If you have medicare do you need supplemental insurance

More than 62 million people, including 54 million older adults and 8 million younger adults with disabilities, rely on Medicare for their health insurance coverage. Medicare beneficiaries can choose to get their Medicare benefits (Part A and Part B) through the traditional Medicare program, or they can enroll in a Medicare Advantage plan, such as a Medicare HMO or PPO. Medicare Advantage plans provide all benefits covered by Medicare Parts A and B, often provide supplemental benefits, such as dental and vision, and typically provide the Part D prescription drug benefit. Many traditional Medicare beneficiaries also rely on other sources of coverage to supplement their Medicare benefits. Supplemental insurance coverage typically covers some or all of Medicare Part A and Part B cost-sharing requirements and, in some instances, provides benefits not otherwise covered by Medicare. Beneficiaries can also enroll in a Part D plan for prescription drug coverage, either a stand-alone plan to supplement traditional Medicare or a Medicare Advantage plan that covers drugs.

This data note explores sources of coverage among beneficiaries in Medicare and the demographic characteristics of people with different types of coverage, based on data from the 2018 Medicare Current Beneficiary Survey (the most recent year available). The analysis excludes Medicare beneficiaries who were enrolled in Part A only or Part B only for most of their Medicare enrollment in 2018 (4.7 million people) and beneficiaries who had Medicare as a secondary payer to employer or other coverage (1.7 million people). The analysis also focuses only on coverage for Part A and Part B benefits, not Part D. All differences reported in the text are statistically significant (see Methods for additional details).

Nine in 10 people with Medicare either had traditional Medicare along with some type of supplemental coverage (51%), including Medigap, employer-sponsored insurance, and Medicaid, or were enrolled in Medicare Advantage (39%) in 2018 (Figure 1). But 1 in 10 Medicare beneficiaries (10%) – 5.6 million people – were covered under traditional Medicare with no supplemental coverage, which places them at greater risk of incurring high medical expenses or foregoing medical care due to costs. Under traditional Medicare, beneficiaries without supplemental coverage in 2021 would pay a deductible of $1,484 for an inpatient hospitalization plus daily copayments for extended hospital and skilled nursing facility stays, and a separate deductible of $203 plus 20% coinsurance for most physician and other outpatient services, including for drugs administered by physicians for cancer and other serious medical conditions.

Figure 1: In 2018, 9 In 10 Medicare Beneficiaries Either Had Traditional Medicare With Supplemental Coverage (51%) Or Were Enrolled In Medicare Advantage (39%)​

What are the characteristics of Medicare beneficiaries with different sources of coverage?

Traditional Medicare

Among Medicare beneficiaries in traditional Medicare, most (83%) have supplemental coverage, either through Medigap (34%), employer-sponsored retiree health coverage (29%), or Medicaid (20%). But nearly 1 in 5 (17%) Medicare beneficiaries in traditional Medicare have no supplemental coverage (Figure 2).

Figure 2: Nearly One in Five Traditional Medicare Beneficiaries Had No Source of Supplemental Coverage in 2018

Medigap

Medicare supplement insurance, also known as Medigap, provided supplemental coverage to 2 in 10 (21%) Medicare beneficiaries overall, or 34% of those in traditional Medicare (roughly 11 million beneficiaries) in 2018. As with other forms of supplemental insurance, the share of beneficiaries with Medigap varies by state. Medigap policies, sold by private insurance companies, fully or partially cover Part A and Part B cost-sharing requirements, including deductibles, copayments, and coinsurance. As of January 1, 2020, Medigap policies are prohibited from covering the full Medicare Part B deductible for newly-eligible enrollees; however, older beneficiaries who are already enrolled are permitted to keep this coverage. While Medigap limits the financial exposure of Medicare beneficiaries and provides protection against catastrophic expenses for services covered under Parts A and B, Medigap premiums can be costly and can rise with age, depending on the state in which they are regulated. Estimated average monthly premiums for Medigap policies range from $150 to around $200.

Compared to all traditional Medicare beneficiaries in 2018, a larger share of Medigap policyholders had annual incomes greater than $40,000, had higher education levels, were disproportionately White, and were in excellent, very good, or good health (Table 1). Only a small share of Medigap policyholders (2%) were under age 65 and qualified for Medicare due to having a long-term disability; most states do not require insurers to issue Medigap policies to beneficiaries under age 65. Federal law provides time-limited guarantee issue protections for adults ages 65 and older when they enroll in Medicare if they want to purchase a supplemental Medigap policy, but these protections do not extend to adults under the age of 65. Legislation has been introduced in the 117th Congress to require insurers to offer Medigap coverage to younger adults with disabilities when they first go on Medicare, and to others.

Employer-sponsored Retiree Health Coverage

In total, 14.3 million of Medicare beneficiaries – a quarter (26%) Medicare beneficiaries overall — also had some form of employer-sponsored retiree health coverage in 2018. Of the total number of beneficiaries with retiree health coverage, nearly 10 million beneficiaries have retiree coverage to supplement traditional Medicare (29% of all beneficiaries in traditional Medicare), while 4.5 million beneficiaries are enrolled in Medicare Advantage employer group plans (see Medicare Advantage section below).

Compared to traditional Medicare beneficiaries overall in 2018, people with employer-sponsored retiree health coverage as a supplement to traditional Medicare were more likely to have had annual incomes greater than $40,000, had higher education levels, were disproportionately White, were more likely to be in excellent, very good, or good health, and were more likely to be age 65 or older (Table 1). Evidence suggests that employer-sponsored retiree health coverage has been on the decline.

Medicaid

Medicaid, the federal-state program that provides health and long-term services and supports coverage to low-income people, provided health coverage for nearly 11 million Medicare beneficiaries with low incomes and modest assets in 2018, or 20% of all Medicare beneficiaries. Of this total, 6.6 million are enrolled in both traditional Medicare and Medicaid (20% of all beneficiaries in traditional Medicare), while 4.2 million are enrolled in Medicare Advantage and Medicaid (see Medicare Advantage section below). For these beneficiaries, who are sometimes called dual-eligible beneficiaries because they are eligible for both Medicare and Medicaid, Medicaid typically pays the Medicare Part B premium and may also pay a portion of Medicare deductibles and other cost-sharing requirements.

The majority of dual-eligible beneficiaries are eligible for full Medicaid benefits, including long-term services and supports. Other dual-eligible beneficiaries may qualify for Medicare premium and cost-sharing assistance through the Medicare Savings Programs, but not full Medicaid benefits, if they meet an income and asset test. Previous KFF analysis has shown that expanding eligibility for the Medicare Savings Program to provide both premium and cost-sharing assistance to beneficiaries with incomes up to 150% FPL and eliminating the asset limits would cover an additional 5.2 million beneficiaries.

Compared to traditional Medicare beneficiaries overall in 2018, a significantly larger share of dual-eligible beneficiaries with Medicaid were Black or Hispanic, had low incomes and low education levels, and were under the age of 65 and qualified for Medicare due to a long-term disability. A much larger share of dual-eligible beneficiaries in traditional Medicare than the total traditional Medicare population reported their health as fair or poor, had six or more chronic conditions, or had three or more limitations in activities of daily living (Table 1).

No Supplemental Coverage

In 2018, 5.6 million Medicare beneficiaries in traditional Medicare– 1 in 10 beneficiaries overall (10%) or nearly 1 in 5 of those with traditional Medicare (17%) had no source of supplemental coverage. Beneficiaries in traditional Medicare with no supplemental coverage are fully exposed to Medicare’s cost-sharing requirements. They also lack the protection of an annual limit on out-of-pocket spending because traditional Medicare does not have an out-of-pocket limit on cost sharing for services covered under Parts A and B. In contrast, since 2011, federal regulation has required Medicare Advantage plans to provide an out-of-pocket limit for services covered under Parts A and B.

Compared to all traditional Medicare beneficiaries in 2018, a larger share of beneficiaries with no supplemental coverage had annual incomes between $20,000 and $40,000, were under the age of 65 (and eligible for Medicare due to having a long-term disability), and were men.

Medicare Advantage

In 2018, Medicare Advantage covered about 4 in 10 Medicare beneficiaries (39%), or 21 million people with Medicare. (Based on more current enrollment data, the total number of Medicare Advantage enrollees increased to 24 million in 2020, but the MCBS, which we use here for demographic analysis of coverage sources, is not available beyond 2018.) Of the total number of Medicare Advantage enrollees, 4.5 million (21%) are enrolled in group employer- or union-sponsored plans for (known as employer group waiver plans, or EGWPs). Under these arrangements, employers or unions contract with an insurer and Medicare pays the insurer a fixed amount per enrollee to provide benefits covered by Medicare. The employer or union (and sometimes the retiree) may also pay a premium for additional benefits or lower cost sharing. Another 4.2 million Medicare Advantage enrollees (20%) are also covered by Medicaid, and are enrolled in either a Special Needs Plan (SNP) or a Medicare Advantage plan generally available to all Medicare beneficiaries (Figure 3).  Special Needs Plans restrict enrollment to specific types of beneficiaries with significant or relatively specialized care needs, including beneficiaries dually eligible for Medicare and Medicaid (D-SNPs), people with severe chronic or disabling conditions (C-SNPs), and beneficiaries requiring a nursing home or institutional level of care (I-SNPs)

Figure 3: 4 In 10 Medicare Advantage Enrollees Were Also Enrolled In Medicaid Or Employer-sponsored Health Coverage In 2018​

Compared to traditional Medicare beneficiaries, a smaller share of beneficiaries enrolled in Medicare Advantage in 2018 were White, and had incomes above $40,000, while a larger share of Medicare Advantage enrollees had lower levels of education and lived in urban areas (Table 1). We observed no significant differences in health status between beneficiaries in Medicare Advantage and traditional Medicare, based on the number of chronic conditions, health status, or limitations in activities of daily living, each of which is self-reported in the MCBS so not subject to coding patterns.