Medicare Supplements Buyer’s Guide      

By Richard Cantu, President, e - Medigap

Medicare & Medicare Supplements (Medigap):  How Does This All Work?

Learning about and shopping for a Medicare supplement policy, also known as Medigap, can be a daunting task.  This Medicare Supplement Buyer’s Guide and the various Medigap resources found on www.e-medigap.com and at www.medicare.gov will help you better understand how Medicare supplements work, how they compare to other options, and what to consider when shopping for your best option for a supplement to Medicare.  I will do my best to describe this in English and will try to avoid legal or insurance terms whenever possible.  I’m also going to make this as concise and high-level as possible as there are several good Medicare supplement guides provided by the Centers for Medicare & Medicaid Services (CMS) that provide all the detail you would ever want about Medicare and Medigap coverage.

If at any point throughout this guide you decide you don’t want to read all this and would like to just discuss it with someone please feel free to call (877) 363-3442 to speak with one of our agents.

Medicare Eligibility

Medicare is available to 2 groups of US citizens.  Those who turn 65 years of age and those under 65 who are offered Medicare due to 25 months on Social Security disability.  Medicare is also available to non-US citizen residents and lawfully admitted aliens who have resided in the country at least 5 years – but at higher monthly costs to them (see Medicare Supplements Overview for details).

Misconceptions:           
Medicare is available at age 62 if you choose to take it:              
Unfortunately, this is wrong.  Social Security is available at age 62 if you choose to take it; however, Medicare is not available until age 65 unless you have Medicare due to a disability.

Medicare is not available until I take social security:
Luckily, this is wrong. The age to take full social security benefits continues to climb past the age of 65.  Medicare is available at age 65 (or younger if you have it due to a disability) regardless of when you decide to take your social security benefits.  Technically Medicare is available on the 1st day of the month in which you turn 65.

Medicare Enrollment

There is a lot of confusion about how you’re supposed to enroll in Medicare.  You might hear that you’re automatically enrolled.  Others might tell you to head down to the Social Security office to enroll.  Here is an outline of when each of these statements is true:

Part A: 
Automatically Enrolled - If you have worked 40 quarters in the United
States you will automatically be enrolled in Medicare Part A at age 65 and will not have to pay a premium for this coverage. 

Not Automatically Enrolled - If you have not worked 40 quarters or you are the widow or spouse of someone who worked 40 quarters but are not eligible on your own work record you will need to visit your local Social Security office to enroll up to 3 months before your 65th birth month.  You can visit this site to find the office closest to you: https://s044a90.ssa.gov/apps6z/FOLO/fo001.jsp

Part B: 
Automatically Enrolled – You will be automatically enrolled in Medicare
Part B at age 65 if you have worked at least 40 quarters and elected to take social security benefits at age 62.  You should receive a welcome letter from Medicare about 3 months prior to your 65th birthday letting you know you’re automatically being enrolled in Medicare parts A & B and giving you the option to opt-out of Part B if you have benefits through other means (such as a group health insurance plan if you’re still working).

Not Automatically Enrolled – If you did not work 40 quarters or if you did but didn’t take social security benefits at age 62 you will need to visit your social security office to enroll in Medicare Part B.  You can find your local security office by visiting this site: https://s044a90.ssa.gov/apps6z/FOLO/fo001.jsp

I’m enrolled in Medicare Part A & B – What Do I Have?

Don’t worry. You didn’t sign your life away.  Medicare Parts A & B provide beneficiaries with coverage for a majority of their medical needs.  You can get complete details by reading “Medicare and You”.  Here’s a very high-level breakdown:

Part A:  Medicare calls this hospitalization.  I call it “room and board” because that’s essentially what it
covers while you’re in the hospital or a skilled nursing facility.  This will cover the stay in the hospital itself (not services) with your responsibility being a “benefit-period” deductible that is currently over $1000 per benefit period.  A benefit period is your stay in a hospital plus 60 days.  So, if you’re in the hospital for 3 days and are out for 61 days after and go back in you’ll have to meet the Part A deductible again.

Part B:  This covers your services – doctors, surgeons, labs, x-rays, etc.  You have a relatively small annual deductible and then are responsible for 20% of the medical bill for Medicare-approved expenses.  If an expense is not a Medicare-covered expense then you will have to pay 100%.

Wellness:  This is an area that can be rather confusing for a lot of people.  Medicare does cover preventive benefits but in a somewhat limited capacity.  The best way to determine what is covered is to read the “Guide to Medicare Preventive Services”.  If you receive preventive services outside of the normal Medicare schedule you will pay for those services 100%.

OK.  Makes Sense … But How Can I Supplement Medicare?

Part D:  Drugs. This is an optional benefit (kind of) that you can enroll in to help reduce the cost of your
medications.  It was rolled out for the first time in January of 2006.  You can elect not to take Part D if you have credible drug coverage through other means (i.e. a qualified group plan or VA benefits) or if you just don’t want it.  However, if you decide not to take this coverage and do not have credible drug coverage through another source you will be assessed a monthly 1% penalty for as long as you don’t take coverage.  The penalty will not affect you unless you later opt-in to a part D plan which will cause your part D drug plan to have a higher monthly premium based on the penalty assessed.  The penalty can be anywhere from several pennies to several dollars depending on how long you were qualified to join a Part D drug plan but held out.

There are a lot of variables (premiums, deductibles, coinsurance, copays, coverage gaps, catastrophic coverage) that you should understand.  You can learn more by visiting the Part D drug plan page of Medicare’s website at www.medicare.gov/pdphome.asp.  You will also find a really nice tool, called the “Medicare Prescription Drug Plan Finder”, for determining which plan will likely save you the most money.

Part C: Medicare Advantage is a relatively new offering as well.  You are not required to take this
coverage as it is only an option for possibly getting slightly better coverage than Medicare alone.

Many doctors will call this “Medicare alternative” and that is a good description of the service.  Even though it is considered a Medicare offering it is administered by private insurance companies.  When you elect coverage through a private insurance company for Medicare Advantage you are giving up your regular Medicare benefits to take benefits that are required to be as good, or better, than classic Medicare benefits.  For these services you will need to have both Medicare Parts A & B and continue to pay for your Part B deductible and may pay a premium for the Medicare Advantage plan as well.

                                There are 3 Main Types of Medicare Advantage Networks: 

PPO:     This tends to be the larger and more stable network and is what is often preferred by many.  You can typically go to any doctor in the network at any time without a referral.  However, you have to stay in the network in order to receive benefits.

HMO:    This type of plan restricts you to one primary care physician and only allow you to see other doctors by getting a referral from your primary care physician.  These networks also tend to be smaller than PPO networks.

PFFS:   Private-Fee-For-Service plans are unique in that they are an “open” network meaning
there really is not a network but the medical facility has to be willing to accept the PFFS plans terms.  This has caused a lot of headaches for many enrollees as it is easy to be mislead about medical facilities willingness to accept these plans.  These plans are widely not accepted which often puts the enrollee in a worse position than they would have been if they had only kept classic Medicare.  Because if they take services from a medical facility and they do not accept the terms of the PFFS plan than the patient will pay for 100% of the services received.

                                Potential Advantages to Medicare Advantage plans:

Better Benefits than Medicare Alone:  Medicare Advantage companies are required to
provide plans that are proven to provide benefits that are equal to or better than Medicare.  This plan often also includes your Medicare Part D coverage as a benefit.

Lower Cost than a Medicare Supplement (Medigap) Policy:  Outside of what you will need to keep paying for your Medicare Part B coverage, Medicare Advantage plans can range anywhere from $0 monthly to over $100/month.

Potential Drawbacks to Medicare Advantage:

Network:  Classic Medicare allows you to go to any doctor or medical facility that accepts Medicare.  A Medicare Advantage plan restricts you to their network or, in the case of Private Fee for Service, to any doctor willing to accept payment terms and bill the PFFS provider (this tends to be a very limited number of doctors and medical facilities).

The worst part of this is that because you have given up your classic Medicare benefits and network you will likely have to pay for 100% of your medical expenses should you want to see a doctor or specialist outside of your network.  Also, because these networks tend to be relatively small, there is a good chance your doctor may not take the Medicare Advantage plan.  Lastly, these networks tend to change with doctors coming in an out of the network which could put you in a position to change doctors from year-to-year.

Medicare Protections:  Medicare is no longer making the decision on what services will be paid for.  The private health insurance makes the determination regarding whether a particular service is a covered expense.

Note on Medicare Advantage plans:  These plans were intended to provide Medicare recipients with better benefits than Medicare alone and at a lower cost than having to purchase a Medicare supplement (Medigap) insurance policy.  Medicare is also benefiting from this move as it is projected to save Medicare money as well.  In its first few years there has been a lot of controversy over Medicare Advantage and it would be well advised to educate yourself further on these plans and make sure you are OK with the limitations before you make a decision to give up classic Medicare for one of these plans.

Medicare Supplements (Medigap) Insurance Plan

When the Medicare program was initially released it was intended to provide coverage for most of the medical expenses for Medicare beneficiaries.  However, it was never intended to provide coverage for all the expenses.  These gaps in coverage were an obvious opportunity for insurance companies to offer policies that would cover those gaps in Medicare and reduce or eliminate the financial exposure of Medicare recipients.  Because Medicare was picking up most of the bill the insurance companies were able to offer Medicare at relatively affordable rates.

As with any new offering, the initial versions of Medicare supplements varied in coverage and pricing from various insurance companies.  The Centers for Medicare and Medicaid Services was established and began to heavily regulate Medicare supplement offerings.  Eventually, they established a standardization of Medicare supplement (Medigap) plans and assigned letter designations to each offering.  If an insurance company wanted to offer Medicare supplements they had to follow this outline of plans with letter designations.  Currently, the plans include letter designations for A-L, a High-deductible Plan F and High-deductible Plan J, and Medicare Select plans.

Because the plans are standardized the process of finding the best Medicare supplement is as simple as deciding which plan letter makes most sense for your situation and preferences and finding the company that offers the best rate for that plan.  For example, a Plan F from one insurance provider offers identical coverage to a plan F from any other company offering a Plan F.  There is no difference in benefits or networks.  With the exception of Medicare supplement Select plans, which in return for lower premiums you agree to stay within a network of affiliate medical facilities which is much smaller then the Medicare network, if a medical facility accepts Medicare they have to accept any insurance company’s Medicare supplement.  Even though this is the case you might find over a $100 difference in the monthly premium rates for the exact same plans offered by different Medicare supplement insurance providers.  So, when searching for the right plan it’s important to work with an agent who specializes in Medicare supplements and can provide you with rates from several companies to ensure you get the best rate for the plan letter you choose. 

E-Medigap has developed a proprietary quoting system that allows our agents to instantly pull pricing from the 10 leading companies in the state.  Although we represent over 20 companies for Medicare supplements we keep the more popular and lowest cost plans in the quoting system.  With the number of Medicare recipients we help to understand how Medicare and Medicare supplements (Medigap) work we rarely run into companies that offer lower prices than the companies listed in our quoting system.  When we do find companies offering lower prices than those of the companies in our quoting system we will investigate the insurance provider and, if it makes sense, will add them to our offering.  This provides a huge advantage to our clients in finding the best company and rate for their initial Medigap plan and in always ensuring they have the lowest price Medigap plan.

Advantage of Medicare supplements (Medigap) over Medicare alone – Medicare parts A & B offer a very good amount of coverage and the big threat isn’t necessarily the deductibles but the coinsurance and Part B excess you would be responsible for.  With the right Medicare supplement plan you will not have to pay for any Medicare-approved expenses at any provider who accepts Medicare.  This gives you ultimate freedom and can help you really budget your medical expenses because your medical expenses are pretty much limited to what you pay for Medicare Part B, your Medicare supplement, and Medicare Part D drug plan.

Advantage of Medicare supplements (Medigap) over Medicare Advantage plans – Medicare Advantage plans can be a nice choice for Medicare recipients that are open to stay within the network offered by the private insurance company they choose to go with.  This often entails switching doctors as the Medicare Advantage networks are small relative to under-65 PPO networks.  Furthermore, many prestigious medical facilities and specialists that accept regular Medicare do not accept Medicare Advantage plans.  So, if you decide you would prefer to go to one of these specialists you would be at the mercy of your Medicare Advantage company for permission to use services from a medical facility outside of their network.  As you can imagine, if the network includes a specialist similar to the one you would prefer to see outside of their network they will tend to decline your request to leave the network.  If you decide it’s important enough to see that particular specialist after being declined for benefits outside of the network you will end up spending 100% of your expenses as you gave up regular Medicare benefits to receive benefits via the Medicare Advantage company’s network.

Another drawback to Medicare Advantage, other than the network, is that they often provide limited benefits in certain important areas.  A Medicare Advantage plan only has to offer benefits that are as good or better than regular Medicare.  So, it is not uncommon to see such treatments as radiation and chemotherapy only covered at 80% while you would be responsible for the remaining 20%.

With regular Medicare and the right Medicare supplement plan you will not have to pay anything for Medicare-approved medical expenses at medical facilities that take Medicare.  It provides full coverage and substantially more choices in your providers than Medicare Advantage plans.

Original Medicare and Medicare Supplements provide a terrific combination of freedom of choice of providers and coverage of your medical expenses.

For a free quote for Medicare supplement (Medigap) plans from the leading and lowest priced plans in the state visit the 2) Compare page of this website or call an e - Medigap agent at (877) 363-3442 for an absolutely free and very informative consultation.