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What Is Medicare Supplement Insurance & Is It Right for You?

Retirement Planning
smiling senior couple, happy to have medicare supplement insurance, embraces each other outside

Medicare, the federal health insurance program that primarily covers seniors and certain young Americans under age 65 with disabilities, is fairly widespread. The program is split into several parts, and beneficiaries typically pay a monthly premium for health coverage based on their income.

However, Medicare plans don't cover everything, so plan holders may encounter out-of-pocket costs. This is why some people enrolled in these plans choose to purchase Medicare supplement insurance, also known as Medigap coverage.

What Is Medicare Supplement Insurance?

According to Medicare.gov, Medigap coverage is only available to Medicare beneficiaries who are enrolled in Medicare parts A and B, which provide hospital insurance and medical insurance, respectively. Medicare parts A and B are considered Original Medicare. Medicare Part A covers hospital care, home health services, nursing home and hospice care. Medicare Part B covers preventive care and medically necessary care, such as inpatient or outpatient visits to treat a medical condition.

Federal and state laws, local coverage decisions made by insurers in each state, and national coverage decisions governed by Medicare all factor into what's covered under the program and what isn't. For example, Original Medicare doesn't cover health care services administered abroad, copays or deductibles. However, a Medigap policy could cover all three of these things and reduce your out-of-pocket health care costs.

Should I Consider Medicare Supplement Insurance?

The majority of people on Medicare are over age 65, and many within this group are retirees who likely live on a fixed income. Health care costs in retirement can be significant. Medigap coverage — as its name implies — fills coverage gaps from Original Medicare.

There are several standard Medigap plans, which either partly or entirely cover some health care costs, including coverage for skilled nursing facilities and blood transfusions, emergency coverage for trips abroad, select copays and deductibles and more. Policies must be purchased from a licensed insurer, and a monthly premium must be paid in addition to any premiums for Medicare parts A and B. Monthly premiums vary by state, with some plans being more expensive than others depending on where you live.

Not everyone chooses to get this coverage. According to a Kaiser Family Foundation study, 23 percent of Medicare beneficiaries have a Medigap plan, while about 30 percent have a Medicare Advantage plan, in which the federal government pays a private company to cover Medicare benefits.

If you are considering a Medigap plan, you could enroll during the open enrollment period. This begins when you turn 65 and are enrolled in Medicare Part B. Open enrollment lasts for six months, so you'll have some time to research plans and select one that aligns with the coverage you need at a price you can afford.

Any Other Considerations?

While Medigap plans do help lower your out-of-pocket costs, especially for copays and deductibles, they don't provide comprehensive coverage.

Medigap policies don't cover vision or dental care, eyeglasses, hearing aids, long-term care or prescription drugs. Consider a Medicare Part D prescription drug plan if you want prescription drug coverage or a Medicare Advantage plan if you want additional insurance coverage. You could also search for insurers who offer these add-on services in their policies. You could also simply choose to pay for such services out of pocket.

If you're approaching age 65 and are concerned about how you'll cover your health care costs later in life or during retirement, a Medigap policy could supplement your Medicare coverage. Though monthly premiums for Medigap policies can vary, shouldering this regular cost may help you avoid higher medical bills in the future. This could reduce your out-of-pocket costs to a figure that's much more affordable in the long term.

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Information provided is general and educational in nature. It is not intended to be, and should not be construed as, legal or tax advice. Western & Southern Financial Group and its member companies (“the Company”) does not provide legal or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. The Company makes no warranties with regard to the information or results obtained by its use. The Company disclaims any liability arising out of your use of, or reliance on, the information. Consult an attorney or tax advisor regarding your specific legal or tax situation.