Congratulations! You’ve worked your whole life for this. The list of things you want to accomplish upon retiring may include travel the world, volunteer with a local charity or spend hours on end at the golf course. Whatever your plans, you’re feeling pretty confident with that gold watch on your wrist and Medicare card in your wallet. Unfortunately, with today’s high cost of medical care, many retirees find Medicare is not enough. So, don’t be surprised if the first item on your retirement “to do” list is shopping for Medicare supplement plans.
These plans are insurance policies intended to minimize out-of-pocket expenses by picking up the charges that Medicare does not cover. Referred to as Medigap, because they bridge the gap between what the doctor charges and what Medicare pays, these insurance policies pay for deductibles, coinsurance, copayments, and in some cases, services that Medicare does not cover at all, such as emergency care in foreign countries.
How They Work
Medicare has two major components: Medicare Part A, which covers hospital expense, and Medicare Part B, which covers medical coverage for expenses such as lab tests, surgeries and doctor visits.
Even if you have both Medicare Part A and Medicare Part B, you will still have out-of-pocket expenses for items such as deductibles, copayments and coinsurance. This is where Medigap comes in.
As of 2013, the annual deductible for Medicare Part B is $147 and coinsurance is 20 percent.
If you went to the doctor, and he charged $500. After you paid the $147 deductible, Medicare would pay 80 percent of the remaining $353, or $282.40. Your out-of-pocket expenses would be the 20 percent coinsurance of $70.60, plus $147, or $217.60.
If you have Medigap insurance coverage, it would pay the $217.60 that you owe on the doctor’s visit.
Who Needs Medigap?
Certainly, you will not need a supplement if the company you worked for offers free health insurance to retirees, but for those with health problems who are living on a fixed income, Medigap insurance can be a good investment.
While everyone’s financial picture and health situation is different, if your out-of-pocket medical expenses are continuing to rise due to health issues, it might be worth your time to look into coverage.
Plans are purchased through private insurance companies, and though the cost of these plans varies widely, the benefits are the same. Since 1992, all Medicare Supplement plans have been standardized by the federal government. Therefore they are all standardized to cover deductibles, coinsurance, and all other benefits within each plan letter regardless of company.
In the United States, federal law allows for insurance companies to carry 10 specific plans. They are identified by the alphabetical letters A, B, C, D, F, G, K, L, M and N. The benefits for these policies are the same regardless of the state in which you live and the insurance company from which you purchase the coverage. However, the premiums for coverage vary widely.
The basic benefits that all Medigap plans cover include:
• Coinsurance on hospital stays
• 100 percent of hospital care over the 150 days Medicare Part A covers
• 20 percent coinsurance of the Medicare-approved amount for Part B expenses
• First three pints of blood each calendar year
Supplements F and G are the only plans that cover Medicare Part B “excess charges.” Excess charges go above the Medicare-approved amount, and in some cases, the patient can be held responsible for these charges.
Both plan F and plan G cover skilled nursing facility care, Medicare Part A deductible, Medicare Part B excess charges and foreign travel emergency care.
However, plan G does not cover the Medicare Part B deductible.
Another difference between these two plans is, plan F has a high deductible option, so premiums for this plan are lower. More out-of-pocket expense means lower premiums.
It is also important to note that Medigap only covers those services that Medicare deems medically necessary, and that Medigap policies generally do not cover long-term care, vision or dental care, hearing aids, eyeglasses, or private-duty nursing.
Who is eligible?
Generally, individuals who are covered by Medicare, can purchase Medigap. Medicare is available to those who are age 65 or older, those who have been on Social Security Disability for more than 24 months and those who have End-Stage Renal Disease.
However, Medigap is not available to Medicare recipients who have a Medicare Advantage Plan, an employer group health plan or a Medicare Select Plan.
In addition, a Medigap policy only covers one person, so if you have a spouse, they will need a separate one.
The Centers for Medicare and Medicaid offer a buying guide for individuals in the market for a Medigap plan. You can view the guide at http://www.medicare.gov/Publications/Pubs/pdf/02110.pdf.
There is no one size fits all when it comes to Medicare supplement plans, though they all pay the 20 percent coinsurance and most or all of the deductibles. The plan you choose will depend on your unique financial situation and on the state of your health. Since there are so many to choose from, it is advisable to shop around using our website and our experienced agents to study the options before making a decision.