Mistake #7: Choosing the Wrong Medigap Plan

In Medicare Mistake #4 we talked about why Medicare Advantage isn’t the best option for people with chronic health issues, and how Medicare supplement insurance offers solid protection from deductibles, copayments, and coinsurance.  In this article, we’ll address the importance of getting the right Medigap coverage.
[keytakeaways]

• There are no limits on Medicare Part A and Medicare Part B out-of-pocket costs (deductibles, coinsurance, and copayments). In most cases, you’ll pay a deductible and coinsurance for each stay.
• Roughly two-thirds of Medicare beneficiaries have Medicare Part A and B coverage and most have some form of supplemental health insurance.
• About 1-in-4 people in Original Medicare protect themselves against catastrophic expenses for Medicare-covered services with Medicare supplement insurance (Medigap).
• Medigap covers some of the shared costs that people with Medicare pay out-of-pocket when they use health care services.
• If you buy a Medigap policy within six months of enrolling in Medicare Part B, you can get any plan in your area even if you have preexisting health conditions. During this 6-month period, you have guaranteed issue rights and cannot be turned down.
• If you try to buy or switch plans when you no longer have guaranteed issue rights, insurers in most states can reject you or charge more because of your health.
• Some states allow you to change plans regardless of your health, and some insurance carriers let you switch to another one of their plans without a new medical exam.

[/keytakeaways]

The Affordable Care Act (ACA) added a lot of confusion to Medicare. When the law was passed, it added new coverage but it did not reform Medicare in the same way as it did health insurance for people under the age of 65.

One of the most significant protections that the ACA brought is the right to enroll in a health plan even if you have preexisting conditions. This right was already built into the Medicare Advantage plans, but Medigap protections are a completely different animal. In almost all states, after your guaranteed issue rights expire, Medigap insurers have the right to deny you coverage, make you wait for coverage, or charge you more for coverage.

Medigap Protections

Since the Medicare program’s beginning in 1965, beneficiaries have had the right to buy Medigap insurance regardless of their health situation. And, once a policy is in place, carriers cannot cancel or increase premiums due to the beneficiary’s health condition. However, a beneficiary’s guaranteed issue right is a very narrow window of time; just 6 short months.[mfn referencenumber=1]Medicare.gov, ”When can I buy Medigap?”, Accessed January 15, 2022[/mfn]

You may also be given Medigap protections if you are in a Medicare Advantage plan and move out of the plan’s service area. However, the law only allows you to buy Medigap Plan A, B, C, D, F, G, K, or L. Medicare Supplement Plan N, which is becoming very popular, and M are not included in this protection.[mfn referencenumber=2]Medicare.gov, ”Choosing a Medigap Policy: A Guide to Health Insurance for People with Medicare”, Accessed January 15, 2022[/mfn]

If you join a Medicare Advantage plan at age 65 and change your mind within 12 months of signing up (trial right), you will get your guaranteed issue rights back, but you must buy your Medigap policy no later than 63 calendar days after your Medicare Advantage coverage ends.[mfn referencenumber=2]Medicare.gov, ”Choosing a Medigap Policy: A Guide to Health Insurance for People with Medicare”, Accessed January 15, 2022[/mfn]

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Medigap protections cited above are mandated by federal law. However, states have the ability to add additional protection if they so choose. These states have specific rules:[mfn referencenumber=3]KFF.org, ”Medigap Enrollment and Consumer Protections Vary Across States”, Accessed January 15, 2022[/mfn]

• California – The birthday rule in California allows you to change policies within a 60-day window. The birthday rule begins 30 days before your birthday and ends 30 days after. Residents can switch to a policy with the same or less coverage.
• Connecticut – Guaranteed issue year-round. Residents can make changes to their Medigap policy at any time.
• Maine – Residents have an extension on the standard Medicare Advantage “trial right” rule. In Maine, you can “try” a Medicare Advantage plan for up to three years. You have 90 days after dropping the policy to buy a Medigap policy with guaranteed issue rights.
• Missouri – If you have a Medigap policy, you can switch plans within 60 days of your enrollment anniversary.
• New York – Resident may enroll in a Medigap plan without underwriting throughout the year.
• Oregon – The birthday rule applies in Oregon.
• Vermont – Residents can enroll in a Medigap plan without underwriting throughout the year.
• Washington – Allows residents to switch Medigap plans (except for Plan A) at any time.

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Medigap Protections for People Under Age 65

According to a Kaiser Family Foundation report, about 1-in-4 people in Original Medicare have Medigap coverage.  However, just 5 percent of Medicare beneficiaries under age 65 have Medigap coverage.[mfn referencenumber=3]KFF.org, ”Medigap Enrollment and Consumer Protections Vary Across States”, Accessed January 15, 2022[/mfn]

The low enrollment in Medigap by beneficiaries who qualify for Medicare under age 65 is due to the lack of federal protections for people with Social Security Disability Insurance. In general, this population relies on Medicaid coverage because most people on Medicare with disabilities tend to have relatively low incomes.

If you are under the age of 65 and you can’t get a Medigap policy, your next best option is Medicare Advantage. Some additional coverage is better than none at all. The maximum out-of-pocket (MOOP) limit on these plans will protect you against catastrophic expenses and most plans include Part D coverage for prescriptions.[mfn referencenumber=4]Medicare.gov, ”Costs for Medicare Advantage Plans”, Accessed January 15, 2022[/mfn]

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How Much Medigap Protection is Enough?

The general rule of thumb is to buy as much coverage as you can afford when you first turn 65. That way, you’re covered if the worst situation occurs (i.e., you have a serious accident or illness). Your health insurance agent may have other recommendations if you live in a state with additional protections.

If you have a tight budget and chronic health issues but do not qualify for Medicaid or a Medicare Savings Program, it is a mistake to think that not having Medigap coverage costs you less. The primary reason for this is Medicare Part A inpatient deductible. For [medicare_costs value=”medicare-cost-year”], this deductible is [medicare_costs value=”parta-deductible”]. And that’s not per year, it’s per benefit period.[mfn referencenumber=5]Medicare.gov, ”Medicare costs at a glance”, Accessed January 15, 2022[/mfn]

A benefit period begins the day you’re admitted as an inpatient in a hospital or skilled nursing facility (SNF). The benefit period ends when you haven’t gotten any inpatient hospital care (or skilled nursing care in a SNF) for 60 days in a row. All Medigap policies pay some or all of the Part A deductible.[mfn referencenumber=6]Medicare.gov, ”Long-term care hospital services”, Accessed January 15, 2022[/mfn][mfn referencenumber=7]Medicare.gov, ”Skilled nursing facility (SNF) situations”, Accessed January 15, 2022[/mfn][mfn referencenumber=8]Medicare.gov, ”How to compare Medigap policies”, Accessed January 15, 2022[/mfn]

The prudent thing to do when balancing your budget vs. your health care needs is to look at your total annual cost for a Medicare supplement plan and compare it to your potential costs without it. A simple example might help.

Let’s say you have COPD and you have needed hospitalization once or twice a year due to respiratory infections. In Original Medicare, you’ll pay the Part A deductible of [medicare_costs value=”parta-deductible”] plus a 20 percent coinsurance for all Medicare-approved costs (e.g., your doctor, tests, medications, supplies, etc.).  And if you required ambulance transportation to get to the hospital, you’ll pay 20 percent of that cost, too.

It’s easy to see how one 3-5 day inpatient stay can easily cost you $3,000 to $5,000 or more out-of-pocket. Can your budget afford that? For most people with a fixed income, a hospital inpatient stay is a catastrophic expense.

In most areas of the country, a Medigap Plan N policy starts at around $90 to $120 per month. High health care cost areas, like Florida, New York, Connecticut, and Washington State, will be higher. So, for between $1,000 and $1,500 per year, most people can avoid big hospital bills.

Curious how much a Plan N would cost you? Get a Free Medicare Supplement Rate Comparison.

Why Plan N? Let’s look at a Medicare Supplement Plans Comparison Chart:

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Medicare Supplement Plan N covers everything except your [medicare_costs value=”partb-deductible”] Part B deductible and Part B Excess Charges. Also, you’ll pay up to $20 per visit to your doctor(s) and up to $50 per emergency room use. In exchange for these small shared costs, you save a lot on your monthly Medigap premium.  Medicare Supplement Plan G, which is the most coverage you can get if you turn age 65 this year, generally costs about 20 percent more than Plan N.

Be sure to check with your doctors before you buy. If your healthcare providers charge Part B Excess Charges, a Plan N policy could end up costing you more than a Plan G. It’s simple math. If you see a specialist monthly and you get hit with an additional $30 fee, but a Plan G would only cost you an additional $20 per month vs. a Plan N, you’re losing money.

A handful of states do not allow Excess Charges. They include:[mfn referencenumber=9]Medicareadvantage.com, ”Medicare Part B Excess Charges: What Are They and How Can You Avoid Paying Them?”, Accessed January 15, 2022[/mfn]

• Connecticut
• Massachusetts
• Minnesota
• New York
• Ohio
• Pennsylvania
• Rhode Island
• Vermont

If you live in one of these states, and you need to make your health care budget stretch, Plan N is a great way to do it.

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Summary

Every day someone over age 65 with preexisting health conditions asks us for a Free Medicare Supplement Rate Comparison. We cheerfully provide it knowing full well that in most cases they can’t get insured unless they live in a state with additional protections.

Not buying Medigap insurance, or not buying enough insurance, will eventually create a greater financial hardship than a manageable monthly premium. Chat with a Medicare health insurance agent about your situation and get the coverage you need while you still have Medigap protections.

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