According to the Centers for Medicare and Medicaid Services (CMS), Original Medicare (Parts A and B) covers about 80 percent of your major healthcare costs. This might be true if benefits included prescriptions, vision, hearing and dental. According to the Employee Benefit Research Institute, Medicare covers only 51 percent of your health care services. This explains why so many seniors supplement their Medicare with additional insurance.
If you or a loved one has ever been admitted to the hospital, undergone surgery or experienced and extended illness, you already know how expensive inpatient, doctor and medical services costs can be. Your portion of the Medicare covered expenses that you are required to pay can add up to massive medical bills.
To help cover the expenses that your Medicare benefits do not cover, you can purchase Medicare Supplement Insurance, also called a “Medigap plan“. This is not government insurance. They are private insurance policies that give you the peace-of-mind you need when you need hospital coverage, surgery, and other expensive procedures.
Understanding Medigap Coverage
Medicare Supplement insurance takes over where your Medicare Part A and B benefits leave off. When you supplement your Original Medicare coverage with additional insurance, Medicare pays its portion first and then your Medigap plan kicks in to pay up to the limits of the policy.
Medicare has created 10 standardized plans. Each plan is represented by a letter (A, B, C, D, F, G, K, L, M, N). There is also a high deductible version of plan F. The range of benefits and coverage rates vary with each type of plan. All policies cover the following common benefits:
- Medicare Part A coinsurance and hospital costs (up to an additional 365 days after Medicare benefits are used)
- Medicare Part B coinsurance or co-payment
- Blood (first 3 pints)
- Part A hospice care coinsurance or co-payment
In addition to the basic coverage listed above, supplement policies may also cover:
- Medicare Part A deductible
- Medicare Part B deductible
- Medicare Part B excess charges
- Skilled nursing facility care coinsurance
- Foreign travel emergency
Medicare Supplement are Standardized and Regulated
As with all Medicare Benefits, supplemental insurance policies are regulated by both Federal and state laws. The regulations are designed to protect seniors and make shopping easier. Medigap policies are required to be clearly identified as “Medicare Supplement Insurance.”
For your protection, a “standardized” policy will be identified by letters A–N. All policies offer the same basic benefits. Some policies provide additional benefits too. Please note that plans E, H, I, and J have been phased out by Medicare. If you are already enrolled in one of these plans you can keep it.
Medigap Premiums Are Not Regulated
Although Medigap policies are regulated, their premiums are not. Insurance companies apply different premiums for the same policy. Be sure to compare both the policy and the premium when you shop. Also, some states offer an additional Medigap policy known as Medicare SELECT. These policies require you to use specific hospitals, and in some cases specific doctors and other health care providers, in order to receive full coverage. If you discover that your Medigap SELECT policy isn’t working for you, don’t worry. You have 12 months to change your mind and switch back to a standard Medigap policy.
Medicare Supplement Price Shopping
Although the coverage for each of the lettered plans is the same, the premiums are not standardized. Each insurance provider sets their own rates. That means a Medicare Supplement Plan with one company could cost significantly more than the same plan from another company. That’s why it’s critical that you compare all Medicare Supplement Insurance Plan rates available in your state each year. Medicare Supplement Insurance Companies are not obligated to tell you when they are going to have a rate increase or how their prices compare to their competition.
Medigap and Your Medicare Benefits Open Enrollment Period
If you plan to purchase supplemental insurance you have a 6-month period of open enrollment, which starts the first month you’re 65 and enrolled in Medicare Part B. In this critical 6-month period you have the guaranteed right to buy any Medicare Supplement Plan that’s available to you in your state. That means you cannot be turned down for health reasons, including a preexisting condition. Be aware that once this critical period starts you cannot get an exception or delay based on having other health insurance coverage. That’s why it is so important that you get enrolled.
An Important Note About Medicare Advantage and Medigap
Medigap Insurance only applies to your Original Medicare benefits. If you have opted into a Medicare Advantage Plan, such as an HMO or PPO, (aka, Medicare Part C), you cannot purchase Medigap insurance (nor do you need to).
If you already have a Medigap policy and you are planning to switch to Medicare Advantage, your deductibles, copayments, coinsurance, or premiums will not be paid by your Medigap policy. You are free to cancel your Medicare Supplemental policy, but be aware that you may not be able to reinstate your Medigap policy in the future. You should contact the State Health Insurance Assistance Program in your area and your Medigap insurance company first to verify your options.
Also, be aware that if you currently have a Medicare Advantage plan. it is against the law for anyone to sell you a Medigap policy unless you drop Medicare Advantage coverage and go back to Original Medicare.
State Health Insurance Assistance Program (SHIP)
Not all ten plans (labeled “A” through “N”) are available in all states. For information about Medicare supplement insurance plans available in your state, contact your State Health Insurance Assistance Program (SHIP) or call your license Medicare insurance agent.