The Real Cost of Going Without Supplemental Coverage
"I'm healthy — do I really need this?" It's a fair question. Here's what the numbers say.
The gamble: no cap on what you owe
Most private insurance plans cap your annual out-of-pocket costs at $5,000 to $8,000. Original Medicare has no such cap. You pay 20% of every Part B service with no ceiling — ever.
In a good year, that 20% is manageable. In a bad year — a cancer diagnosis, a heart attack, a serious accident — your 20% share can reach $25,000 to $50,000 or more. And Medicare will not stop the bills from coming.
What you'd pay: three scenarios
| Year type | What happens | No Medigap | With Plan G | With Plan N |
|---|---|---|---|---|
| A good year | 3 doctor visits, annual wellness exam, routine labs | $600 - $1,200 | $283 (Part B deductible only) | $60 - $120 (copays) |
| A moderate year | Minor surgery, 8 specialist visits, imaging | $3,000 - $6,000 | $283 | $283 - $500 |
| A bad year | Major surgery, hospitalization, cancer treatment | $15,000 - $50,000+ | $283 | $333 - $500 |
Out-of-pocket costs shown. Plan G and N costs do not include monthly premiums. With premiums factored in, Plan G total annual cost is typically $1,500-$3,300 regardless of health events.
The underwriting trap: "I'll buy it later"
The most expensive mistake in Medicare planning is assuming you can buy Medigap coverage whenever you want. You can't.
Your Medigap Open Enrollment Period starts the month you turn 65 and are enrolled in Part B. During this 6-month window, insurance companies must sell you any Medigap plan at the standard rate, regardless of your health. This is called guaranteed-issue.
After this window closes, companies can use medical underwriting. They can ask about your health history and:
- Charge you a higher premium based on pre-existing conditions
- Exclude coverage for specific conditions for up to 6 months
- Deny your application entirely
By the time you realize you need Medigap — usually because you got sick — it may be too late to get it at a reasonable price, or at all.
The math on self-insuring
Some people with significant savings choose to self-insure — skip the Medigap premium and pay the 20% coinsurance out of pocket. This can work, but only if you can absorb a worst-case scenario.
The math: A Plan G premium of $150/month costs $1,800/year. Over 20 years (age 65-85), that's roughly $36,000-$50,000 including rate increases. To self-insure with equivalent protection, you'd need $50,000-$100,000 earmarked for medical expenses — money you cannot spend on anything else, because you never know which year will be the bad year.
Most financial advisors recommend Medigap as the more efficient use of capital. Insurance is designed to smooth out the tail risk — the unlikely but devastating event.
Convinced you need coverage? The next step is choosing your path.
Medigap and Medicare Advantage take fundamentally different approaches. Here's how to decide.