When it comes to signing up for Medicare, the federal health insurance program for those age 65 and older, there's plenty of confusion. Which part of the four-part program covers hospital stays? Do all parts help pay for prescription drugs? What's the difference between Medicare, Medicare Advantage, and Medigap?
Medicare itself has four parts. Part A (hospital insurance) and Part B (health insurance) come standard in every Medicare Plan. Part C is also called Medicare Advantage; it is an alternative to a standard Medicare Plan and offers some additional benefits like prescription drug coverage. Part D covers prescription drugs for those who do not purchase Medicare Advantage. And then there is Medigap.
Medigap is private health insurance that can help you pay for the "gaps" in your traditional Medicare policy – things like co-payments at a doctor's office, coinsurance at skilled nursing facilities and out-of-pocket hospital costs not covered by Medicare Part A. There are 10 different types of Medigap plans, each designated by a letter of the alphabet (You can find details about all 10 plans at Medicare.gov). In most states, the benefits are the same no matter which insurance company you purchase the plan from, though each plan covers different things. Massachusetts, Minnesota and Wisconsin have standardized their plans differently. Premium prices for each of the 10 Medigap plans varies depending on the benefits offered, and the premiums are separate from your regular Medicare premiums.
The most comprehensive Medigap plan is Plan F, which covers all available benefits. Plan C, which covers everything except excess health insurance costs, and Plan F are the most popular plans, according to Joe Baker, President of the Medicare Rights Center. To be eligible for a Medigap plan, you must already have Medicare Parts A and B.
Medigap policies are renewable even if you develop health problems and, as long as you pay your monthly premium, your insurance carrier cannot terminate your policy. Medigap plan prices depend upon your age, where you live, the insurer and type of plan you select. In general, Medigap policies usually do not cover long-term care, vision or dental care, hearing aids, eyeglasses or private-duty nursing. A Medigap policy can also only cover one person. If your spouse needs additional coverage, they will need their own policy.
Since a Medigap plan supplements your regular Medicare plan, while Medicare Advantage is an alternative to Medicare, you cannot purchase a Medigap plan to help you pay for your Medicare Advantage plan.
There are good reasons to opt for a Medicare Advantage plan instead of Medicare plus Medigap. Medicare Advantage covers the same benefits included in a traditional Medicare plan (Parts A and B), but Medicare Advantage plans often charge different (usually lower) co-payments, all of your coverage is consolidated under a single plan, and there may be no additional monthly premium. The monthly premiums are lower than Medicare, but the out-of-pocket expenses may be much higher.Medicare Advantage plans also include prescription drug coverage at no additional cost. Medigap plans do not cover drug prescriptions, so if you need help in paying for prescriptions, you will need to purchase a Medicare Part D policy. Most Medicare Advantage plans require you to see providers in-network or pay high co-payments for out-of-network service; you may need a referral from your primary doctor to see a specialist and it may be more expensive.
The advantage of a Medigap plan is that you will have a larger network of providers to choose from. If you have a health condition, a Medigap plan may provide you with more access to providers and better ways to pay for medical expenses. If you can afford to spend a bit more, a Medigap plan may be a wiser choice. It may save you a lot of money in the long run if you need extensive medical services or treatments.
Regardless of whether you opt to buy a Medigap or Medicare Advantage plan, Baker advises not only exploring plan details, but also speaking with providers, neighbors, and others who have already purchased the plan you are considering.
You have six months after your 65th birthday to enroll in a Medigap plan, according to the federal rule. However, depending on where you live, you may be able to purchase a Medigap plan later, but keep in mind that you may have a limited number of plans to choose from at that point.
On the other hand, if you have a Medicare Advantage plan, you may opt to change your plan, but only during the Annual Enrollment Period (AEP). During 2013, the AEP runs from Oct. 15 to Dec. 7.
You can sign up for a Medigap or Medicare Advantage plan online or by calling 1-800-633-4227. You can explore Medicare Plan Finder (https://www.medicare.gov/find-a-plan/questions/home.aspx) to see available plan options in your area.