Understanding Medicare One Part at A Time, Part 4: Medicare Supplements AKA MediGap Plans
We arrive at Part 4 of the “Understanding Medicare…” series. Medicare Supplements (MediGap) used to be the only option one had to plug the many holes Original Medicare has:
- Part A hospital deductible
- Part B medical deductible
- The 20% coinsurance that applies to everything.
However, a MediGap plan is NOT mandatory! Those who could afford to purchase a plan did, but many could not. They would roll the dice and pray they had no major medical or hospital issues. But, as life would have it, that day would always come, and many were devastated.
Before I continue, I want to say this will not be an exhaustive article on MediGap plans. It will cover the general information necessary to understand them, and compare two of the most popular sold today, along with my personal insights and opinion.
So, what makes a MediGap plan so good and bad at the same time? Let’s look at those aspects one at a time.
We will look at the following in this article:
- The Good of a MediGap Plan
- The Bad of a MediGap Plan
- Who Is A Good Prospect?
- What Do They Cover?
- When Can I Get a MediGap Plan?
The Good of a MediGap Plan
The best thing about a MediGap Plan is that you can go to ANY doctor that accepts Medicare, anywhere Medicare is accepted (Guam, Puerto Rico, the American Virgin Islands, Hawaii, Alaska, and of course the 48 continental United States). You don’t have to worry if the doctor is in- or out- of network and you don’t need a referral. You may require prior approval for certain services (specialist visits and/or durable medical equipment) depending on the plan. That is a lot of freedom and peace of mind.
The Bad of a MediGap Plan
When I speak with a MediGap customer (they are almost evangelists), what I hear most often is, “I LOOOOVE my MediGap plan, because I can go anywhere and never get a bill!” That is true and false at the same time.
The Cost and Savings Factor
Is it true that if they met their deductible they don’t get a bill when they receive services? Answer: yes and no, it depends on the plan. For example, Plan N has copays for certain specialist appointments and emergency room visits; meanwhile, Plan G does not. The difference? The premium you pay at the beginning of each month!
This leads me to the fallacy of that statement: they get a bill every month, whether they use their insurance or not. This is what we call the prepaid method. Imagine spending $400 a month (on average with a Plan G) for your Part-B premium, MediGap Plan G premium and your Part-D premium (and it does not include dental, vision or hearing coverage), each month without going to the doctor? When you add a dental plan, you are looking at about $450 per month (which is $5,400 per year) – this is about the average MOOP (maximum-out-of-pocket limit) for an average Medicare Advantage plan.
The difference (monetarily speaking only) between a MediGap arrangement and a Medicare Advantage plan is you only pay the MOOP on a Medicare Advantage plan if you have a VERY BAD YEAR! On average, most people spend a few hundred dollars annually for hospital and medical services (prescription drugs excluded from this statement).
Now, I know many may say, “That’s normal! What are you talking about?” Well, in the insurance world of people under 65, yes, this is normal. But when you get to 65 and Medicare, it doesn’t have to be your norm – you have options. Okay, now that I sound like a MediGap basher (I am truly not), let’s take a look at for whom this would be a good option.
The Preexisting Conditions Factor
If you have any preexisting conditions, many plans will not cover services for those conditions for the first six months of coverage. If you are at Guaranteed Issue (when you turn 65) and in fairly good health, it’s not a big deal. However, if you are not in good health, it is. Moreover, if you are considering a MediGap plan and you no longer have a Guaranteed Issue right, you are now looking at underwriting, which can make it more expensive. Things to consider.
Who Is a Good Prospect for MediGap?
Now, when I speak to a prospect, I do not try and sway them any which way; I simply present the facts and do the math. The math never lies.
With that said, the first criterion is the beneficiary must be able to pay $400+ a month (on average with all the premiums combined) for 10 to 20 years and not have it affect their retirement. If they pass that criterion, they are a good candidate. However, there are further criteria to consider.
What kind of lifestyle does he or she have? Is he or she a traveler, or live on an RV or boat and are doing the wander lust thing in retirement? If he or she is, this is a good option.
Does the beneficiary have a serious medical condition in his or her family or personal history and fear it rearing its ugly head in the future, and he or she want no obstacles to treatment? If so, this may be a good option. Other than those two scenarios, it could be just a matter of choice.
What Do They Cover?
Assuming the beneficiary is a good candidate, understanding which plan is best for his or her specific needs is important, because no two plans are the same. They are largely alike, but the subtle differences are crucial and decide what one will pay.
Since Plan C and F are no longer being sold to anyone turning 65 after January 1, 2020, so let’s look at the two most popular and why: Plan G and Plan N.
Plan G and N are very similar, with a few exceptions.
- Plan G pays for all Part B copays and coinsurances; Plan N may charge some copays for specialists and emergency room visits. The copays are typically up to $20 for doctor visits and up to $50 for an ER visit (will vary depending on Plan and state).
- Plan G covers excess charges; Plan N does not.
Excess Charges: What are they and how much can it cost?
There are only eight (8) states that allow excess charges of up to 15% above the Medicare rate. What this means for you is, if a provider feels they are not being paid enough in:
- New York
- Rhode Island, or
…they may charge an excess charge and the beneficiary (you) would be liable to pay. With that said, fewer doctors are practicing that today. And if you live in the remaining 42 states, commonwealth(s) or territories of the United States, you will not see excess charges. Therefore, saving the difference in premium may well be worth it, depending on which state you live in.
There are other less expensive plans available, but they cover between 50% to 75% of the coinsurances, copays and deductibles of Medicare, which can be very costly, hence they are not as popular.
When Can I Get a MediGap Plan?
While you can get a MediGap plan whenever you want, it’s not feasible to do so. The best time to do so is during your right of guaranteed issue, which is when you turn 65, or are in your ICEP (which could vary if you chose to continue to work past 65 and had coverage or were covered by your spouses creditable coverage).
During guaranteed issue, there is no medical underwriting; therefore, they must charge you the same preferred rate they charge everyone else in good health. If you miss this opportunity, then you will be subject to underwriting.
Can I Change My Mind?
If you chose a MediGap plan and feel a Medicare Advantage plan may be a better fit, you have one opportunity to change to an MAPD or MA plan and return within 365 days with guaranteed issue and no medical underwriting.
So, there you have it! Medicare Supplements in a nutshell.
As we continue on this series, you will come to understand your options better and will be able to decide what is best for you. In the meantime, if you have any questions and can’t wait for the other articles, please feel free to contact us for a NO OBLIGATION FREE CONSULTATION, by clicking on CONTACT US. Also, download your FREE digital Medicare & You 2024 guidebook.
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