap. This type of additional coverage can be invaluable for many retirees because it helps cover certain out-of-pocket expenses, helping to keep healthcare costs down. And that can be critical when you're on a limited budget. 

But while Medicare supplemental insurance can be a great option for many retirees, there are still some potential downsides to consider along with the benefits of this type of policy. As such, it can be helpful to explore the pros and cons of Medicare supplemental insurance to help you make an informed decision about whether it's the right choice for you.

Start exploring Medicare supplemental plans here to find one that works best for you.

Pros of Medicare supplemental insurance

If you're trying to determine whether a Medicare supplemental insurance policy is right for you, here are a few of the potential pros to consider:

Comprehensive coverage

One of the most significant advantages of a Medigap policy is that it provides comprehensive coverage for you. It can help pay for out-of-pocket expenses that are not covered by Original Medicare (Part A and Part B). This can offer you greater financial security, knowing that your healthcare costs are better controlled.

Some of the expenses that Medigap policies may cover include:

• Medicare Part A deductible: This deductible is what you must pay before Medicare covers your inpatient hospital care. In 2023, this deductible is $1,600 per benefit period.
• Medicare Part B deductible: This is the annual amount you pay before Medicare covers outpatient medical services. In 2023, this deductible is $233. 
• Medicare Part A coinsurance and hospital costs: After the deductible is met, Medicare requires you to pay a daily coinsurance amount for extended hospital stays. 
• Medicare Part B coinsurance and copayments: Medigap plans can help pay for the 20% coinsurance or copayments for Medicare Part B services, which include doctor visits, lab tests and outpatient procedures.
• Other costs: Skilled nursing facility coinsurance, excess charges (for Medigap Plan G and Plan F) and emergency medical care while traveling outside of the United States.

It's important to note that Medigap policies are standardized into different plans (e.g., Plan A, Plan G, Plan N), and not all plans cover all of these expenses. The extent of coverage can vary depending on the specific Medicare supplemental insurance plan you choose.

Review your Medicare supplemental insurance options here.

Freedom to choose providers

Medicare supplemental insurance allows you to choose any healthcare provider who accepts Medicare. You are not restricted to a network of doctors or hospitals, giving you the flexibility to receive care from the healthcare professionals you trust.

Guaranteed renewal

Medigap policies are guaranteed renewable. This means that your policy can't be canceled by the insurance company, as long as you pay your premiums on time. This assurance provides peace of mind, especially if you develop health issues over time.

No referral requirement

Unlike some Medicare Advantage plans that may require referrals to see specialists, Medigap policies generally do not have referral requirements. This means you can consult with specialists directly without needing your primary care physician's approval.

Travel coverage

Many Medigap plans offer coverage for emergency medical care while traveling outside the United States. If you're a globetrotter or plan to spend time abroad during retirement, this feature can be invaluable.

Cons of Medicare supplemental insurance

And, there are also a few cons to consider when it comes to Medicare supplemental insurance, including:

Premium costs

While Medigap policies generally offer extensive coverage, they also come with higher premium costs. In addition to your standard Medicare premiums (Part B and, if applicable, Part A), you'll need to pay a separate premium for your Medigap policy. These costs can add up, making it important to budget for your healthcare expenses.

Limited prescription drug coverage

Medigap plans do not cover prescription drugs. For prescription drug coverage, you'll need to enroll in a standalone Medicare Part D plan. This means you'll have multiple insurance plans to manage, which can be confusing in some cases.

No extra benefits

Unlike Medicare Advantage plans, which often include additional benefits such as dental, vision and hearing coverage, Medigap policies focus solely on filling the gaps in original Medicare. If you're looking for extra healthcare-related benefits, you may need to explore other healthcare options.

Enrollment period restrictions

To purchase a Medigap policy without medical underwriting (i.e., without being subject to health-related questions), you must enroll during your Medigap open enrollment period (OEP). Missing the window for your OEP may result in higher premiums or denial of coverage if you have pre-existing health conditions.

State variations

Medigap plans are standardized at the federal level, but availability and pricing can vary from one state to another. It's essential to research the options specific to your location so you know exactly what you're getting into with a Medicare supplemental insurance policy.

The bottom line

Medicare supplemental insurance can be a valuable tool in securing your healthcare needs during retirement. Its comprehensive coverage, the flexibility it offers in terms of choosing providers and the guaranteed renewal make it an attractive option for many seniors. However, it's essential to weigh these advantages against the potential drawbacks, such as premium costs and the need for a separate prescription drug plan, to determine if it makes sense for you. Ultimately, the decision to purchase Medicare Supplemental Insurance should align with your healthcare needs, budget and preferences.