Orlando Harmon
Medicare beneficiaries have various types of insurance choices. They can choose to either enroll in traditional Medicare (TM) or Medicare Advantage (MA). While TM is administered by the federal government, MA is operated by private health plans. Due to gaps in and costs associated with Medicare coverage, beneficiaries can obtain supplemental coverage to limit their exposure to risk. Supplemental coverage generally covers the beneficiary’s cost-sharing, reducing out-of-pocket (OOP) spending. In 2022, 29.7 million Medicare beneficiaries in traditional Medicare had some type of additional coverage, with 12.5 million (42%) of those in traditional Medicare having Medicare supplement insurance, also known as Medigap.
| Characteristics | Values |
|---|---|
| Total number of Medicare beneficiaries in 2022 | 29.7 million |
| Percentage of Medicare beneficiaries with additional coverage in 2022 | 89% |
| Percentage of Medicare beneficiaries with no additional coverage in 2022 | 11% |
| Number of Medicare beneficiaries with no additional coverage in 2022 | 3.2 million |
| Percentage of Medicare beneficiaries with supplemental insurance (Medigap) in 2022 | 24% |
| Number of Medicare beneficiaries with supplemental insurance (Medigap) in 2022 | 12.5 million |
| Percentage of Medicare beneficiaries with employer-sponsored insurance in 2022 | 31% |
| Percentage of Medicare beneficiaries with Medicaid in 2022 | 16% |
| Percentage of traditional Medicare beneficiaries under age 65 with a Medigap policy | 2% |
| Percentage of traditional Medicare beneficiaries ages 65 and older with a Medigap policy | 11% |
| Number of Medicare beneficiaries with employer or union-sponsored health insurance coverage in 2022 | 14.5 million |
| Percentage of Medicare beneficiaries with Medicare Supplement insurance who were 75 years or older in 2020 | 42% |
| Percentage of the general Medicare population who were 75 years or older in 2020 | 36% |
| Percentage of Medicare beneficiaries with Medigap with annual household incomes below $20,000 in 2020 | 11% |
| Percentage of Medicare beneficiaries with Medigap with annual household incomes below $30,000 in 2020 | 24% |
| Number of companies offering Medicare SELECT policies in December 2021 | 86 |
| Number of Medicare beneficiaries covered by Medicare SELECT policies in December 2021 | 490,000 |
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What You'll Learn
Racial disparities in supplemental insurance coverage
While the majority of Medicare beneficiaries have some form of supplemental insurance coverage, there are racial disparities in the rates of enrollment in different types of supplemental insurance plans.
A study examining racial and ethnic differences in supplemental insurance coverage among traditional Medicare (TM) and Medicare Advantage (MA) beneficiaries found that racial and ethnic minority beneficiaries had lower adjusted rates of enrollment in Medigap among TM beneficiaries and higher enrollment in Medicaid among both TM and MA beneficiaries compared to White beneficiaries. The study also noted that Black beneficiaries had the lowest rates of remaining in Medigap or MA-only coverage. Additionally, Black and Hispanic beneficiaries were more likely to have wrap-around Medicaid coverage or Medicare Advantage and less likely to have private supplemental insurance than their White counterparts.
The lower enrollment of Black and Hispanic beneficiaries in Medigap relative to Medicare Advantage may be due to the relatively high cost of Medigap premiums, which can be challenging for individuals with lower incomes and assets. Black and Hispanic beneficiaries have been found to have lower incomes and assets compared to White beneficiaries. Additionally, Black and Hispanic beneficiaries are more likely to report relatively poor health and have higher prevalence rates of certain chronic conditions that would be classified as pre-existing conditions by Medigap insurers, potentially making it more difficult for them to obtain Medigap coverage outside of guaranteed issue periods.
Racial and ethnic disparities in health care utilization are defined as population differences in the use of health care services between Whites and other racial/ethnic groups that are not due to differences in health status or preferences. Studies have shown that racial differences in the use of health care services persist even with the same level of basic coverage. For example, Balsa, Cao, and McGuire (2007) found that Black Medicare beneficiaries were significantly less likely to visit a medical provider compared to their White counterparts. These disparities may be influenced by differences in socioeconomic status (SES), with beneficiary costs (premium contributions, deductibles, and coinsurance) potentially being unaffordable for minorities.
Medicare eligibility at age 65 has provided many previously uninsured minorities with coverage, leading to increased utilization and expenditures. However, racial disparities in supplemental insurance coverage persist, indicating that minority Medicare beneficiaries may not have equitable access to supplemental insurance plans.
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Medicare beneficiaries with no supplemental coverage
Medicare beneficiaries without supplemental coverage may face higher out-of-pocket expenses and inadequate protection against catastrophic medical expenses. Supplemental coverage helps to limit financial exposure by covering Medicare's cost-sharing requirements, such as deductibles, copayments, and coinsurance. Medigap policies, which are sold by private insurance companies, can be costly, making them less accessible to those with lower incomes.
Racial and ethnic disparities exist in supplemental coverage among Medicare beneficiaries. Minority beneficiaries have lower enrollment rates in Medigap and higher enrollment in Medicaid. Black and Hispanic beneficiaries, in particular, have lower incomes and assets compared to White beneficiaries, making it more difficult for them to afford Medigap policies. They also report poorer health and have higher rates of certain chronic conditions, which could make it challenging to obtain Medigap coverage outside of guaranteed issue periods.
For low-income Medicare beneficiaries, public programs are available to supplement Medicare coverage. Additionally, Medicare Savings Programs (MSP) can help enrollees with limited incomes and assets by paying for Medicare Part A and Part B premiums, deductibles, copays, and coinsurance. However, some Medicare beneficiaries without supplemental coverage may still face financial challenges, especially if they develop a significant medical condition or require prescription medications, as Original Medicare does not include prescription drug coverage.
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Medicare Advantage plans vs. traditional Medicare
Medicare Advantage (MA) plans and traditional Medicare differ in several key ways. Firstly, original Medicare is administered by the federal government, while Medicare Advantage plans are offered by private companies. Medicare Advantage plans have become increasingly popular, with nearly 33 million people enrolled in an MA plan in 2024, representing 54% of eligible Medicare beneficiaries.
Original Medicare consists of two parts: Part A and Part B. Part A covers inpatient hospital care, skilled nursing care, some home care, and end-of-life hospice care. Part B covers doctor's services, diagnostic screenings, durable medical equipment, lab tests, outpatient care, and preventive services. Original Medicare does not automatically include prescription drugs, so beneficiaries may need to purchase a separate Part D plan. Additionally, original Medicare does not cover routine dental, hearing, and vision care.
Medicare Advantage plans, on the other hand, often combine Part A, Part B, and prescription drug coverage into a single plan, known as Part C. Many Medicare Advantage plans also provide some coverage for dental, hearing, and vision care. Some plans even extend coverage to gym memberships, over-the-counter medications, and transportation to medical appointments. Medicare Advantage plans may also offer additional benefits, such as reduced cost-sharing and out-of-pocket spending limits. However, these plans typically have provider networks and prior authorization requirements that beneficiaries need to consider.
When choosing between original Medicare and Medicare Advantage plans, beneficiaries should consider their specific needs and preferences. Factors to consider include the network of doctors and hospitals included in the plan, the coverage for prescription drugs and other benefits, and the potential out-of-pocket costs associated with each type of plan. Additionally, beneficiaries may want to consider the availability of supplemental insurance options, such as Medigap policies, which can help with deductibles, copayments, and cost-sharing requirements.
In terms of supplemental insurance coverage, there are racial and ethnic disparities among traditional Medicare and Medicare Advantage beneficiaries. Racial and ethnic minority beneficiaries have lower enrollment rates in Medigap policies and higher enrollment in Medicaid. Additionally, Black beneficiaries have the lowest rates of remaining in Medigap or Medicare Advantage plans without supplemental coverage. These disparities may be due to lower incomes and higher rates of certain chronic conditions among minority groups.
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Medigap policies and their costs
Medigap policies, also known as Medicare Supplement Insurance, are sold by private insurance companies to cover the cost-sharing requirements of Medicare Part A and Part B. These include deductibles, copayments, and coinsurance. Medigap policies help to limit the financial exposure of Medicare beneficiaries, making healthcare costs more predictable through monthly premium payments.
The cost of Medigap policies can vary depending on several factors, including the insurance company, the specific plan chosen, and the beneficiary's location. The benefits offered by each lettered plan are standardised, but the premium amount can differ between insurance providers for the same plan. For example, the average monthly premium for Plan G in 2023 was $164, with prices ranging from $140 in D.C., Hawaii, and New Mexico to $236 in New York.
Additionally, Medigap premiums can be influenced by the beneficiary's age, health status, and medical history. Premiums are generally lower if Medigap insurance is purchased during the open enrollment period, as insurance companies cannot factor in health or medical history during this time. After this period, prices may increase, and coverage may be denied due to health status.
Medigap policies may also offer discounts to beneficiaries, such as household discounts, online application discounts, and multi-policy discounts, which can reduce the overall cost of the plan.
While Medigap policies provide valuable financial protection, they may be costly for some individuals, particularly those with lower incomes or specific medical histories. This has contributed to lower enrollment rates among certain demographic groups, such as Black and Hispanic beneficiaries, who often have lower incomes and higher prevalence rates of certain chronic conditions.
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Supplemental coverage for those under 65
Supplemental coverage for Medicare beneficiaries under 65 is available through various options, including Medigap policies, employer-sponsored insurance, and Medicaid.
Medigap policies, also known as Medicare Supplement Insurance, help cover deductibles, copayments, and other out-of-pocket costs associated with Medicare. While Medigap is a popular option for those over 65, federal protections do not extend to those under 65 who qualify for Medicare due to long-term disability or end-stage renal disease. However, 34-36 states have enacted protections, requiring insurers to offer at least one Medigap policy to Medicare recipients under 65. The availability and cost of Medigap policies for this age group vary across states, and premiums may be higher.
Employer-sponsored insurance is another form of supplemental coverage for those under 65. In 2022, 14.5 million Medicare beneficiaries had employer or union-sponsored health insurance coverage in addition to Medicare Part A and Part B. This form of supplemental coverage is particularly beneficial for those with lower incomes, as it is often provided as a benefit without additional premiums.
Medicaid is a federal-state program that provides health coverage for those with low incomes and assets. It is an essential source of supplemental coverage for those under 65, as they are more likely to qualify for Medicaid than those 65 and older (65% vs. 10%). Racial and ethnic minority beneficiaries are also more likely to enrol in Medicaid, indicating potential disparities in access to supplemental insurance coverage.
The availability and affordability of supplemental coverage for those under 65 vary depending on their circumstances and location. While some may have access to employer-sponsored insurance or Medicaid, others may face challenges due to higher premiums or eligibility criteria. The federal government subsidizes health insurance for most Americans under 65 through various programs, including subsidies for coverage obtained through marketplaces established by the Affordable Care Act.
Overall, while options for supplemental coverage exist for those under 65, the specific protections and offerings differ from those for beneficiaries 65 and older.
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Frequently asked questions
In 2022, 29.7 million Medicare beneficiaries had some type of additional coverage, with 12.5 million of those having Medicare supplement insurance, also known as Medigap.
In 2022, 14.5 million Medicare beneficiaries had some form of employer or union-sponsored health insurance coverage in addition to Medicare Part A and Part B.
In 2022, 89% of the 29.7 million Medicare beneficiaries had some type of additional coverage. This is an increase from 2018, when 90% of Medicare beneficiaries had supplemental insurance.
In 2022, 16% of Medicare beneficiaries had additional coverage through Medicaid.
