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When you reach retirement age, Medicare insurance offers basic medical insurance protection for your health needs. However, this coverage is basic and does not cover all of the costs for covered medical services and supplies. Medicare supplemental insurance policies are known as “Medigap insurance” and they fill in the gaps of Medicare coverage. A financial advisor could also help you create or adjust a financial plan for your medical care needs in retirement. Let’s break down the average cost of Medicare supplemental insurance. 

What Is Medicare Supplemental Insurance?

Medicare supplemental insurance plans cover the costs that you’re responsible for with Original Medicare. These policies are offered by private insurance companies and are on top of your Part A and Part B benefits. Supplement insurance policies offer a predictable monthly expense versus the unknown cost of visiting a doctor or going into the hospital.

Original Medicare insurance policies are offered by the government to provide medical insurance for senior citizens through Part A and Part B policies. Unfortunately, these policies do not pay for all of the costs of covered medical services and supplies. Medicare supplemental insurance (aka Medigap insurance) fills in these gaps to help pay for some of the remaining health care costs.

Medigap insurance policies help pay for co-payments, co-insurance amounts and deductibles. Additionally, some Medigap policies cover medical care when you travel outside the U.S. Traditional Medicare policies (Part A and Part B) do not cover international medical care.

What It Does and Doesn’t Include

Some Medigap policies include prescription drug benefits as part of their plan. When a plan does not include prescription drug coverage, then you can buy a standalone Medicare Part D insurance policy.

Medicare supplemental insurance provides additional benefits and reduces your out-of-pocket expense for covered services. However, some services are excluded with these policies, including:

  • Long-term care
  • Vision care and eyeglasses
  • Dental care
  • Hearing aids
  • Private-duty nursing

Is Medigap the Same as Medicare Advantage?

No, these are two different options that seniors have for their healthcare needs. Medigap policies take care of the unpaid costs of Original Medicare. By comparison, Medicare Advantage policies are an alternative to Original Medicare and offer different levels of benefits that Medigap policies do not. Advantage Plans also help pay uncovered medical expenses that Original Medicare doesn’t.

With a Medigap policy, you’ll have multiple insurance policies and insurance cards for your care, but you can see any doctor that accepts Medicare. Medicare Advantage is more like insurance that you had during your working years. You pay one company for your insurance and many Advantage Plans include extra benefits like dental, vision and prescription drug coverage. However, many Advantage plans require you to see “in-network” doctors and may not cover out-of-network care.

What Does Medicare Supplemental Insurance Cost?

Medicare Supplemental Insurance application

Insurance companies often charge different premiums for the same Medicare Supplemental insurance policy. It pays to shop around to find the best price. Medigap policies are standardized and must follow federal and state laws to offer the same basic benefits. Price strategies vary by state and are determined in one of three ways:

  • Community-rated. The same price for everyone that has the same policy, no matter what your age is. Everyone in the state is treated the same.
  • Issue-age-rated. Price is based on the age when you first buy the policy and will not increase as you get older. You’re rewarded for buying your policy at a young age and not changing your coverage.
  • Attained-age-rated. Premiums are based on your age for the current year of coverage. Premiums start out lower for younger buyers, then increase as you get older.

The average cost of Medigap supplemental insurance depends on your age, where you live, if you use tobacco and which Medigap Plan you are purchasing. The chart below shows 12 different Medigap policy options for a 70-year-old woman. It includes the range of premiums for someone living in Tennessee who does not use tobacco.

Medigap Policy Options for a 70-Year-Old Woman
Medicare Plan Monthly Premium Co-Pay/Deductible Benefits
Plan A $65 to $244 $0 copay, $1,484 hospital deduct., $203 medical deduct. None
Plan B $109 to $306 $0 copay, $0 hospital deduct., $203 medical deduct. Part A deductible
Plan C $125 to $369 $0 copay, $0 hospital deduct., $0 medical deduct. Skilled nursing, Part A&B deduct., Foreign travel emergency
Plan D $118 to $265 $0 copay, $0 hospital deduct., $203 medical deduct. Skilled nursing, Part A deduct., Foreign travel emergency
Plan F $116 to $371 $0 copay, $0 hospital deduct., $0 medical deduct. Skilled nursing, Part A & B deduct., Part B excess charges, Foreign travel emergency
Plan F – High deductible $28 to $83 $0 copay after $2,370 deductible Skilled nursing, Part A & B deduct., Part B excess charges, Foreign travel emergency
Plan G $98 to $341 $0 copay, $0 hospital deduct., $203 medical deduct. Skilled nursing, Part A deduct., Part B excess charges, Foreign travel emergency
Plan G – High deductible $25 to $80 $0 copay after $2,370 deductible + $203 medical deduct. Skilled nursing, Part A deduct., Part B excess charges, Foreign travel emergency
Plan K $48 to $131 10% coinsurance up to $6,220, then $0 the rest of the year, $742 hospital deduct., $203 medical deduct. Skilled nursing, Part A deduct.
Part L $66 to $216 5% coinsurance up to $3,110, then $0 the rest of the year, $371 hospital deduct., $203 medical deduct. Skilled nursing, Part A deduct.
Plan M $111 to $272 $0 copay, $742 hospital deduct., $203 medical deduct. Skilled nursing, Part A deduct., Foreign travel emergency
Plan N $73 to $315 $0 copays, $0 hospital deduct., $203 medical deduct. Skilled nursing, Part A deduct., Foreign travel emergency

*These policy options are available at Medicare.gov. Plans C and F are not available for people who turned 65 on or after Jan. 1, 2020.

Bottom Line

"MEDIGAP" written ona card with a stethoscope next to it

Medicare supplement insurance is an important tool to control your healthcare costs in retirement. It turns the unknown into a fixed monthly expense, which makes it easier to budget for. There are numerous Medicare Plans to consider and premiums vary based on your age, gender, state and tobacco use. It helps to consult with a professional to determine which plan is right for you.

Tips for Insurance in Retirement

  • Medical insurance can be a significant expense in retirement. Understanding what those costs are will help you plan for these costs in your budget. Our retirement calculator helps you figure out your projected income and expense in retirement.
  • Picking the right Medicare supplement insurance policy can be a challenge. Working with a financial advisor can help you calculate those costs and plan accordingly with your retirement savings. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Photo credit: ©iStock.com/monkeybusinessimages, ©iStock.com/Johnrob, ©iStock.com/Mohamad Faizal Bin Ramli

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