Under Medicare, you face extra costs not covered by the program, particularly if you are a regular user of the health care system.
For roughly 23 percent of Medicare enrollees, one solution to covering those costs is buying a Medicare supplemental plan — commonly known as Medigap. These policies, sold by private insurers but under tight guidelines from state and federal governments, fill some of the gaps in health care costs that Medicare doesn’t cover. Medigap plans are only for people who have chosen original Medicare (parts A and B); they cannot be applied to a Medicare Advantage plan.
Think a Medigap policy might be right for you? Then you have one more round of decision-making to complete. Here’s some guidance to help you choose wisely.
And it’s a big one. When you first enroll in Medicare (that is, during the seven-month initial enrollment period, or IEP), insurers offering Medigap policies cannot deny you coverage or charge you more for any preexisting conditions. After that, anything goes. For example, if you don’t buy a Medigap policy during your IEP but decide a year later that you want one after all, insurers may be able to turn you down based on your health status, or set prices higher due to a preexisting condition.
The message: To guarantee stable, ongoing Medigap coverage for years to come, the time to buy is when you first enroll in Medicare.
The government has created 10 Medigap benefit designs. Each varies slightly in what it covers. To compare, go to medicare.gov and, under the Supplements & Other Insurance tab, click on How to Compare Medigap Policies. Details are there on a single chart.
Don’t get confused by the way these policies are named: You have your choice of Medigap policies A, B, C, D, F, G, K, L, M or N. These designations have nothing to do with which Medicare program you chose.
Medigap plans are standardized, meaning that (for example) an A or F plan sold by one insurer covers the same things as an A or F plan sold by another insurer. Medigap plans are consistent in all but three states: Massachusetts, Minnesota and Wisconsin have their own standard policies.
So how do the 10 policies differ? “Some are high deductible, some require higher cost-sharing and some cover more costs,” explains Mary Mealer, life and health manager in the Missouri Department of Insurance, Financial Institutions & Professional Registration. Consumers should “evaluate their individual situation as to what plan meets their needs and what they can afford,” Mealer says.
What to focus on
The government’s comparison chart shows 10 different health care costs that could be covered by a Medigap policy. Some come into play more than others, so you should focus most on those big-ticket items. They include:
- Your 20 percent share of the cost of doctor visits
- Your 20 percent share of the cost of lab tests and other outpatient services
- The deductible for each time you are admitted to a hospital
- The coinsurance costs of hospital stays, or stays in a skilled nursing facility after being in a hospital
There are other considerations as well. For example, while other plans cover 100 percent of Part B coinsurance, plans K and L have higher cost-sharing, but also an out-of-pocket limit. Once you’ve paid that amount, they cover 100 percent of covered services for the rest of the year. In 2017, the limit for the K plan is $5,120, and the L plan limit is $2,560. These limits increase each year, based on inflation.
Remember, Medigap does not cover prescription drugs or dental, vision or most other needs that original Medicare doesn’t cover.
Generally, Medigap Plan F is the most popular, as it is the most comprehensive. There are actually two F plans — one has a high deductible. So look at each option carefully.
What it will cost you
Nationwide, the average Medigap plan costs roughly $183 a month. Premiums are based on three different pricing systems.
- Community rated: The same monthly premium is charged to everyone who has this policy, regardless of age.
- Issue-age rated: This premium is based on your age when you first buy the policy. The younger you are, the lower the initial premium. Any premium increases in the future will not be based on your age.
- Attained-age rated: This premium is initially based on your current age, but can increase as you get older.
Experts suggest that you ask a potential insurer which pricing system it uses before buying a Medigap policy. That way you’ll know whether to expect increases as you age.
Mealer suggests that consumers contact their state’s insurance department before signing to make sure the agent and company selling the policy are licensed by the state, and to find out that company’s complaint record. Each state has a State Health Insurance Assistance Program that can help you find this information.
And remember: Changing a Medigap policy can be hard. Give the policy one last read to see if it covers not just your current needs, but potential future needs as well.