Demystifying Medicare Supplement Plans and Unraveling the Confusion

Medicare is a beast, but it need not be frightening.

It’s easy to be intimidated by Medicare.  Its sheer size can be overwhelming.  According to the Kaiser Family Foundation, 2018 found 59,869,402 people with Medicare coverage (https://www.kff.org/medicare/state-indicator/total-medicare-beneficiaries/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D), and the Medicare program cost $582 billion, about 14 percent of the total federal government spending, in that same year (https://www.pgpf.org/budget-basics/medicare). 

While the sheer size of Medicare may lead some to believe that it is “free”, it is not.  The answer as to what the program costs an individual is not simple either, as it depends upon - if you qualify for fully-funded Part A (do you have enough quarters paid into Social Security, or are you married to someone that has?); when you enrolled into the program (when you were first eligible or did your delay to do so subject you to a lifelong penalty?); what is your income (beware IRMAA); or do you qualify for an entitlement program because of income and assets (what is LIS and MSP?).

While the material made available to the public to explain the program is very comprehensive, it too can seem overwhelming.  For example, “The Official U.S. Government Medicare Handbook”, “Medicare & You” is 120 pages long.  If as a Medicare beneficiary, you’d like to examine just one type of supplemental coverage, Medicare Supplement or Medigap policies, “Choosing a Medigap policy: A Guide to Health Insurance for People with Medicare” - that guide itself is 52 pages long.

Layer on four “parts” of Medicare and twelve different Medicare Supplement Insurance Plans, and the fact that Medicare needs to cover a service before a Medicare Supplement will – prepare to be confused.

The government is working to make basic Medicare coverage easier to understand.  The four parts of Medicare are explained fairly well in the government material (and in that made available insurance companies and agencies).  In addition to all of the explanatory material available on medicare.gov and cms.gov, it has introduced the “What’s covered” app, a free mobile app as part of its “eMedicare” initiative to modernize and streamline customer service.

As for the twelve different Medicare Supplement Insurance Plans, that generalization doesn’t apply to every state.  As Medigap policies are standardized in a different way in Massachusetts, Minnesota, and Wisconsin.  Different states also have different requirements as to when medical underwriting is necessary for you to be able to purchase a Medicare Supplement.  And, MACRA legislation passed in April of 2015 that becomes effective in January of 2020 makes what policies one is eligible for dependent upon when your Medicare became effective.

If you are not confused yet, factor in that prescription drug coverage is not part of original Medicare and is not part of any Medicare Supplement currently available to purchase.  That coverage is purchased separately through that fourth part of Medicare- Part D. 

So let’s demystify what Medigap plans do and do not cover, but first answer the most basic coverage questions – are they required or really necessary?

Required?  No.  They are optional coverages that are the choice of the individua Medicare Beneficiary.

Really necessary?  It depends.  Basic traditional Medicare has deductibles, of both an annual and per stay nature, along with coinsurance that would be out-of-pocket, in addition to the cost of the coverage itself.  And, traditional Medicare does not have a maximum-out-of-pocket to keep expenses from piling up without a limit, so if you suffer a catastrophic illness or condition, the bills have no limit.

 So what will Medicare Supplements cover, and what will they cost?

This information, taken from the Centers for Medicare & Medicaid Services’ 2019 Choosing a Medigap Policy: A Guide to Health Insurance for People with Medicare, page 11, details the policy types available to those who are on Medicare prior to the end of 2019:

The basic coverages of any of the standardized plans will be the same regardless of the company offering the plan.  Additionally, some companies are making benefits beyond these required standardized benefits available in certain states.  However, the companies are not required to offer all plans, and may well have different pricing and underwriting considerations.  Those pricing differences can be substantial from company to company, even though the coverages may be identical.

So what should a Medicare Beneficiary do?

1.       Homework.  Use the information provided by the government to educate themselves regarding the coverages that are available.  Be careful of just “Googling it”, as advertisements by insurance companies and insurance agents will appear above the information supplied by the government agencies’ explanations of benefits.

2.       Investigate.  Determine what options are personally available, especially if the Medicare beneficiary is still working, or has coverage available through prior employment or governmental service.

3.       Work with a qualified insurance broker who represents multiple insurance companies for medical coverage and who knows what all else basic Medicare does not cover, e.g. prescription drugs; dental, vision, hearing coverage; long-term-care, burial coverage.

Medicare coverage can be confusing, but you needed not know all the answers.  You just need to know what questions to ask.