Choosing a Medigap Policy

Now that you’re on Medicare, all your health insurance worries are over, right? You think you’ll never have to make a decision about health insurance again, or be concerned about how to pay premiums for coverage, or pay exorbitant fees for services? Think again.

There are gaps left by traditional Medicare – you could end up paying thousands out of your own pocket if you don’t have a supplemental insurance policy, also known as a “Medigap” policy. Let’s take a look at what Medicare covers, and more importantly, what it doesn’t cover.

Medicare is a Federally provided health insurance program for American citizens over the age of sixty-five or citizens with certain disabilities. It’s a “fee for service” arrangement, which simply means you may go to any health care provider: doctor, lab, hospital, etc., that accepts Medicare, pay your deductible and your share of cost, and Medicare pays its share of cost.

There are two parts to Medicare: Part A and Part B. Part A covers the “hospital-type” expenses: inpatient care in a hospital or skilled nursing facility, home health care and hospice. There are certain limits, such as it covers only the first 60 days in the hospital, and you pay a deductible and a co-payment. Part A is generally premium-free, and almost everyone qualifies for Part A.

Part B is the “medical-expenses” portion: doctors, ambulance, X-rays, kidney dialysis, outpatient therapy, emergency care, artificial limbs, medical supplies, neck braces, etc. There is an annual deductible for Part B, and it is optional. Premiums vary each year, and are typically deducted by your Social Security check.

Because not all services are covered by Medicare, such as prescription drugs, many people buy “Medigap” policies to fill in the areas not covered by Medicare. In 1992 Congress mandated that all Medigap policies be standardized, to make it easier for consumers to compare plans and prices. There are 10 Medigap policies now offered, lettered A through J, but not all insurance companies offer all ten plans. Also, insurance companies in Massachusetts, Minnesota and Wisconsin are allowed to offer slightly different combinations of benefits. And to make it even more confusing, although the plans are standardized, the premiums are not. Costs can vary dramatically from one company to the next, so compare carefully.

The major differences, other than price, between the Medigap plans offered are the differences in benefits. For example, prescription drug coverage is a highly desirable benefit; most elderly patients take at least one prescription regularly, and the cost of prescription drugs can be very expensive. Yet only three of the Medigap plans offer prescription drug coverage: H, I and J, with varying deductibles, co-payments and upper limits on total amount of coverage each year. The other difference between the plans is centered on deductibles, levels of coverage and benefits covered. For example, Plans E and J are the only ones that cover preventative care. Some plans offer a much higher deductible and co-payments in exchange for a lower premium.

Before you even seriously consider purchasing a Medigap policy, decide if you really need this coverage. If you’re income is sufficiently low enough, Medicaid may be a better choice for you to fill in the gaps. You may also be eligible for a local program, if your community offers one. Check with your local welfare or public assistance office.

Each state also offers a SHIP program (State Health Insurance Assistance Program) that offers the elderly free counseling on health-insurance related issues. To find the program nearest you, call the Eldercare Locator at 1-800-677-1116. Have them review your options for Medigap policies before you purchase a supplement. Options and premiums vary so widely from company to company, you’ll benefit from some expert advice.