If you’re a little befuddled with all the pieces, parts, and “Yes, buts…” of Medicare Parts A&B hold on to your hats for this next section. As I’ve already explained, Medicare Parts A&B have deductibles and co-pays attached.
Medicare Part A (the hospital insurance portion) has a deductible payable by you attached to it each time you are admitted to the hospital. Some hospital re-admissions for the same problem may not require a second deductible in the first 90 days following discharge.
After the deductible is paid, Medicare Part A pays all your hospital charges subject to a fixed period of coverage before various co-pays are required. The deductible is adjusted upward every year. For 2013, the deductible is $1087.
Medicare Part B (the provider insurance portion) also requires a deductible. Unlike the Part A deductible, the Part B deductible is paid only once every calendar year. Afterwards, Part B pays 80 percent of most charges for the remainder of each year. The amount paid and the services covered are predetermined by Medicare. Medical specialists are allowed to charge up to 15 percent more than the Medicare approved charge. For 2013, the annual deductible is $147.
The specifics of how all this works is spelled out in great detail in the “Medicare and You” book which should have been mailed to you when you became Medicare eligible. It is also available online at www.medicare.gov on the internet. Because Medicare is designed to pay only a part of medically related charges, there can be a sizable balance due for services provided.
Supplemental insurances called Medigap insurances are available to pay for any outstanding balances after Medicare pays its portion. Medigap insurances come in a variety of flavors. Policies are purchased from private insurers. Each insurer runs its own risk pool and sets its own rates. Medigap policy availability and rates are supervised through the individual state insurance commissioners. Some states cost much more than average because of large senior populations and local state requirements. Medigap insurances are not required, but most seniors agree that some kind of Medigap coverage is a good thing.
Unlike other kinds of insurance, Medicare has specifically defined the terms for 10 different levels of Medigap coverages so they can be compared. Unfortunately, for clarity sake, Medigap “Plans” are identified with letter names just like the “Parts” of the Medicare program. There is no relationship between Medicare “Parts” and Medigap “Plans,” but the similarity in naming conventions do not make this obvious.
Medigap Plans are named A through N. All Medigap Plan As are like all other Medigap Plan As and so forth. Blurring the already murky waters, some letters have been eliminated or are not included. Not all insurers offer all Plans in all states. Not all insurers operate in all states. Risk pools are refigured for each state. Rates go up as you age. Metropolitan areas that sit on state borders may have different rates in force for the same policy depending on which state you live in.
Which policy you buy depends on your tolerance for risk and on your financial situation. The less risk you take on, the more expensive the policy. Some policies pay all deductibles and all co-pays for Medicare approved services. Other policies pay much less.
All health insurance provides several main benefits. It pays a portion of your health expenses. It assures your continued insurability. And it negotiates the cost of services. The cost of services and continued insurability portions may be the most important.
Most health related goods and services have sticker prices which you or I would pay as individuals. The price an insurer generally pays will be between 30 percent and 50 percent of the sticker price.
Initial signups to Medigap policies are not rated for a period of time. You cannot be asked health questions or given any exclusion periods. It is important that you buy the best coverage you can afford at the beginning of your eligibility because upgrading the services delivered by a Medigap policy can require health questions that may justify increased premiums or exclusion periods for some conditions.
Should you move from one state to another, you may always re-enroll in Medigap at the same level or lower that you were enrolled in at your previous residence. You may not automatically enroll in one that pays better benefits.
Next, I’ll try to address what each of the ten available policies covers. Stay tuned.