What Do I Need to Know About Medicare Supplement Plans?
Part A (hospital insurance), Part B (doctor’s services) and Part D (prescription drugs) of original Medicare have co payments and deductibles. Deductibles are what you have to pay before Medicare pays anything. Co-payments are what you have to pay for each hospital stay, physician’s service, or prescription after the deductible is met.
Part A has an annual deductible of $165 for each hospital stay, and no co-payments. (There are exceptions for frequent and prolonged hospital stays.) Part B is designed to cover 80% of the cost of services; you pay the other 20%. There is no out-of-pocket limit for Parts A and B. For sever illness or multiple chronic conditions, they can potentially run into tens of thousands of dollars.
Medicare Supplement policies (“Medigap”) cover these deductibles and co-payments, and may include benefits that Original Medicare does not provide, such as medical services outside the United States, which Original Medicare does not cover
What Types of Supplement Plans Are There?
The short answer is, “a lot.” Details, and a guide to plans available to you in your area, can be found at CMS Guide to Medigap Policies. (“CMS” refers to the Centers for Medicare and Medicaid Services, which runs Medicare. It is a Federal government agency. The Plan Finder at their web site tells you what plans are available in your area (selected by zip code), what the monthly premiums are (for example, in one area, they run from $34 to $248), based on what the plan covers.
What Are the Requirements?
To enroll in a Medigap plan, you need to have Medicare Part A and B. Since 2006, Medigap policies are not allowed to cover prescription drugs. If you want prescription drug coverage, you have to enroll in Part D of Original Medicare. At your first enrollment, plans may refuse to issue you insurance if your health status is poor. After you are enrolled, the company cannot refuse to renew your plan, no matter how much your health status changes. Of course, you must pay the premium monthly.
It is important to be aware that Medigap plans and Medicare Advantage plans are two totally different things. Medigap plans, like Original Medicare, are not required to have an out-of-pocket limit, though some do. Medicare Advantage plans always have an out-of-pocket limit. The Medigap plan you choose may or may not an out-of-pocket limit. This is one reason why it is useful to consult with a broker who represents several Medigap insurers to ensure that the policy you select meets your probable needs. Even if you are in good health, an accident may cause medical costs to run into tens of thousands of dollars. It is better to be as fully covered as you can afford.
How Can I Compare Plans?
A guide to comparing Medigap plans may be found at Medigap Plan Comparison Guide. Note that starting in 2020, Medigap plans will not be allowed to cover the part B deductible but can continue to cover Part B co-payments. If you are enrolled in a plan before January 1, 2020, your plan will continue to cover your Part B deductible, if it covered it prior to that date.
CMS standardizes the benefits available under Medigap plans to make choosing and purchasing them a little easier. As with all things governmental, this is not simple. There are plans A, B, C, D, F, G, K, L, M, and N. The CMS comparison chart tells you what percentage of a benefit is covered if it does not cover 100%.
If you live in Massachusetts, Minnesota, or Wisconsin, Medigap plans are standardized in a different way. See the state-specific links at How to Compare Medigap Policies for more information. If you do not wish to use an insurance broker, many states offer assistance. The State Health Insurance Program Center will tell you who to call in your state.
When Can I Enroll?
You can enroll in Medigap at any time. Unfortunately, you are guaranteed issuance and cannot be charged a higher premium only during your open enrollment period. The open enrollment period is the six months including the first month you are over 65 and enrolled in Part B. During this period, you cannot be denied a policy no matter how bad your health is. After that, the company may refuse to issue a policy and may charge a higher premium due to poor health. In some states, you can buy a policy called “Medicare Select” which can be issued even when other insurance companies refuse to enroll you or charge a higher premium. Your insurance broker or State Health Insurance Program can tell you if these policies are available in your state. Guidance on buying Medigap policies can be found at How to Buy a Medigap Policy.
When Can I Switch?
You can switch at any time, but you will not have guaranteed issuance or protection from higher premiums in the new plan except under special circumstances, which are detailed at Switching Medigap Plans. Incidentally, your Medigap insurer cannot drop you unless you stop paying your premiums, were not truthful on your Medigap application, or the company is dissolved or goes bankrupt. (If you bought your policy before 1992, it may not be guaranteed renewable. If it is one of those and it is not renewed, you have the right to enroll in another Medigap plan.)
What’s the Bottom Line?
Although Medigap plans are less complicated than some other aspects of Medicare, the matter of choosing them is still complicated. You definitely should consider a Medigap plan or a Medicare Advantage plan, simply because Original Medicare does not cover everything and exposes you to potentially catastrophic expenses. Remember, medical expenses are the leading cause of bankruptcy in the U.S. Consulting an insurance broker or your state health insurance center can avoid a lot of worries.