Among many confusing health insurance terms, the “Medicare Supplement” is perhaps the one that is most misinterpreted by seniors and other Medicare recipients. Here we look at the Good, the Bad and the Ugly relative to Medicare Supplements (aka Medigap).
Let start with a simple foundation:
- Medicare has four parts A, B, C & D.
- Assuming you have qualified generally by contributions to the system when you turn 65 you are eligible for Medicare Parts A & B.
Parts A & B together comprise foundational, necessary “Original Medicare” where almost everyone who is eligible opts in.
- According to Medicare.gov “In general, Part A covers:”
- Hospital care
- Skilled nursing facility care
- Nursing home care (as long as custodial care isn’t the only care you need)
- Home health services
- Part A has no premium in most cases where the person has met the contribution through payroll deductions.
- Again according to Medicare.gov “Part B covers 2 types of services:”
- Medically necessary services:Services or supplies that are needed to diagnose or treat your medical condition and that meet accepted standards of medical practice.
- Preventive services: Health care to prevent illness (like the flu) or detect it at an early stage, when treatment is most likely to work best.
- There is a monthly premium of $144.00 for Part B in most cases that may be higher based on income.
Let’s skip to Part D which is prescription coverage. With limited exceptions, drugs are not covered through Parts A & B. We recommend a Part D plan depending on your needs and plans may be switched annually. Not opting in to Part D coverage will cost more down the road. For those without pressing needs plans are very inexpensive.
This brings us to Part C, referred to as Medicare Advantage plans. Let’s be clear.
Medicare Advantage is not the same as a Medicare Supplement.
This is a common confusion among seniors. A Medicare Supplement also known as Medigap is designed to cover all or most of the costs not covered in Parts A & B. The services in Parts A & B are delivered in Original Medicare and the Medicare Supplement bridges the “gap” in coverage. So let’s get to it.
- Preserves Access – In Original Medicare you have “open access”; that is you may see any participant (health care provider) that accepts Medicare nationwide. This is especially important in cases where rare and /or extensive treatments are necessary.
It is a freedom of choice for those want the best care available and especially for those who live in areas with limited access to very high quality care. It may also be more suitable for those who travel a lot or maintain a seasonal lifestyle in different areas.
This is important and here’s why.
A PCP or specialist may leave a Medicare Advantage network in the middle of a plan year leaving the beneficiary with a number of problems. They may still take Medicare and other plans.
The same participant would have to cease taking Medicare patients as there are no networks in Medigap as Medicare remains the primary insurer.
- Maintains Standardization – In Original Medicare the coverage including deductibles and cost sharing (coinsurance) is standardized.
- Relative Cost – Medigap has a premium that when combined with Part B and Part D premiums for most seniors is still more affordable than their health insurance at age 64.
- Consistency – Plan F or G (the most popular Medicare Supplement plans although Plan F is no longer available unless you already have it) have identical levels of coverage across all insurance companies that provide them in an area. Unlike Medicare Advantage, the carriers cannot change levels of coverage or access.
- Little Risk – Plan G is the most comprehensive and covers 100% of all Medicare approved Part A and Part B costs including Part A deductible excess charges. Plan G does not cover the Part B deductible (currently $198).
- Guaranteed Issue when “turning 65”. Medicare Supplements or Medigap coverage is provided by a private insurer. When you are in your OEP (Open Enrollment Period, generally as you are “turning 65”) you may get a Medicare Supplement plan without any underwriting that is, regardless of your health you are approved.
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- It Can Be Very Costly Compared to Medicare Advantage – While compared to under 65 premiums it provides significant relief to the budget, compared to Medicare Advantage plans that have a “zero premium”, Medigap can be expensive especially if you live in urban areas. Throughout the U.S., Medigap Plan G coverage averages about $140.00/mo. Some areas of the country like SE Florida can be substantially higher however.
As a result you may find that you are paying in advance for services anywhere from $1200 to well over $2500 annually in the form of premiums. If you are in an area that is rich with quality health care options it would be wise to at least consider whether Medicare Advantage would be more suitable.
- Window of Opportunity Lost – In the event that you choose not to purchase Medigap insurance during your initial election period (IEP), you must be medically approved to get it later. This is where many seniors with existing health needs end up paying more for uncovered services especially ongoing care.
- Changes to Medigap Happen Through Government Rules – Plans may be discontinued as Plan F is currently was eliminated in 2020. Current Plan F enrollees are grandfathered in. However for the most part the carriers are adversely rating Plan F for premium compared to Plan G to influence beneficiaries to move to Plan G. To reiterate, Plan G covers everything that Plan F does except the Original Medicare Part B deductible currently $198.
- Not Option Rich – With Medicare Advantage many desirable related health care services are included; many with no copays or coinsurance. They include routine dental, vision (optometry), gym memberships, over the counter drugs to name a few. This becomes even more important in Income Planning for those who are budget sensitive.
- No Prescription Coverage – Medicare Part D covers prescriptions except for certain drugs (e.g. chemotherapy) covered under Part B. Unlike Medicare Advantage that has Part D “baked in” as MAPD, beneficiaries staying in Original Medicare must also purchase Part D coverage with an additional premium. The upfront costs add up.
- You cannot have Medicare Advantage and a Medigap Plan together – It’s illegal. Enrolling in Medicare Advantage places your care with a private insurer who operates under Medicare rules. Enrolling in Medigap terminates your (quite possibly essential) Part D coverage in MAPD that could not be replaced until an Annual Election Period (AEP), a Special Enrollment Period or Annual Disenrollment Period.
Medicare Supplement or Medigap Insurance can be an excellent option once you know the Good, the Bad and the Ugly and have chosen a plan that is best suited to your unique health situation. If you would like advice regarding your options we would be delighted to help without obligation.