Individuals covered by Medicare Parts A (hospital charges) and Part B (medical and physician charges) should not rely on Medicare alone. Medicare has deductibles and only covers 80% of approved expenses after the deductible. A large, catastrophic medical expense could leave you with hefty medical expenses to pay off. There are two options that you can use to limit these large, potential losses. Let’s examine each one in detail:
o Medicare supplements – also known as “medigap” coverage, these plans pay most of the expenses or gaps left unpaid by Medicare. The government standardized Medicare supplement plans years ago so that the benefits would be the same from one insurance company to another. There are currently 10 plans available with the letter designations A-J. The most common plan is F and is offered by practically all Medicare insurers.
Not all insurance companies offer all 10 plans. Plan F covers both the Part A and B deductibles as well as the 20% coinsurance gap left by Medicare. For the individual that would like to have all doctor visits, hospital charges and other medically necessary testing and expenses covered in full, a medigap plan would be the best choice. Most insurers offer plans based on age and medical underwriting is required to be approved for a plan unless you are applying during an open enrollment or guarantee issue period of time.
It is important to note that underwriting is not required if you apply for coverage within 6 months of your 65th birthday or enrollment is Part B of Medicare, whichever comes later. There are also special guaranteed enrollment periods in situations where another coverage is lost at no fault of the insured. Individuals that require more medical attention seem to be better satisfied with a supplement plan although these plans provide little or no coverage for routine dental, vision, hearing or preventative care.
o Medicare Advantage Plans – While these plans are part of Medicare (Part C), they work drastically different than original Medicare paired with a supplement plan. First of all, no claims are submitted directly to Medicare. Medicare Advantage plans are private-fee-for-service plans and you deal directly with the insurance company. The advantage plan is responsible for handling all of your medical claims. These insurers are being subsidized by Medicare since they are paying your medical expenses.
There are some advantages and disadvantages of these types of plans. One advantage is the low premiums. Most plans cost significantly less than a traditional Medicare supplement plan-some even have a $0 premium. There is also no medical underwriting required to purchase one of these plans. Although the plans must cover all medial procedures normally covered by Medicare, most plans provide some additional benefits for dental, vision and hearing screenings as well as preventative check-ups.
These extra benefits vary widely from one insurer to another. The one major disadvantage of these plans are the co-pays and out-of-pocket expenses left for the insured to pay. While the out-of-pocket expenses are limited to a maximum amount, these expenses can be considerable compared to having them covered in full by a traditional supplement plan. Simply put, these pans work best for those individuals in good health and need very little medical attention.
Which plan is best for you? That all depends upon the amount of medical expenses that you incur each year. If the out-of-pocket expenses in a Medicare Advantage plan cost you more than the premium on a traditional supplement plan in a given year, you would have been better off paying for a supplement plan. This is an important decision which deserves valuable consideration and the advice of an experience broker.