When seniors turn 65, they’re automatically eligible to enroll in Medicare Part A, which covers most of in-patient hospital care, skilled nursing facilities and hospice fees—usually with no premium.
These older adults can also enroll in Part B for medical treatment and preventive care, which comes with a monthly cost that’s usually deducted from Social Security payments. But quite a few health care expenses fall into a “gap,” expenses that aren’t covered, and these can drive out-of-pocket health care costs through the roof.
Purchasing a Medigap policy from a private insurance company can help, but what are these policies and how can they help?
What do Medigap policies pay for?
Original Medicare – or Parts A and B – pays for around 80% of approved costs for doctors, hospitals and medical procedures, but doesn’t pay for copayments, deductibles, coinsurances, and amounts higher than approved costs. Because these extra expenses can really add up when receiving frequent medical care, it’s a good idea for seniors to purchase a supplemental or Medigap policy.
The Center for Medicare Advocacy provides the following list of expenses not covered by Original Medicare, which is where a Medigap policy may be beneficial:
- Home health aide services that are regularly scheduled
- Home health nursing and aide services when there’s no longer a skilled care component
- Hospital coinsurance payments (Medicare covers the first 60 days in full after the deductible has been met, but days 61 to 90 require a copayment and days 91 to 150 require an even higher copayment.)
- Hospital services beyond 150 days per spell of illness
- Skilled nursing facility services beyond 100 days per spell of illness
- Skilled nursing facility coinsurance payments (Medicare covers the first 20 days, while days 21 to 100 require a daily copayment.)
- Part B deductible, which can vary depending on the policy
- Physician charges above the Medicare-approved amount
While some people confuse Medicare supplement plans (Medigap) with Medicare Advantage plans (Part C), they aren’t the same. Medigap does not help with vision, dental, hearing, long-term care, private duty nursing, and prescription drug expenses, where Medicare Advantage does. In short, Medigap’s purpose is to supplement expenses accrued during Original Medicare services.
When should I sign up for a Medigap policy?
The ideal time to purchase a Medigap plan is while first enrolling in Medicare Part A and B, which is usually a month or so before seniors turn 65. Harry Lockhart, owner of H&L Senior Benefits, said there’s only a small window after this before plan costs can skyrocket.
“Within the first six months after enrolling in Original Medicare, medical underwriters don’t get involved,” he said. “After that, underwriters will base Medigap premiums on health history, so purchasing a policy can become expensive or even impossible to afford if underlying health conditions exist.”
Lockhart stressed that while recipients don’t always think about accruing high costs of copays and deductibles when they enroll in Medicare, they should be planning for long-term coverage. Medigap comes with a monthly cost, but it’s well worth it, he said, when those medical bills start stacking up.
What can I expect to pay for a supplemental policy?
Twelve different Medicare supplement plans are available, from Plan A to Plan N. Not all plans are available in every state, but the ones that are available are standardized, which means they must follow federal and state laws as far as what’s offered. The Centers for Medicare & Medicaid Services includes a chart on its website showing what’s covered in each of the 12 plans, as well as a search tool to find available plans per ZIP code.
Because premiums vary greatly from one ZIP code to the next (and from one agency to the next), it’s hard to say what you can expect to pay. However, The American Association for Medicare Supplement Insurance lists the lowest and highest prices for Plan G in 10 major metro areas, and Lockhart said G is the most popular plan because it covers 100% of what Original Medicare doesn’t pick up.
In New York, the lowest a 65-year-old male can expect to pay is $268 while the highest is $476. In Atlanta, the lowest he’ll pay is $136 per month and the highest is $291. Females tend to pay less overall than men, but not always. As you can see, it depends on where you live and who sells the policy. Lockhart said the most important thing is to shop around before making a purchase.
“You have to be aware of a company’s rerates,” he said. “Some agencies will lowball to get you to buy in, then raise their rates 15%. An increase of 5 or 6% periodically is normal, but 15-20% is not.”
As long as a premium continues to be paid, Medigap policies are guaranteed to automatically renew each year.
How do I sign up for a Medicare supplement?
There are a few steps to take when applying for a Medigap plan. First, examine Medigap Plans A through N to see which benefits match your current needs, but also consider future concerns—keeping in mind any family history of health issues.
Next, research insurance companies at Medicare.gov to search for companies in your area that sell the plan you want. Jot down several of them as you will be calling them all.
Finally, contact each of those companies for quotes. The one you choose will help you complete an application either over the phone or online, and should be able to address any concerns you have going forward.
“There’s a lot to learn about Medicare, and about Medicare supplement plans,” said Lockhart. “The right agent should be able to explain things in a way you can understand, so you can be confident you’ve made the right decision.”