What are Medicare and Medigap policies?
Medicare is a federal health insurance program for people 65 years of age or older. It pays for much of your health care, but not all of it (e.g. prescription drugs, deductibles, coinsurance).
Medigap is a health insurance policy sold by private heath insurance companies to fill the "gaps" in Medicare coverage. Medigap polices are also called "Medicare Supplement Insurance". To buy a Medigap policy, you generally must have Medicare Part A and Part B.
What are Part A and Part B?
Medicare has two parts:
1. Part A (Hospital Insurance) helps pay for:
- Inpatient hospital care
- Some skilled nursing facility care
- Hospice care
- Some home health care
2. Part B (Medical Insurance) helps pay for:
- Doctors' services
- Outpatient hospital care
- Some other medical services that Part A doesn't cover (like some home health care)
What is not covered by Medicare Part A and B?
Medigap polices will help you pay for the following costs that are NOT covered by Medicare Part A or Part B:
Part A and B Deductibles
If you need to stay in the hospital, you will pay the following amounts based on the length of your stay:
- $840 total for days 1 through 60
- $210 per day for days 61 through 90
- $420 per day for days 91 through 150
- All costs for each day beyond 150 days
For other non-hospital services you will pay $100
Part A and B Deductibles
You will pay:
- 20% of the Medicare-approved amount for most covered services
- 50% of outpatient mental health treatments and the copayment for outpatient hospital services
- 5% of the Medicare-approved amount for inpatient respite care
Part B Excesss - Above Medicare's Approved Amount
Under federal law, doctors who don't accept "assignment" (take Medicare's approved amount as payment in full) may charge up to 15% more than the approved amount. You will pay this excess amount.
Outpatient Prescription Drugs
You will pay the entire cost of prescription drugs.
Foreign Travel Emergency
You will pay the entire cost of emergency care while traveling in a foreign country.
Skilled Nursing Coinsurance
You will pay $105 per day for days 21 through 100 per stay in a Skilled Nursing Facility plus all costs beyond the 100th day.
Preventative Care
You will pay the entire cost of routine yearly check-ups and tests (such as routine yearly check-ups, serum cholesterol E and screening, hearing tests, diabetes screening, thyroid function test).
Blood
You will pay for the first 3 pints of blood.
Why should I buy a Medigap policy?
Top 8 Reasons Why to Buy Medigap Insurance
- Without Medigap coverage, if you spend one night in the hospital, it will likely cost you $840 (the Medicare hospital deductible).
- If you are sick or hospitalized while traveling abroad, you will need to pay 100% of all costs because Medicare does not have foreign emergency medical coverage.
- If you develop a chronic illness, you can easily spend 10% or more of your annual income on prescription drugs because Medicare has no prescription drug benefit.
- Medicare does not cover many medical services, like routine check-ups, cholesterol screenings, hearing tests, eye exams, and at-home recovery.
- Even for the services that Medicare covers, you may have to pay up to 15% of the bill because doctors and hospitals can charge more than what Medicare finds is "reasonable."
- If you don't buy Medigap coverage within 6 months of enrolling in Medicare Part B, you may be declined and you may be charged significantly higher premiums due to pre-existing conditions that you have or may develop.
- As long as you keep paying your Medigap premiums, the insurance company must renew your policy, regardless of your health.
- All Medigap policies come with a 30-day "free look" - if, within 30 days of purchasing a Medigap policy, you decide you don't want it, you can get a full refund