Medicare Supplemental Insurance Policies

Medicare Supplemental Insurance Policies also known as Medigap Plans are privately run Insurance policies that can be used to make up for some of the gaps that exist in Original Medicare (Part A and Part B). These policies will help you to pay for a variety of costs including coinsurance, copays and deductibles. These supplemental policies are standardized according to a lettering system A-N for all states except Minnesota, Wisconsin and Massachusetts. When comparing plans you can look at the letter designations to help you compare plans. You should compare plans of the same letter designation rather than trying to compare plans across letters.

Determine Your Risk Tolerance when Considering a Medigap Plan

Each letter designation includes a different type of plan. To choose the letter plan that is right for you, take into account your income, any retirement plans you may have and whether you might want to sign up for a Medicare Part C Advantage Plan. In most places there are too many choices available and making a decision can be difficult. One word of advice that will help you separate out the plans that are best for you is to honestly evaluate your health and financial circumstances. Once you do this ask yourself what your risks are. Everyone has risks they can manage and these need to be separated from the risks that could be devastating. Catastrophic risk coverage is generally much more important than manageable risk coverage.

The good news is that all the Supplemental Plans are forced to provide catastrophic coverage for Medicare Part A, Hospital Coverage. Original Part A Hospital Coverage ends after the first 150 days in the hospital. All supplemental plans provide extra coverage for up to an additional 365 days. These costs can up to thousands of dollars a day so this part of supplemental insurance is very important and should be one of your deciding factors in choosing to get a supplemental policy.

Some Medigap Coverage is More Valuable

Second, some of the coverage covered by all the plans like blood (normally donated and free) doesn't really matter all that much. Hospice care co-insurance is another benefit offered that is fairly well covered by Original Medicare especially if you have the means to stay at home. Neither blood nor hospice care is fully covered under Original Medicare but comparatively speaking this is not where the benefit of supplemental plans is to be found.

Then there are significant costs that you may want to pay attention to. For example, Part A deductible coverage (you will pay $1,132 for the first 60 days of any hospital stay in Original Medicare followed by significant costs thereafter. Find out exactly what portion the supplemental plan will cover. Part B coinsurance is also expensive. For example, say you have no supplemental insurance and you are in the hospital for 3 months. The cost without supplemental insurance will cost you at least $9,622 plus 20% of your Part A fees, Part B doctor's services and any excess charges. Add in the total cost of skilled nursing facilities etc. and you could easily see a $30,000 bill AFTER Medicare pays its share. This is why it is so important to pay close attention to what is and isn't covered in the A-N Plans. If you are reasonably healthy and can afford to pay some out-of-pocket expenses the F Plan also offers a high deductible plan ($2000 a year). Out-of-pocket expenses are limited in plan K and L to $4540 and $2320 per year.

Auntie Lou says, "Make up lots of example questions for the plan reps to get a better idea of each policy's value."

In summary, supplemental policies break down into plans A-N (minus discontinued Plans E, H, I and J). Unless you live in Minnesota, Wisconsin or Massachusetts the coverage in these policies has been standardized. In evaluating which plan fits you needs look objectively at your finances, retiree coverage, general health and lifetime goals. Evaluate your risk tolerance and choose your plan wisely.