Medigap Options

Health care reform has sparked heavy debate regarding the appropriate supplement for Medicare. It is widely known that seniors ages 65 and above are eligible for government medical aid (Medicare) to assist in healthcare cost. Medicare covers a portion of senior's medical cost. Although government assistance is available, many seniors still lack ample funds to cover the holes in Medicare. Thus, seniors are left to decide whether to adopt a Medicare advantage plan or to simply adopt a supplement for Medicare.

Though this segment is dedicated to the appropriate supplement for Medicare it is prudent to explain differences in what Medicare advantage plans would provide as well. As stated above traditional Medicare covers certain medical needs for seniors. The government covers (by paying doctors and hospitals) certain senior medical needs based on a fee for service schedule.

There are options for seniors to be covered by an advantage plan with 0 out of pocket monthly . It goes without saying that where one medical plan may be ideal for an individual; the same medical plan may fall short of covering another individual's needs. Advantage plans are plans in which the government pays insurers a specific amount monthly for every Medicare member that they enroll (the plans cover hospitals and doctors as well).

Individuals covered under advantage plans are able to choose HMO plans which require advantage recipients to choose from a network of health care providers as well as PPO plans which allow for in network providers as well as out of network providers. It should be noted that individuals going outside of the network would likely have to pay additional fees. All advantage plans offer the same benefits (regardless of the insurer). However, the benefit to the Medicare Advantage plans is that they cover things such as hearing, vision and dental care whereas traditional Medicare plans do not. Medicare Advantage has become increasingly popular due to the advantages provided over and above traditional Medicare.

However, that is precisely the issue that critics raise. Advantage plans are said to "pay out" more than traditional Medicare plans. The congressional budget office has estimated that over 150 billion additional dollars has been spent in the last 10 years on advantage plans (that would not have been spent with standard Medicare). Ultimately, the additional expenditures mean more money spent by taxpayers. Which is why Medicare Advantage plans have been targeted by government and health care reform.

With Medicare Advantage plans being heavily scrutinized and funding likely to be cut at least to some extent, supplements are becoming more appealing. Where advantage plans offer 0 out of pocket, a supplement for Medicare would require some payment by the senior. Where advantage plans replace traditional Medicare, a supplement for Medicare is literally that€a supplement that covers certain holes left by traditional Medicare. Therefore, Medicare is considered the primary plan and a supplement for Medicare is considered secondary to the plan.

Medigap plans are also offered through private insurers at specific cost. Medicare supplement plans are also considered Medigap plans as they fill the gaps left by Medicare. Gaps such as Deductibles, Coinsurance and Co-pays can be filled with an appropriate supplement for Medicare. Any doctor that accepts Medicare should accept a supplement for Medicare. Medicare participants must be enrolled in Medicare part b in order to be eligible to buy a Medigap plan. Medicare part b covers things like doctor services, outpatient care, home health services as well as some preventative services.

There are several Medigap plans available and participants typically need not go through underwriting if they will attain the age of 65 within the next 6 months(and two months following their 65th birthday). Open enrollment occurs from November 15th through December 31st and this is the time that changes may be made by existing supplement users. Medigap options vary and are labeled A through L. Each plan offers different options to fill the holes left by traditional Medicare plans.

Core benefits include hospital coverage for specific periods during Medicare benefit period, approved hospital cost for co-payments during specific periods, skilled nursing coinsurance, doctor deductibles, foreign travel emergency coverage, at home recovery, drug benefit as well as preventative care. Benefits vary from plan to plan and may be viewed in the Medicare handbook.

Will Health Care Reform Kill Medicare Advantage?

It has been six months since the highly contested Patient Protection and Affordable Care Act, also called health care reform, became law. Polls show that people remain worried about how the law will affect their health care. There is a lot of talk about big cuts in Medicare, and seniors are worried their coverage will be reduced or that their doctors will no longer accept Medicare. Should they be worried?

The worst news is for people who love their Medicare Advantage plans. This program pays private insurance companies to enroll seniors in managed-care networks. Many plans offer more benefits than "plain" Medicare, such as dental and vision coverage and health club memberships.

The problem with Medicare Advantage is that taxpayer's aren't getting their money's worth from the program. Much of the recent increases in Medicare costs can be traced to overpayments to insurance companies offering the subsidized plans.You've heard that Medicare is going broke? Well, Medicare Advantage is a big reason for that.

A Medicare Advantage benefit costs the government 14 percent more than exactly the same benefit offered through regular Medicare. In some parts of the country, the difference is as high as 20 percent. That extra money is being eaten up in marketing and administrative costs, and in profits to the insurance companies.

According to the U.S. Department of Health and Human Services, all Medicare beneficiaries, including those enrolled in regular Medicare, are paying for these overpayments through higher premiums. HHS says that this year these subsidies are adding about $3.60 per month to premiums.

But there is no proof that the program is providing better health care than regular Medicare; just that it's more expensive. And for this reason, most of the cuts to Medicare provided in the health care reform law are cuts to Medicare Advantage, not regular Medicare.

These cuts won't go into effect all at once. In 2011, the subsidy going to private insurance companies will be frozen at 2010 levels. After that, the payments will be reduced an average of 12% per year, until costs are more in line with the cost of regular Medicare. Beginning in 2014, the private insurers offering Medicare Advantage plans must maintain a "medical loss ratio" of at least 85%, which is a fancy way of saying that 85 percent of the subsidies and premiums they receive must be paid out in benefits. On the other hand, companies that meet certain benchmarks for quality of service are eligible for a bonus.

Bottom line: according to the Congressional Budget Office, by 2019 the private insurance companies offering these plans will receive $136 billion less than they would have received at the current level of subsidy.

Naturally, the private insurance companies do not like this one bit, and they say they will drop out of the program if these cuts aren't repealed. And when those Medicare Advantage taxpayer subsidies stop being a cash cow for those companies, they might very well drop out of the program. Companies that stay in the program probably will eliminate some of the extra benefits that make Medicare Advantage popular.

Some seniors will be unhappy about this, but it's important for them to understand why it is happening -- Medicare Advantage as it is has been dragging the entire Medicare program closer and closer to bankruptcy.

Before the Medicare program began in 1965, only 56 percent of people over age 65 had any health insurance. Today, without Medicare, the percentage of seniors with health insurance would be very tiny, indeed. It's a sad fact that in our autumn years, nearly all of us will suffer increasing problems with our health. Some ailments -- arthritis, heart disease -- are common, and some are rare, such as mesothelioma cancer, rarely diagnosed before the patient is 50. Either way, senior health care is expensive, and private insurance companies don't want seniors as customers -- unless taxpayers are supplying the profits.

In 2009, while health care reform was being hotly debated in Congress and town hall meetings all over America, some insurance companies deliberately misinformed their customers about what the bill would do to their Medicare Advantage Plans. One major Medicare Advantage provider sent out a letter to its Medicare Advantage customers claiming that Congress and President Obama would cut "important benefits and services" provided by Medicare.

Remember the stories about silver-haired grandmothers marching in protests with signs saying "Keep Government Out of My Medicare"? People laughed at them, but it's possible those were misinformed Medicare Advantage customers.

But the Patient Protection and Affordable Care Act is not cutting any benefit from Medicare. In fact, it is adding a few new benefits. Beginning this week, Medicare patients will not have to pay a co-payment to the doctor for preventive care or for an annual checkup. The health care reform law also will gradually close the infamous "doughnut hole," the gap in Medicare Part D prescription drug coverage that costs some Medicare patients thousands of dollars every year.

Last year, the trustees of the Medicare program announced that by 2017, the part of Medicare that pays hospital bills would be out of money, and Medicare would have to stop paying those bills. This year, the same trustees said the hospital fund should be good until 2029, thanks mostly to the health care reform bill. This tells us the struggle to save the program isn't over, but we're moving in the right direction.

As we get closer to the November midterm elections, watch out for politicians citing the cuts to Medicare Advantage as a reason to repeal the health care reform bill. Without those cuts, Medicare itself is in grave danger.

Barbara O'Brien is a concerned citizen who writes the popular political blog, The Mahablog.

Discover the 8 Critical Questions to Ask When Selecting a Medicare Supplement Plan

Once you qualify for Medicare, there are many options for a Medigap, or supplemental coverage plan. All the information out there can make the process confusing, however use this guide to help help ask the right questions so you can understand the differences.

The 8 Critical Questions YOU MUST Ask When Picking a Medicare Plan

1.  Do I retain my rights to Medicare Part A & B?

The reason you want to ask this question  is because even though you have your rights to Medicare Part A and B, your choices on where you use your benefits may be limited.  For example, Most Medicare Advantage plans have a network which you must use to get your benefits, if you go out of the network you may pay a much higher portion of the bill or not even covered at all unless it is an emergency situation.


2.  Will I be able to see the same doctor or visit the same hospital?

Just as in the question above, if your favorite doctor or hospital is not in the Medicare Advantage network, then you will have to make a choice on whether the plan is worth it.  On the other hand a Medicare Supplement plan along with Original Medicare will not restrict you to a network, as long as the doctor or facility accepts Medicare then they will accept your Medicare Supplement as well.


3.  Is there a co pay-and if so, how much?

Currently the Medicare Supplement plans do not have a copay option, however some of the plans to require you to take care of your Part B deductible.  Depending on the plan, this might still be a good option depending on what your monthly premium is.  There are some supplement plans that take care of both your Part A & B deductible for you.
Medicare Advantage programs typically have a co-pay, deductible and an out of pocket maximum that you are responsible for each year.  Be careful, these plans also change each year as well, so your co-pays and deductibles could increase from year to year.


4.  Is there an out of pocket maximum?

Medicare Advantage plans do have an out of pocket maximum, which is the portion you are required to pay above and beyond your deductibles and co-insurance.  Medicare Supplement plans typically have a deductible you have to meet if there is one and that is it, once you meet your deductible the plan takes care of the rest.


5.  What happens if I travel to Florida or outside of my normal area -am I still covered?

With Medicare Supplement plans, the only requirement is that the provider accepts medicare, then your benefits will take care of the rest up to your plan limits.  With a Medicare Advantage plan, you may only be covered in emergency situations or if there happens to be coverage you are typically exposed for much much more of the expenses incurred.  Make sure you look at your plan benefits summary to see what your true financial exposure is.


6.  Does it cover prescriptions? Glasses? Dental?

Medicare Supplement plans do not cover prescriptions glasses or dental, you will have to obtain a separate policy for these coverages.  Medicare advantage programs are not required to offer all of these benefits but you may find some plans that incorporate some of these benefits within your plan. 
There are some Medicare Advantage plans that do have prescription coverage included, however the included prescription plan may not be the best option for you.  Make sure you look at all options before you choose a plan.


7.  What does the coverage cost, and will my rates go up?

Typically the Medicare Advantage have a lower monthly premium when compared to a Medicare Supplement program, however your potential total expenses each year may be 2x, 3x, maybe even 5 times the amount you would spend on a Medicare Supplement plan.  Don't just look at the monthly, also factor in your doctors co-pays, deductibles, and out of pocket expenses you would be responsible for during the year.
As for rates going up, just as with any other type of insurance program, rates do change from time to time because they have to compensate for their actual expenses. How much do Medicare Supplement policies cost? More information on premiums can be found here.
Medicare Advantage programs on the other hand also have one other factor you may want to consider, the current administration has made many statements and started to take action towards reducing the funding for the Medicare Advantage programs, because of the fact that it costs Medicare more than Original Medicare benefits.  Which as an agent concerns me as to what will happen to the benefits of those programs over the long haul.


8.  As my agent, how much commission will you make?

Each company sets a commission amount that they are willing to pay an agent or advisor to recommend their product.  The companies pay the agents directly so you should never have to pay an agent for their services.  The other thought process is that you are paying that agent for their services by being their client, so are they thinking about more than what they are going to make for each sale.  Medicare Advantage commissions are approved by Medicare and released by the private companies,  depending on the situation there may be more of a financial incentive for an agent to place you in on product instead of the product that is best for you.   Do not be afraid to ask your potential agent how they will be compensated for that product they recommend, compared to other potential products.