When Medicare Isn’t Enough

If you thought you were covered health insurance-wise once you hit 65, think again. An Original Medicare policy, the basic

If you thought you were covered health insurance-wise once you hit 65, think again. An Original Medicare policy, the basic policy everyone 65 and older is entitled to, typically covers just 64 percent of your annual health-care costs.

Add in the deductibles, co-payments, and coinsurance Medicare requires — not to mention those items Medicare doesn’t cover at all — and estimates are that a typical couple will ultimately need about $250,000 for medical expenses not covered by Medicare.

That’s a lot of cash. Which is why 90 percent of Medicare beneficiaries have some form of supplemental insurance. Where do they get it?

  • 25 percent join Medicare Advantage programs, which provide more complete health coverage
  • 33 percent have employer- or military-sponsored coverage
  • 15 percent have Medicaid, the state health insurance program for the poor
  • 17 percent purchase a Medicare supplemental insurance program, fondly called “Medigap.”

No matter which option you choose, you’ll still have medical expenses Medicare doesn’t cover. But they will be far less than if you didn’t have any supplemental insurance. That’s why many experts recommend that anyone without other forms of supplemental insurance buy a Medigap policy.

The Ins and Outs of Medigap
If you choose a Medigap policy to help cover out-of-pocket costs, you’ll pay a monthly premium that varies based on the benefits and where you live and, in some situations, your age and health. Here’s what you need to know about the wonderful world of Medigap insurance.

  • Meet the basic requirements. You must have already enrolled in Medicare Part A and B in order to buy a Medigap plan.
  • Get the real thing. All Medigap policies must be labeled “Medicare Supplemental Insurance” and follow all Federal and state regulations related to Medigap policies.
  • If you want it, get it now.“Now” being when you enroll in Medicare Part B (you’re eligible the first day of the month in which you turned 65, but you can wait). For the first six months after you sign up for Part B, all Medigap programs must accept you and must cover all preexisting conditions. They also can’t charge you more based on past or present health problems. This is known as “guaranteed issue rights,” or Medigap protections.After that first six months, however, plans can turn you down if you have preexisting health conditions, such as diabetes, heart disease or cancer. The good news? Once you’re in, you’re in for life; the insurance company can’t cancel your policy unless you stop paying your premiums, lied on your application form, or the company goes bankrupt.

    Oh, one other thing:If you are under 65 and have Medicare, you may not be able to buy Medigap insurance. It depends on which state you live in.

  • Ask about preexisting condition coverage. Although all Medigap plans must cover you in the first six months after you sign up for Plan B, some make you wait six months before they cover preexisting conditions. This is known as the “preexisting condition waiting period.”
  • Pick the right letter.Most insurance companies can only sell “standardized” Medigap policies that cover specific benefits. The policies are organized alphabetically, from A to N. All insurance companies must offer an A plan; if they offer any other type, they must also offer either a C or an F plan The rest is up to the insurance company. All plans within each letter offer the same benefits; the only difference is price.Plan A offers the least amount of coverage and Plan F offers the most comprehensive coverage. That doesn’t mean, however, that Plan F is the most expensive. In 2010, according to the Employee Benefits Research Institute, the average annual premium for Plan F was $1,479, but that varied widely based on the state. For instance, Connecticut had the highest average premium for Plan F at $2,493, while Rhode Island offered it for an average of $1,348. Most Medicare beneficiaries choose the C plans, says Matheis.
  • Choose your plan carefully. If you choose an A plan and later want to switch to a D plan and your insurance company doesn’t offer D plans, you’ll have to switch insurers and risk being rejected for coverage because of preexisting medical conditions.
  • Know the limits. If you qualify for Medicaid or already have a Medicare Advantage Plan, you can’t buy a Medigap policy. If you join a Medicare Part D prescription drug plan and your Medigap policy also has prescription drug coverage (as some did before Medicare Part D became available in 2006), you must tell your Medigap insurance company so it can drop the prescription drug coverage. Make sure, however, that you join the drug plan before you lose your Medigap drug coverage or you may find yourself with no drug coverage at all.
  • Pick the real thing.
    The following are not Medigap policies:
    – Medicare Advantage plans
    – Medicare prescription drug plans (Part D)
    – Medicaid
    – Employer or union plans, such as the Federal Employees Health Benefits Program (FEHBP)
    – Veteran’s benefits
    – Long-term care insurance policies
    – Indian Health Service, Tribal, and Urban Indian Health plans

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