As you approach age 65, you need to begin thinking about Medicare. Original Medicare includes Part A, which covers hospital-based care, and Part B, which covers other medical care from your doctors. According to the Centers for Medicare and Medicaid Services, some people get Medicare automatically, while others have to sign up for it, including those who are 65 or almost 65 and not getting Social Security yet.
Here are some other things you should know about Medicare:
- There are certain times of the year when you can sign up or change how you get your coverage.
- If you sign up for Medicare Part B when you’re first eligible, you can avoid a penalty.
- You can choose how you get your Medicare coverage.
- You may be able to receive help with your Medicare costs.
However, Medicare doesn’t cover all your medical costs. “Original Medicare is good coverage, but it’s not complete coverage,” says Andrew Shea, senior vice president of eHealth Medicare Marketing.
Medicare parts A and B don’t cover copays, deductibles and coinsurance, so the subscriber is on the hook for those fees. These are known as “gaps” in the Original Medicare plan – and they can be significant for the patient. These out-of-pocket costs “can break the bank,” says Diane Omdahl, president and co-founder of 65Incorporated, a Medicare consulting firm.
Thankfully, there is a way to cover those costs. A Medicare supplement insurance plan can fill in many of those gaps in coverage. That’s why they are colloquially known as Medigap policies.
When to Buy a Medigap Policy
In the confusing world of Medicare, it is important to know one plan from another. There are many supplemental insurance plans that aren’t Medigap. According to CMS, these include:
- Medicare Advantage Plans (like an HMO, PPO or private fee-for-service plan).
- Medicare prescription drug plans (Medicare Part D).
- Employer or union plans, including the Federal Employees Health Benefits Program.
- Veterans’ benefits.
- Long-term care insurance policies.
- Indian Health Service, tribal and urban Indian health plans.
Medigap policies are sold separately from Medicare and are offered by private insurance companies where you live. Like any insurance policy, these require you to pay a premium to the provider. Premiums are usually $100 or more each month, and they go up as you age, Shea says.
If you are interested in a true Medigap plan, the best time to buy one is when you’re first eligible, during your six-month Medigap open enrollment period. This begins the month you turn 65 and enroll in Medicare Part B, Omdahl says, and during this period, “You generally will get better prices and more choices among policies.” Once this period ends, you may be ineligible to buy a Medigap policy, depending on your state regulations. And even if you are eligible, it may cost you more if you have a current or past health condition, she says.
Like other insurance policies, Medigap policies, which are known by different letters, such as Plan A or Plan G, cover different services. For example, some Medigap policies also cover services that Original Medicare doesn’t cover, like medical care received outside the U.S. But most Medigap policies don’t cover services like dental care, vision care, long-term care, private nurses or some medical equipment like hearing aids and eyeglasses.
Unlike Medicare, which is a federally regulated system, Medigap plans are state-regulated. “Most states have standardized Medicare supplement plan designs. In those cases, there are only two things different about any Medicare supplement plan letter,” Shea says, “the price you pay every month and the company that offers the coverage. The benefits and the coverage rules are the same.”
If you have Original Medicare and you buy a Medigap policy, Medicare is first in line to the approved amount for covered health care costs. After that, the Medigap policy pays its share.
Typically, Medicare will send the insurance company underwriting your Medigap policy your claim information, then pay the doctor directly, Omdahl explains.
Dropping or Switching Your Medigap Policy
In some cases, you may want a completely different Medigap policy. Or, you might decide to switch to a Medicare Advantage Plan, or Part C, that may cover more than Original Medicare, including prescription drug coverage. CMS says that, if you decide to drop your entire Medigap policy, you need to be careful about the timing. When you join a new Medicare drug plan, you will have to pay a late enrollment penalty if one of these applies:
- You drop your entire Medigap policy and the drug coverage wasn’t “creditable” drug coverage approved by CMS. (Ask the health plan administrator if the coverage is creditable.)
- You go 63 days or more in a row before your new Medicare drug coverage begins.
“You can technically switch or get rid of your Medicare supplement plan at any time. There are no traditional enrollment periods,” Shea adds. “But if you wish to change from one Medicare supplement plan to another, you are often subject to medical underwriting. You may not pass – which means no enrollment – or you may be accepted but pay a higher premium.”
Your Guaranteed Rights
According to CMS, guaranteed issue rights – also called “Medigap protections” – are rights you have in certain situations when insurance companies must offer you certain Medigap policies. In these situations, an insurance company:
• Must sell you a Medigap policy.
• Must cover all your preexisting health conditions.
• Can’t charge you more for a Medigap policy because of past or present health problems.
In most cases, you also have a guaranteed issue right when you have other health coverage that changes in some way, such as when you lose that other health care coverage. In other cases, you have a “trial right” to try a Medicare Advantage Plan and still buy a Medigap policy if you change your mind, CMS says.
If all of this makes your head swim, don’t worry – the pool is crowded with people just like you. It’s best to talk to an independent, licensed insurance broker or your State Health Insurance Assistance Program. They can help you navigate these muddy waters and make the right decision for your coverage needs.