Medicare supplement insurance premiums continue to increase. The increases have a lot to do with changes brought about by the Affordable Care Act (aka, Obama) and how these changes affect reimbursements to health care providers. As a result, a lot of seniors are asking about low-cost Medicare supplement plans. But, do these plans actually help you save money?
The answer might surprise you.
In this blog post, we’ll go over what supplemental plans cover, copays, and coinsurance, and how to determine the amount of coverage that’s right for you. We’ll also answer these frequently asked questions about Medigap plans:
The answer varies based on your health. For super healthy seniors, Plan N offers great coverage and good savings. For people with one or more chronic health conditions, Plans F and G are more cost effective.
Medicare Supplement Plan F and Plan G are nearly identical. Technically, Plan F is better because it offers first-dollar coverage. However, the one cost that Plan G does not cover, the Part B deductible, is often less than the annualized premium difference between the two plans. As a result, Plan G holders generally save a little money. Read Medicare Plan F vs Plan G to learn more.
There are 10 different standardized Medicare supplement plans, each with a different level of coverage. Three Medicare plans — Plan F, Plan G, and Plan N — are the most popular and account for more than 80 percent of all Medigap plans sold. To get rates on these plans where you live, enter your zip code on this page.
What Do Medicare Supplements Cover?
Medigap policies, as the name implies, cover the gaps in your Original Medicare health insurance. As a general rule, once you have paid your annual Part B deductible, Medicare covers about 80% of the rest of the “reasonable charges”. However, that still means that you’re on the hook for 20% of copayments and coinsurances. This is where most seniors can save some money.
The first thing you’ll want to do is to look at the Medicare Supplement Plans Comparison Chart so you can better understand what each plan covers.
RELATED: Medicare Plan F vs. Plan G: Which is Better?
Medicare Co-payments and Coinsurance Explained
Co-payments are a fixed fee that you pay for various medical services. For instance, when you see your primary care physician you may have to pay a $20 co-payment, and seeing a specialist may cost $25. These fixed-price fees are predetermined by Medicare based on the type of service.
Although it may sound like the same thing, coinsurance is another out-of-pocket medical expense, but it is a percentage of the service cost instead of a fixed amount.
Copayments and coinsurances can really add up fast, especially if you see your doctor frequently or have a condition that requires hospitalization. If this sounds like you, then having a Medigap Plan G or Plan N might be the best strategy. However, if you are very healthy and rarely see the doctor, you can save a lot of money by taking a little more risk. It all comes down to weighing your out-of-pocket expenses versus your supplemental insurance costs.
The following Medicare Supplement Plan Benefits Chart offers a quick look at the benefits provided by the ten standardized Medigap lettered plans (A through N).
Evaluating Cost Differences
Let’s assume that the Medicare-approved amount for a doctor’s office visit is $75. In this case, Medicare pays $60 and your portion of the bill, the coinsurance, is $15. In other words, there’s a $15 gap that has to be paid.
Medicare supplement insurance, or Medigap if you prefer, lowers your health care costs by covering the copayment and coinsurance gaps in your Original Medicare (Part A Hospital Insurance and Part B Medical Insurance) coverage. Using our example, if you have a policy that covers all of your Part B coinsurance, you will save $15 each time you need to see the doctor.
As you can see, having a policy that offers you full Part B gap coverage won’t save you money if you don’t use outpatient services regularly. However, if you see your doctor and specialists often, those fees add up fast and your full-coverage Medigap policy is saving you money.
Do the math. If you’re paying $200 per month ($2,400 a year) for your Medigap policy but you’re only saving $500 a year on copayments, you might want to consider a plan with a little less Part B coverage and a lower monthly premium.
Choose Your Plan Carefully
Saving money on copayments and coinsurance is smart, but you don’t want to be penny wise and pound foolish. It’s important to fully understand the costs and benefits of your supplemental Medicare policy. The right plan for you depends on your medical needs, expenses, and budget. You don’t want to buy more insurance than you can afford. At the same time, you don’t want to put your savings or property at risk by not having enough coverage in the event you should become hospitalized or critically ill. That’s why it’s so important to do your homework and choose wisely.