Earlier this week, we talked about Medicare Part D at the 30,000 foot level, and Medicare Part A and B at the 25,000 foot level. These are the baseline Medicare policies. One of the key take-aways is that Medicare is decent insurance but it does not cover everything. Medicare Part A limits hospital stays (for extreme outliers), Medicare Part B has no cap on out of pocket co-insurance payments. Medicare Part D’s 5 % catastrophic co-insurance is never capped either. There is significant outlier risk for extraordinarily bad luck or illness.
The solution to these problems are three fold. The first is to marry a beer distributor heiress (now legal in all states for all adults). The second is to buy a Medicare Advantage plan that is configured much more like a traditional employer insurance policy with annual out of pocket caps. The final choice is to buy a Medicare Supplement.
Medicare Supplemental plans are standardized, regulated insurance products that fill some of the Medicare gaps. They are underwritten at purchase at a community rate if they are bought during the initial Medicare eligiblilty open enrollment period. If a policy is bought outside of that window, insurers are allowed to medically underwrite policies. A 68 year old with no major health issues will get a much better rate than a 66 year old cancer survivor with diabetes and rheumatoid arthritis. This is a major difference between Medicare and the PPACA under-65 regulatory world.
Medicare Supplements in most states (except for some of my neighbors and my childhood home) are nationally standardized. Medigap Type A plans cover certain things (extra hospital days, the first three pints of blood, hospice care etc) while not covering other things. Type M plans cover everything that Type A covers while also paying some of the Medicare-A deductible and the skilled nursing facility co-pays. There are a bunch of different benefit designs, but each private insurer has to cover the same things within each benefit design. There is no space for creativity.
Medicare supplementals are an optional buy-up. Something like a Medicare supplemental system would be common in countries that provide a baseline public insurance plan with the option to get richer coverage. This design leads to two groups of people to buy these add-on policies. The very sick as they know that they will be burning through services and they want to limit their costs. And the reasonably healthy with some extra income and assets as they are buying insurance against seeing their standard of living surprisingly drop due to excess medical bills.
Bringing us back to the PPACA world, standard Medicare (A+B+D) has a combined acturial value in the low 80s. It is a Gold plan. Medicare supplemental plans allow people to buy up to Platinum (90% AV) or higher coverage.
Another Holocene Human
Would it be off topic to discuss a lot of the confusion I think is out there about these plans? Some people about to retire educate themselves in detail but others don’t seem to know what choice to make, and it’s not early onset dementia. The media is terrible on this, and the insurance companies are advertising like crazy. I suspect AARP is good at educating people, but other than that–?
Richard Mayhew
@Another Holocene Human: I think that would be a perfectly cromunulent discussion as I know the Springfield Retirement Castle does not do a good job of educating their residents or their families on these matters.
However, I am at or beyond the scope of any reasonable knowledge as I’ve never had to spend any significant time in my career on Medicare issues except at the most basic plumbing/network build-out phases where operational knowledge is not needed.
I don’t know enough to be a good resource. If anyone does know more, I will highlight their knowledge.
rikyrah
thanks once again for the information.
MazeDancer
Most people seem to purchase Part F supplemental plans. Which, as Richard says are all the same by law. Naturally, that standardization is not emphasized by insurance companies.
AARP sponsors a supplemental plan though United HealthCare. Many people get that one, which in several NE states is around $208 a month. There is also a part F High Deductible. Which has a 2K ish deductible. It also costs about $150 less per month than AARP. So doing the math, if you have the 2K in case of emergency, you can see if you put that $150 in the bank each month, you have close to your deductible in the bank, you keep on saving each month.
Buried somewhere at each state’s insurance department is a list of what carriers offer which parts. It takes some searching, but it is there somewhere.
japa21
A couple points of clarification, not correction. As stated by Richard and a couple commenters, there is a wide range of supplement plans out there, each level defined by law to have a specific coverage aspect. My mother-in-law had a BC/BS plan which was a blessing when she had to go into a rehabilitation setting for an extended period of time. Basically, it was a nursing home. Medicare covers up to 100 days of nursing home per year, but after the 30 day period the amount they pay drops drastically. The supplemental plan picked up the rest.
My wife chose one from Mutual of Omaha which is Plan F. We still have to pay the Part B deductible, but the difference in cost between the deductible and what the next level up was negligible.
A clarification about the “initial Medicare open enrollment period. Generally speaking, this is when you turn 65. And like the exchanges, there is a period late in the year when you can make changes in plans (say from regular to Med advantage plans and in Part D plans). However, like the Exchanges, there is a life change situation as well. My wife retired last year at the end of April, just after she turned 67. Up until that time she was covered under employer provided insurance so was not eligible for Medicare B or D. This means she had a limited time to apply for both and she had to provide proof of coverage up until then or she would have had to A) pay a higher premium for Medicare B, ) pay a much higher premium for D and C) have to undergo medical underwriting for the supplemental policy.
Fortunately, she started the process early so she was able to get everything ready and on hand to make the adjustment smoothly. However, BC/BS still screwed up her part D application and it took 3 months to get that straightened out.
One other thing about Medicare Supplement plans. Plan F is the most common, although not the most complete coverage. However, for some of the other plans, the insurance company can require medical underwriting due to their increased exposure, even if it is timely.
japa21
@japa21: Oh, and I am glad to have watched my wife go through all this a year ago as I have finally given myself a retirement date of the end of April next year. I now know what to do to avoid any problems.
jo6pac
Here’s supplemental plan for Calif. and AZ. My doctor hates hmo but pushes this plan for us on Medi-Care.
https://legacy.scanhealthplan.com/
I have this but haven’t used it yet, they do have a lot of good futures. On Medi-Care make sure you buy D in the beginning, I didn’t and when I joined SCAN I now pay a penalty for the rest of my life. It’s only $3 a month but it get worse the longer you don’t have D & B
Alex
The biggest gap in Medicare coverage is long term care. Sure, that’s not usually covered by regular health insurance.But it’s a big deal for a universal program for the elderly and disabled not to cover long term care at home or in a facility. The fact that Medicaid is the only way for most people to pay for long term care means that many, many people die in enforced poverty with nothing to pass on to their kids.
dnfree
I attended a Medicare Advantage presentation before I retired, and the salesman actually said that if you have known health issues AND have the ability to pay for the coverage, a supplement plan is the way to go. I am by nature not a gambler, so I chose supplement F because even though the monthly payment is higher than an Advantage plan would be (and does not cover vision or dental), I pretty much know what my medical expenses for the year will be no matter what happens. There are no copays for doctor visits and I can see pretty much any doctor I want. My chiropractic visits are paid in full but I have to pay for x-rays at the chiropractors.
As it happens, I have developed a couple of somewhat expensive health issues since I went on Medicare and they have been completely paid for. I did have to pay $24 out of pocket for my cataract surgery because apparently there’s one exam the doctor wanted to do that isn’t covered. But that’s it. I pay my three Medicare premiums (part B and D and my supplemental insurance); my dental and vision and chiropractic x-rays; and my drug co-pays. Medicare and my supplemental coverage pay the rest. I virtually never see a doctor bill.
Emerald
I’m facing this change in four months and just learned that frankly, Medicare is more expensive and the coverage is not as good as the Covered California plan I have.
I’m paying $76/mo for an Enhanced Sliver plan. The out-of-pocket max is $2,250. Medicare is going to cost me a bit over $100/mo with an OOP max of $4,400. And that’s without the Plan D, for which I’ll have to pay more.
So I’m not too happy. Plus, I’m with Kaiser and I want to keep it. They don’t offer any supplemental plans (except Part D). They said it would probably cost me as much to pay for the plan as it would if I hit the OOP, which is probably pretty close to true.
I guess I’ll have to be sure that I’ve got an extra $2,200 saved up every year. Or better yet, $4,400. Somehow.
Keene Field
So at 65 I enroll in Medicare A&B. I don’t take my Employers health because I have Tricare Prime which turns into Tricare-for-Life. TFL covers Medicare Part D. The question I ask myself: Do I need a medicare supplement?
J R in WV
My Dad had medicare supplemental with Bankers Life. Once his “chronic CMML” went to acute MML leukemia, he was into huge prescription costs, which were covered by Bankers. Eventually he got somewhat confused and missed several monthly payments – the money wasn’t a problem, he just didn’t write the checks.
My sister-in-law spent several days on the phone, and talked them into renewing his coverage with full payment of the arrears, which I thought was a rare case of huge insurance company actually doing the right thing.
And once he had cataract surgery, he no longer needed prescription glasses, just reading glasses from RiteAid, which really tickled him. He had been wearing coke-bottle-thick glasses since he was in his early teens. Now he could buy those cool Ray-Bans…
I was glad he was so happy about it.
MazeDancer
@Keene Field:
Unless this TFL covers the 20% Medicare doesn’t, the answer is yes.
If you, heaven forbid, get in a car wreck, without supplemental, you’re on the hook for 20% of a giant bill. Medicare only covers 80%.