Many seniors are shocked to learn that Original Medicare (Part A and Part B) only pays about 80% of Medicare-covered costs and that there’s no out of pocket maximum on the costs that beneficiaries pay (the remaining 20%). Learning this is when most people become interested in supplemental Medicare insurance.
A Medicare Supplement plan (aka, Medigap) is additional insurance that helps pay some of the deductibles, copayments, and coinsurance that’s baked into Original Medicare. Some supplements have out-of-pocket limits, meaning they will pay all your covered medical expenses once you’ve paid a certain amount, but most plans cover one or more of the gaps straight across the board.
Related Article: Are Medicare Supplement Plans Worth It?
With Medicare supplements, the cost is a function of the gaps you want to have covered. The more expansive the coverage, the more the plan will cost. For this reason, it’s important that you know what costs Medicare expects you to pay, and which ones you are most likely to incur, so you can choose the right amount of coverage.
With Original Medicare, there are nine costs that beneficiaries pay out-of-pocket. These include deductibles, copayments, and coinsurance. All of these out-of-pocket costs can be covered with Medigap plans.
Medicare Deductibles, Coinsurance, Excess Charges, Blood… Oh, My!
Most of your Medicare costs can be broken down into deductibles, coinsurance or copayments, excess charges, and the cost of blood. Medicare Part A (your hospital insurance) and Medicare Part B (your medical insurance) work differently, so it’s important to understand the costs in each. Here’s an overview for you (2020 rates).
Medicare Part A deductible: This is a per benefit period cost, not an annual deductible. If you have two inpatient hospital stays more than 60 days apart, you’ll pay the deductible for each period. The Part A deductible is $1,408.
Medicare Part A coinsurance: This is a daily copayment that starts on the 61st day of inpatient treatment. All Medigap plans cover this cost. It’s $352 per day for the 61st through the 90th day. From the 91st day on it’s $704 per day.
Medicare Part A Hospice care coinsurance or copayment: Medigap plans cover the parts of hospice that Medicare doesn’t. As a result, in most cases, you typically incur no costs.
Medicare Part A Blood (First 3 pints): This benefit is included with all Medigap plans. When you need blood, Medicare only pays for the 4th pint and above. Blood is very expensive, so it’s important to have the first 3 pints covered.
Medicare Part A Skilled Nursing Facility coinsurance: Medicare covers up to 100 days of skilled nursing care after a stay in the hospital when ordered by your doctor. But, Medicare only pays for the first 20 days. After that, you’ll pay $176 per day.
Medicare Part B deductible: The Part B deductible is $198 per year. You’ll pay this amount before Medicare begins covering its share of your doctor visits, lab-work, and physical therapy. Be aware that anyone turning age 65 after 31 December 2019 cannot buy a plan that covers this deductible, which includes Medigap Plan F and Plan C
Medicare Part B coinsurance and copayments: All Medigap plans cover some parts of Part B coinsurance and copayments. Because Medicare only covers 80% of your medical expenses, this benefit is what helps pay the remaining 20% for you. This can be critical in the case of high-cost treatments for dialysis, cancer, etc.
Medicare Part B excess charges: Medicare allows healthcare providers to accept Medicare’s assigned rates for each healthcare service. Providers may also choose to charge an excess charge of up to 15% more than the assigned rate. For services like surgery or diagnostic imaging, excess charges can be very pricey. Some Medigap plans cover it and some don’t.
Foreign travel emergency: Medicare covers you anywhere you go in the USA, including its territories, but it does not cover foreign travel emergencies. However, some Medigap plans do. Plans that offer the foreign travel benefit cover 80% of your expenses, up to $50,000, after you pay a small deductible.
What Determines the Monthly Premium on a Medicare Supplement Plan?
In most states, there are ten standardized Medicare Supplement plans. Each plan is identified by the letters A, B, C, D, F, G, K, L, M, and N.
Medicare Supplement plans A and B, as an example, do not cover everything that plans F and G cover. However, all policies with the same letter offer the exact same benefits, no matter which insurance company you buy from. This makes plans easier to choose. Simply look at the comparison chart, find the plan with the coverage you want, then go price shopping.
[INSERT MEDIGAP PLAN COMPARISON CHART HERE]
Here are the most common factors that affect premiums:
- Plans with more coverage most often cost more.
- The insurance company (companies with a larger, younger pool of people have lower rates).
- Where you live (in a high cost of living area plans generally cost more)
- How the plan is “rated” (how they factor your age into your cost)
Tip: Some companies charge the same monthly premium to everyone, regardless of age. Some companies charge according to your age when you buy the plan, and some companies charge according to your current age so your premium may increase yearly. Your insurance agent can help you make the right choice.
Also See: How to Choose a Medicare Supplement Plan
Do Medicare Supplements have Deductibles?
The term deductible is probably familiar to you in terms of your car insurance. It’s the amount you pay before your insurance begins to pay. Some Medigap plans pay the Medicare Part A hospital deductible but make you pay the Medicare Part B medical deductible. Other plans don’t cover either deductible.
There are two plans that have substantially lower monthly premiums than other plans. However, these low premiums come with a high deductible. With these plans, you pay a significant amount out of pocket before the Medigap plan pays anything. If you are healthy and have saved for the day when you may need to pay the deductible, one of these plans may work for you, but be sure to discuss it with your insurance agent first.
The plans are:
What Other Costs Do I Have?
One of the most important things to know about Original Medicare and supplemental Medicare insurance is that they don’t cover everything. Original Medicare only covers your major medical costs, and a Medicare supplement can only cover Medicare-approved services. Minor medical costs that Medicare does not cover include prescriptions, dental, vision, and hearing.
For your prescription needs, Medicare has Medicare Part D plans. These are private prescription drug plans that help some of your costs at the pharmacy. Plans start at around $20 per month.
For your dental, vision, and hearing needs, try DentalPlans.com. They offer a wide selection of dental and vision plans for seniors.
Also, be aware that there’s a limit on what coinsurance costs your Medigap plan may cover. For instance, if you stay in the hospital for more than 365 days, you may be responsible for all costs. Similarly, if you stay in a skilled nursing facility for more than 100 days, you may be responsible for all costs.
The only way to have a known limit on your costs is to get a plan with an out of pocket maximum. If you’re concerned about long-term hospitalization, ask your insurance agent if Medicare Plan K or Plan L could be right for you.
Need a consultation? Call 1-855-266-4865. A licensed HealthPlanOne agent will be happy to assist you.