A Medicare Supplement policy (or a Medigap policy) is a great addition to those eligible for Medicare. Whether it’s routine medical costs or an emergency, a Medigap plan can give you the peace of mind in knowing that your out-of-pocket expenses will be kept to a minimum. With over 70% of bankruptcies resulting from medical bills, it is well worth the money to supplement your Medicare with one of these plans.
Medicare has different “parts”, and supplement plans are referred to as a “plan”. The current Medicare Parts are:
- Medicare Part A – Covers hospitalization. There is no premium if you have worked for 40 quarters (10 years) and paid into the system.
- Medicare Part B – Covers physician’s services. There is an annual premium which is typically deducted from one’s Social Security check each month. The average monthly premium for 2010 is $110.50. Those still on employer group insurance coverage may opt-out of Part B until the retire and lose that coverage.
- Medicare Part D – Prescription drug plan coverage. This is not required? and there are only specific time periods during the year in which you may enroll or change plans.
The reason why people choose a Medicare Supplement is to help pay for what Medicare does not. There are certain items such as deductibles and co-pays that Part A and Part B Medicare do not cover. These are called “gaps” in Original Medicare. The gaps are what anyone on Medicare is financially responsible for pretaining to hospital or medical bills. Those who have just Part A and/or Part B must pay for these expenses out-of-pocket. For those on a supplement, the plan picks up most or all of these gaps depending on the type of plan.
What are the Gaps in Medicare?
The gaps listed below are what you are financially responsible for paying when on Medicare.
Medicare Part A – You must pay an $1100 deductible if you are admitted to the hospital. If you leave for 60 days or more you must pay this again as it is not an annual deductible.There is also hospital coinsurance that you are required to pay after day 60.
Medicare Part B – You are responsible for 20% of all doctor’s bills, any blood deductibles, any Part B excess charges, and skilled nursing coinsurance. There is also an annual deductible of $155 (2010) that you must pay.
It’s easy to see that these gaps can add up to a substantial amount of money even with routine doctor’s visits. In many cases a Medicare Supplement plan is the only reason people still have any savings after a major health condition. As stated there are many different plans available, however finding the right plan for you is easier than you might think.
Which Plan Is Best?
Medigap Plans are designated in Letters ranging from A – N. opposite to popular belief, coverage does not increase as you get further into the ABCs. Plans E, H, I and J were eliminated in June of 2010 due to underused benefits and their unpopularity. Each remaining plan offers slightly different coverage, and insurance companies are not required by law to carry every plan letter. This typically results in only a few plans that make sense depending on the state you are in. Some of the most popular Medigap Plans are:
Medicare Supplement Plan F- This plan is by far the most popular due to it’s outstanding coverage for a relatively low premium. Plan F covers 100% of the gaps in Medicare, leaving one with no out-of-pocket costs provided they simply see doctor’s and specialists that accept Medicare. For anyone not wanting to deal with any medical bills, co-pays or deductibles this is the very best pick in coverage.
Medicare Supplement Plan G – Plan G is an outstanding choice as it is nearly identical to Plan F. The only difference is you must pay the annual $155 Part B deductible. After this is paid the plan pays everything 100%. By paying this yourself, it usually results in a lower monthly premium and often you can save money by choosing this plan. Check with a Medigap agent to determine what plans are available in your area. For those ages 70 years and older the saving in monthly premium for this plan over a Plan F is typically much larger than someone who is 65. Most often this is a great option for people in this age bracket.
Medicare Supplement Plan N – Introduced in June of 2010, Medigap Plan N is quickly becomming very popular due to it’s low premiums and small out-of-pocket costs. Plan N is usually about 30% lower in premium than a Plan F. This is because the beneficiary is responsible for more costs themselves. Whereas a Plan F covers everything 100%, with a Plan N you must pay a $50 copay if you visit the ER. You must also pay the annual Part B deductible, and then up to a $20 copay each doctor’s visit thereafter. For people who are relatively healthy or those who wish to return to Original Medicare and visit any doctor they choose a Medigap Plan N is a great choice.
One of the most important things to remember when it comes to a Medicare Supplement is that these plans are standardized. This means that regardless of which insurance company you choose to get your plan from, then all have identical coverage. A Plan F from Blue Cross Blue Shield is exactly the same coverage as a Plan F from United of Omaha. Although the coverage is the same, the premiums can vary widely between companies. This means you can pay substantially more with one company than you might from another, for exactly the same coverage.
Therefore, it’s important to shop the market and make sure you don’t over pay for your Medicare Supplement Coverage and find the plan that fits your needs the best.