The Importance of Signing Up for Medicare Supplemental Coverage

You are turning 65 and enrolling in Medicare, but as a healthy senior do you really need to also sign up for Medicare’s supplemental coverage? The bottom line is that NOT signing up initially (when you first become eligible for Medicare and eligible to purchase a Medigap policy) can be very costly down the road.

Medicare pays for only about half of all medical costs. To augment Medicare’s coverage, you can purchase a supplemental or “Medigap” insurance policy from a private insurer. In addition, Medicare offers a federally subsidized prescription drug program, in which private health insurers provide limited insurance coverage of prescription drugs to elderly and disabled Medicare recipients.

Purchasing the supplemental coverage means paying more premiums. As such, if you do not typically go to the doctor very much, you may be tempted to forego purchasing a Medigap policy. However, choosing to not sign up for a Medigap is quite risky. If you get sick, what Medicare does not cover may prove to cost you significantly more than having opted to purchase a Medigap policy and to pay the extra premiums.

As expected, the monthly cost for a plan that covers most of your out-of-pocket expenses will be more expensive than plans offering less coverage. As for Medigap plans, there are currently 10 government standardized Medigap plans (known as Plan A through Plan N in Illinois, and most states). Each lettered plan will always have the same benefits, no matter which insurance company sells the policy to you. However, each letter plan offers a different combination of benefits.  You can review the benefits of each lettered plan and choose the combination of benefits that is right for you. To compare the benefits offered in each standardized letter plan, visit the official Medicare website at: https://www.medicare.gov/find-a-plan/results/medigapresults/medigap-view-all-policies.aspx

It is, also, important to understand that waiting to buy coverage until after you get sick can be difficult and expensive. The good news is that, if you apply for and purchase coverage within six months of enrolling in Medicare Part B, you cannot be denied a Medigap policy for pre-existing conditions. If you choose to not purchase a policy within that time frame, then the insurance company can use medical underwriting to decide whether to accept your application. Essentially, the insurance company will look at your age, gender, and pre-existing conditions and can charge you higher premiums, restrict coverage, or even reject your application.

Beneficiaries who enroll in Medicare Advantage plans cannot also buy a Medigap policy. But if they chose Medicare Advantage as their first form of insurance and later decide to return to original Medicare, they must select a Medigap policy within the first year of their initial Medicare enrollment or risk being shut out of a policy.

Medicare beneficiaries are also subject to significant financial penalties for late enrollment in the Medicare drug benefit (Medicare Part D). For every month you delay enrollment past the Initial Enrollment Period, the Medicare Part D premium will increase at least 1 percent. For example, if the premium is $40 a month, and you delay enrollment for 15 months, your premium penalty would be $6 (1 percent x 15 x $40 = $6), meaning that you would pay $46 a month, not $40, for coverage that year and an extra $6 a month each succeeding year.

There are some exceptions built in to both Medigap and Medicare Part D. For example, there is an applicable exception, if you did not enroll right away because you had other coverage.

Quite simply, the bottom line is that if you choose not to enroll because you think you will not need the plan, it may not be easy to change your mind later on, and doing so may also prove to be very costly down the road.

The Elder Law Center, P.C. (a division of Mickey, Wilson, Weiler, Renzi & Andersson, P.C., http://www.mickeywilson.com) is located in Sugar Grove, IL, Kane County, in the Chicago Western Suburbs, phone number: 630-844-0065.

 

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