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Medicare Supplement Insurance, aka “Medigap”


Medicare Supplement Insurance, aka “Medigap”

Executive Summary: Its complicated! Consider working with a competent independent insurance agent who can help you sort it out. Or you can call 1-800-MEDICARE (1-800-633-4227). TTY users can call 1-877-486-2048. There is also your state’s SHIP (State Health Insurance Assistance Program). In Indiana you can reach SHIP at 1-800-452-4800, TTY 1-866-846-0139. In Kentucky the number is (877) 293-7447. In Illinois the number is (800) 252-8966.


www.medicare.gov

 

Indiana SHIP Website:
www.in.gov/idoi/2495.htm


Illinois SHIP Website:
www.illinois.gov/aging/ship/Pages/default.aspx

 

Kentucky SHIP Website:

https://chfs.ky.gov/agencies/dail/Pages/ship.aspx

 

And before I forget: Medicare does not cover long term care. Long term care is custodial care expected to be needed for at least 90 days if not indefinitely. Medicare covers some rehabilitative care delivered in long term care facilities. But it does not cover custodial care, also known as long term care.

 

Here Are (a few of) the Details:

 

There are publications available for download on the www.Medicare.gov web site that explain Medicare Supplement Insurance: “Choosing a Medigap Policy,” and “Medicare and You.” It is highly recommended that you consult these publications if you are enrolled or eligible to enroll in either or both Original Medicare Parts A and B and are considering the Medicare Supplement option.

 

Medicare Supplement insurance is also known as Medigap. These are insurance policies that help you cover Original Medicare’s “gaps,” cost-sharing features such as deductibles, copays, and coinsurance.

 

Under original government-run Medicare there are no caps on your share of Medicare-covered healthcare expenses. That’s why Medicare Beneficiaries should consider buying either a Medicare Supplement policy to use alongside Original Medicare Parts A and B, or a Medicare Advantage policy which substitutes a private health plan for Original Medicare. Both approaches allow you to limit your share of Medicare-covered healthcare costs. Your entitlements as a Medicare Beneficiary remain the same with both approaches. Unfortunately, simplicity is not one of those benefits.

 

Medigap policies are sold by private insurance companies. There are ten standardized plans: Plans A through D, F through G, and K through N. New enrollments in plans C and F are disallowed starting in 2020. All plan policies of the same letter designation must offer the same coverages regardless of which insurance company sells them. The comparison chart on this page shows the differences in coverage provided by the ten standardized plans.

 

Medicare Supplement Benefits

A

B

C

D

F(1)

G

K(2)

L(3)

M

N(4)

Part A co-insurance & hospital costs

x

x

x

x

x

x

x

x

x

x

Part B co-insurance or co-payment

x

x

x

x

x

x

50%

75%

x

x

First 3 pints of blood

x

x

x

x

x

x

50%

75%

x

x

Part A hospice co-insurance or co-pay

x

x

x

x

x

x

50%

75%

x

x

Co-insurance for skilled nursing facility

 

 

x

x

x

x

50%

75%

x

x

Medicare Part A deductible

 

x

x

x

x

x

50%

75%

50%

x

Medicare Part B deductible

 

 

x

 

x

 

 

 

 

 

Medicare Part B excess charges

 

 

 

 

x

x

 

 

 

 

Foreign travel emergency

 

 

80%

80%

80%

80%

 

 

80%

80%

1) Plan F offers a high-deductible plan. This plan requires you to pay a $2,240 deductible (in 2018) before it covers anything. 2) Plan K has an “Out-of-Pocket” yearly limit of $5,240 (in 2018). After you pay the out-of-pocket yearly limit and yearly Part B deductible, it pays 100% of covered services for the rest of the calendar year. 3) Plan L has an “Out-of-Pocket” yearly limit of $2,620 (in 2018). After you pay the out-of-pocket yearly limit and Part B deductible, it pays 100% of covered services for the rest of the calendar year. 4) Plan N pays 100% of the Part B coinsurance, except for a copayment of up to $20 for some office visits and up to a $50 copayment for emergency room visits that don’t result in an inpatient admission. Source: www.medicare.gov

 

It is important to understand Medigap GUARANTEED ISSUE rules. These rules require insurers to issue you a policy without charging a higher premium, and without waiting periods for pre-existing conditions, regardless of your health history, but only if you enroll during your Medigap OPEN ENROLLMENT PERIOD. This period lasts for 6 months and begins on the first day of the month you are 65 or older and enrolled in Original Medicare Part B. Guaranteed Issue may be available outside of this period but only in specific limited situations.


If you delay enrolling in Part B, because you have group health coverage through your job or your spouse’s job, your Medigap Open Enrollment Period will start when you enroll in Part B. If you apply for a Medigap policy outside of your Open Enrollment Period, you will be subject to medical underwriting. This means that, depending on your health history, you might be charged a higher premium or declined for coverage.


Prescription drug coverage is another important factor to consider when evaluating the Medigap option. Medigap policies that offer prescription drug coverage are no longer sold. Unless you have “creditable coverage” for prescription drugs, such as Veterans Administration (VA) benefits or employment-based group health coverage, you should seriously consider pairing your Medigap policy with a separate Medicare Part D Prescription drug plan.


Creditable prescription drug coverage is coverage that is at least as good as the coverage that Medicare requires Part D plans to provide. Your current provider of prescription drug coverage should be able to tell you whether your coverage is “creditable coverage.”


If you do not have creditable coverage and you do not enroll in Part D when you are first eligible you will pay a penalty that is permanently added to your monthly Part D premium when you do enroll in Part D. The longer you go without Part D coverage the higher will be the penalty. The penalty is 1% of the national average premium for Part D plans ($33.50 in 2018) for each month you are eligible and do not enroll.


I strongly suggest requesting free Medicare supplement and Part D Prescription Drug plan quotes on this website so that you may see monthly premium costs and compare plans before deciding whether the Medigap option is right for you and, if so, which Medigap plan is best suited for you. The combined premiums for Medigap coverage and Part D prescription drug coverage are currently likely to be higher than the options available through Medicare Part C, also known as Medicare Advantage.


For example, if you are 65 and newly eligible for Medicare, ask yourself if your household can afford roughly $200 per month if you are single, $400 per month if you are married (and your spouse elects the same coverage), in Medigap and Part D insurance premiums? Would you be able to afford it if or when Medigap premiums increase as you get older? If these premiums will be difficult for you to afford you should take a serious look at Medicare Advantage plans. But keep in mind that if you choose Medicare Advantage when you are first eligible for Medigap Guaranteed Issue, you are not likely retain guaranteed-issue rights if you want to change to a Medigap plan in the future.


Medicare Advantage premiums are currently significantly lower than premiums for Medigap Plan F, the most popular Medigap plan. But, if you regularly use a lot of healthcare services each year, the out of pocket costs due to deductibles, copays, and coinsurance can easily be higher with Medicare Advantage than what you would save in monthly premiums compared with Plan F.


Medicare Advantage plans place an annual cap on your out of pocket costs, reaching as high as $10,000 per year depending on the plan you choose. Part D prescription drug out of pocket costs are not included in this cap and are subject to their own caps which vary depending on which plan you choose. Annual Part D expenses, excluding premiums, can reach $5,100 or more. In contrast to this, excluding premiums, Medigap Plan F covers most if not all your covered out of pocket expenses, excluding drugs.


When you compare Medigap plan F with Medicare Advantage you are comparing, among other things, premium costs with cost sharing. Put another way, you are choosing between paying up front (Medigap) or paying as you go (Medicare Advantage). Choosing between these options will depend heavily upon how much you expect to use health care services and prescription drugs from year to year. Your financial circumstances will be equally important to your decision.


If you become seriously ill for a prolonged period or are seriously injured, do you have between $7,000 and $10,000 available to meet your share of the cost of covered Medicare benefits in one year? If you have a bad year health-wise, what you save in lower premiums with Medicare Advantage could be easily outweighed by what you pay in out-of-pocket costs. And then there are next year’s costs to think about.


If you can afford to pay higher premiums for peace-of-mind and greater certainty regarding future healthcare costs, then the Medigap option paired with a separate Part D prescription drug plan may be best for you. If higher premiums are leading you toward Medicare Advantage, keep in mind that your Medigap Guaranteed Issue right will most likely not be there for you later.


Finally, be advised that starting on January 1, 2020 Medigap plans sold to newly eligible Medicare beneficiaries will not be allowed to cover the Part B deductible. This means that Plan F, the most popular Medigap plan, along with Plan C, will no longer be available for new enrollments starting on January 1, 2020. If you buy Plan F before then you will be allowed to keep it.


Another consideration: Medicare Supplement Plans, Medicare Advantage Plans, and Medicare Part D Prescription Drug Plans are all optional, the Part D Late Enrollment Penalty notwithstanding. There are plenty of Medicare Beneficiaries in Original Medicare who have decided they can live without caps on their share of covered expenses. Sometimes agents try to scare beneficiaries by suggesting that the absence of one of these plans leads inevitably to financial ruin. It could. But you probably know better what the odds are. You know your health history. Don’t send more money to an insurance company than you need to.


For the record, the Part D Late Enrollment Penalty can be steep. And few of us can say with certainty what our future prescription drug needs may be. The penalty is 1% of the national average monthly Part D premium ($33.50 in 2018) for each month you were eligible but did not enroll. This penalty is added to your monthly premium when you enroll later than you should have. And it is permanent.So lets see . . .  .01 times $33.50 is 0.34 cents, times 120 months is $40.80(!) in addition to the regular premium. I wish I had enrolled when . . .



It’s complicated. Consider consulting with a qualified independent insurance agent. I can be reached at (812) 988-6793. Bill@billstant-insurance.com. Or fill out the contact form on this website. Thanks!

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