Beyond Basic Medicare: Understanding Medicare Supplemental Coverage by Ron Pollack
(Editor's Note: Ron Pollack is the executive director of Families USA, the national organization for health care consumers.)
Although Medicare provides vital health insurance for about 50 million seniors and people with disabilities, most people with Medicare have some form of additional coverage. Why is this coverage so important? And what are your options for getting this coverage? Let's take a look.
Q: What gaps does Medicare have?
A: Medicare provides very important basic health insurance. However, it has gaps in the services it covers and in what beneficiaries have to pay out of pocket. Medicare has limited or no coverage for vision, hearing, dental, and long-term care. In terms of what beneficiaries have to pay, in addition to premiums, they often have large deductibles. And many services, like doctor visits and lab tests, come with substantial co-insurance (often 20 percent). Finally, unlike most other health insurance, Medicare does not have lifetime or annual out-of-pocket limits.
Q: How do people supplement Medicare?
A: Because of these major gaps, most people with Medicare have some kind of supplemental coverage. About one-third of beneficiaries have supplemental coverage from a former employer, but this coverage is becoming less common. People who can't get job-based supplemental coverage have other options. Those with very low incomes and assets can get help through their state Medicaid programs (see below). Otherwise, private Medicare supplemental insurance (often called "Medigap") or a private Medicare Advantage plan can help. But these options may be expensive, and they have other limitations. About 12 percent of people with Medicare do not have any supplemental coverage and are at risk of facing high out-of-pocket costs.
Q: What are Medigap plans?
A: Medigap plans are sold by private insurance companies, but these plans have to follow state and federal rules. Medigap plans come in several standard varieties, which helps consumers compare plans. They cover some of Medicare's cost-sharing (for example, deductibles and co-insurance), but they do not pay for services that Medicare does not cover. Medigap plans are popular because they rarely change from year to year, and they allow you to see any health care provider who accepts Medicare. But Medigap plans can have high premiums that increase annually, and policyholders usually must also buy separate Part D prescription drug plans. If you currently have a Medigap plan, think twice before dropping it for some other coverage — you may not be able to get it back later.
Q: What are Medicare Advantage plans?
A: Medicare Advantage plans are run by private insurance companies that contract with Medicare to provide the full range of Medicare benefits. Most include Part D prescription drug coverage, and some offer supplemental benefits and have out-of-pocket limits.
Medicare Advantage plans have grown more popular in recent years, but they have important drawbacks. In general, they limit which doctors and hospitals you can use, and plans decide what services they will approve. Plans can leave a market, forcing people to change their coverage. Beneficiaries can join, switch, or leave their Medicare Advantage plans only during Medicare's open enrollment period each fall.
Q: What if I can't afford supplemental coverage?
A: You may be eligible for Medicaid or a Medicare Savings Program in your state, or for the Part D Extra Help program through Social Security.
Q: How can I get more information?
A: Anyone with Medicare can get help from a local counselor through their State Health Insurance Assistance Program (SHIP). You can call 1-800-MEDICARE and ask for a referral to your local SHIP or go to this website and click on your state: www.familiesusa.org/resources/program-locator.
Q: Should I expect changes to Medicare rules in the future?
A: No immediate changes are planned for Medicare supplemental coverage. But private plans can change their offerings each year. There's also a chance that, in the next few years, Congress may make changes to Medicare, Medigap, and other supplemental coverage. So, as always, it's good to stay informed.