Original Medicare – Mind the Gaps
Many people incorrectly believe that once enrolled in Medicare, all their medical bills will be paid. This is not the case. While Medicare Parts A and B cover a broad range of medical services, there are significant gaps in the program that can create a devastating financial hardship. To cover the gaps created by deductibles, copayments, and coinsurance required by Medicare Parts A and B, a senior can purchase a Medicare Supplement, also known as a Medigap policy. Medicare Supplement policies are health insurance policies designed, standardized, and regulated by the federal and state governments and sold by private insurance companies. Medigap coverage comes into play after Medicare has paid its portion of any Medicare-approved charge. The process for payment is that the provider sends the bill to Medicare who, after paying its portion of the approved amount, sends it on to the Medicare supplement provider who pays the balance, subject to any outstanding deductible amount. It is a seamless process and does not require the covered senior to do any additional filings.
Medicare Supplement Insurance is offered by private insurance companies and works hand-in-hand with Medicare to pay the balance of Medicare-approved charges that Medicare doesn’t pay. Some policies offer additional coverage not found in Original Medicare, such as coverage for travel outside the United States. Medicare Supplement Insurance does not cover prescription drugs, long-term care (nursing home care), vision or dental care, or hearing aids.
In addition, Medicare Supplement policies do not cover premiums for the following types of coverage:
- Medicare Advantage (Medicare Part C)
- Part D prescription drug plans
- Employer or union plans
- Veterans Administration benefits
- Indian Health Service, Tribal, and Urban Indian Health plans
- Long-term care insurance policies
In fact, if a senior has any of the previously listed plans, except for a Part D drug plan, he may not buy and it is illegal for an agent to sell him a Medicare Supplement plan.
Unlike traditional healthcare insurance, Medicare Supplement Insurance is sold as an individual policy with no family provisions. If two spouses wish to be covered by Medigap insurance, they must each purchase their own policy. Many insurers, however, are happy to provide a household discount. In fact, realizing that seniors enjoy better health due to the socialization of having a living companion, some companies are moving to offer a household discount simply by virtue of living with another adult of a certain age. (5o years of age, for example)
What are the advantages of Medicare Supplement Insurance?
Medicare supplement insurance allows you to:
- Exercise a Free Look Period of 30 days and return your policy for a full refund less any claims paid should the coverage not be to your liking
- Renew annually with no change in benefits as long as premiums are paid on time
- See any doctor, hospital, or health care provider who accepts Medicare with no network restrictions
- Know exactly what your out-of-pocket costs will be as benefits are standardized and won’t change from year to year
- Have coverage anywhere in the United States without the concern of staying within a network as coverage is portable
- Have emergency coverage when traveling outside the United States. (Some plans)
What do Medicare Supplement Plans Cover?
Medicare Supplement policies cover Medicare-approved services and procedures. After paying its portion, Medicare forwards the provider’s bill to your carrier who will pay the balance according to the coverage benefits of the plan you have. There is no bureaucrat or medical board to determine whether or not the plan will allow a treatment or cover a procedure.
To be eligible to enroll in a Medicare Supplement Plan, Medicare has established the following requirements:
- You must be enrolled in Medicare Parts A and B when your Medicare Supplement policy goes into effect. However, most carrier’s will accept your application up to six months prior to your enrollment into Medicare.
- You must be a resident of the state in which you are applying for coverage. Residency is determined by the state in which you file your income tax return. Once enrolled in a plan, you may carry that coverage with you should you move to another state and remain insured by your original carrier. If that carrier sells the same plan in your new state of residence, your premium may be changed to the carrier’s premium charged in your new location.
- You must be 65 or older, although some states require insurers to offer Medicare Supplement policies for Medicare beneficiaries under 65.
You may not be eligible to purchase a Medicare Supplement policy if:
- You aren’t able to pass underwriting and you’re applying outside of your Initial Enrollment Period or if you don’t qualify for Guaranteed issue.
- You are currently enrolled in a Medicare Advantage Plan or another Medicare Supplement Plan which you do not intend to replace.
What the Plans Cover
An insurance company with a Medicare Supplement Plan offering within a state is not obligated to offer all the plans. Plan A is a basic required plan but it is the choice of the insurer which additional plans it may wish to offer.
The Medicare Supplement plans as offered in 2017 are demonstrated by the following chart:
Medigap Plan A
Medigap Plan A is the core plan which covers basic benefits; the other plans all build on the basic benefits of plan A. This plan covers:
- Coinsurance for Medicare Part A hospital costs for days 61-150 plus and additional 365 days after Medicare benefits end
- Coinsurance or copayment for Medicare Part B services
- The first 3 pints of blood
- Coinsurance or copayment for Medicare Part A hospice care and respite care
Medigap Plan B
Medigap plan B covers the core benefits included in Plan A and adds coverage for the Plan A deductible of $1316 in 2017
Medigap Plan C
Medigap plan C covers the core benefits included in Plan A, the deductibles for Medicare Parts A and B ($1316 and $134 in 2017), coinsurance for skilled nursing care days 21-100, and 80% of foreign travel emergency care up to the plan limits.
Medigap Plan D
Medigap plan D offers the same level of coverage found in Plan C with the exception of the Part B deductible. ($134 in 2017)
Medigap Plan F
Medigap Plan F is the Cadillac plan and offers complete coverage for any Medicare-approved service.
Medigap Plan G
Medigap Plan G offers the same level of coverage found in Plan F with the exception of the Part B deductible. ($134 in 2017) It offers all the benefits of Plan D and adds coverage for excess charges.
Medigap Plan K and L
Medigap plans K and L were added in 2006 to offer seniors a cost savings on premiums by requiring higher out-of-pocket costs. While they offer similar coverage, they differ in the percentages of costs covered and in the maximum out-of-pocket amounts.
Medigap Plan M
Medigap Plan M is similar to Plan D except that it offers no coverage for excess charges and only covers 50% of the Part A deductible.
Medigap Plan N
Medigap Plan N offers the same coverage as Plan G except for requiring a $20 copayment for office visits and a $50 copayment for emergency room care. The $50 copayment is waived if the patient is admitted to the hospital.
Which Medigap Plan is Best
Well, that depends. No two seniors are alike to it’s difficult to recommend one plan over all the others. Having said that, we can narrow things down a bit. Very few seniors purchase plans A and B because of their very limited coverage and many find plans K and L unattractive due to the high out-of-pocket costs. Plans C and F are slated to be discontinued for anyone aging into Medicare as of January 1, 2020, although anyone who attains that age prior to December 31, 2019 will always have the option to purchase these plans. Those already enrolled in plans C and F will be grandfathered in and will be permitted to keep their coverage. The concern is that with a pool of insured seniors who are aging and encountering increased health issues, the question of rate stability may become an issue.
While Plan F it by far the most popular of the ten standardized Medicare supplement plans, it rarely represents the best value. Plan G offers the same benefits with the exception of the $183 Part B deductible but in a price comparison between the two plans, Plan F is often $400 – $600 more than Plan G. Thus, a senior could afford to pay the $183 deductible and still enjoy several hundred dollars in savings if he chose Plan G over Plan F. Because commissions to insurance agents are based on the plan premium, self-serving agents often recommend Plan F to their clients but it is rarely, if ever, in the best interest of the client to purchase the more expensive plan.
While Plan G is highly recommended, there are two other plans that offer attractive benefits. In
How to Compare Plans Between Companies
Medicare Supplement plans are standardized by the federal and state governments meaning that an insurance carrier is prohibited from changing the benefits offered by any plan. Therefore, each plan is identical across all insurers who offer the plan with the only difference between companies being the price. This allows seniors to shop with ease and confidence, knowing that they are truly comparing apples to apples with the only variations being the price of the premium and the financial rating of the company.
When to Apply
It is best to apply for a Medicare Supplement policy when you first enroll in Medicare Part B at age 65 or older. At this time, you have a guaranteed right to purchase a Medicare Supplement policy for 6 months without having to answer any medical questions or without having to go through underwriting. In most states, you can apply 6 months prior to the start of your initial enrollment period with coverage to begin on the date your Part coverage begins. At the time of your Initial Enrollment Period, insurers are required to offer you any plan they sell in your state and may not charge you more for a policy due to past or present health conditions.
Once your Initial Enrollment Period has passed, you can still purchase a Medicare Supplement policy if you are able to pass underwriting, but the insurer may charge you a higher rate due to your health condition.
Guaranteed Issue Rights
Under federal and state law, you may have guaranteed issue rights if you are losing your health coverage. If you qualify for guaranteed issue, an insurer cannot:
- Deny coverage
- Charge more for pre-existing conditions
- Require exclusions for past or present health conditions
None of these plans offers Medicare Part D Prescription Drug Coverage, so it will be necessary for you to enroll in a separate Part D policy if you wish to have coverage for your prescription drugs.