Is Medicare Supplement Insurance (Medigap) Really Worth the Cost?

The goal is to stay healthy and live longer, right? What does that mean in terms of lifetime medical costs? The better we are at living longer, the more we end up spending on healthcare.

If you’re serious about designing your best possible retirement, planning for preventive care and preparing for major medical expenses is critical. It’s not much different than buying auto or home owner insurance. We all hope we never have to use insurance, but just to be on the safe side, we’re protected from crushing debt.

What can you expect from Medicare?

First, keep in mind that Medicare doesn’t cover every medical service, and it doesn’t pay for 100 percent of the many services it does cover. Part A covers home care, hospice, hospital and skilled nursing care. You must meet a $1,100 deductible per illness before your Part A coverage begins. After that, part A will cover your hospitalization costs for the first 60 days, but you will only pay part of the daily costs from the 61st day onwards.

Part B deals with doctor’s services and other services not covered by Part A. After you meet the $155 annual deductible, Part B pays 80 percent of the Medicare pre-approved amount. You are responsible for the remaining 20 percent and for any amount your doctor charges that exceed the pre-approved amount.

What Can You Expect From Medicare Supplement Insurance?

Medicare Supplement Insurance, also known as Medigap, offers you 10 different plans to fill the gaps in Medicare in a way that best suits your situation. That’s important so you can get the coverage you need without paying for benefits you don’t need.

Nine Medigap plans pay for that $1,100 part A deductible and many also pay for the $155 part B deductible. All Medigap plans pay your coinsurance amount for hospital expenses after the 60th day, and they also pay for the total Medicare reimbursement amount for an additional 365 days per life.

Immediately after hospitalization, Part A also pays for 20 days in a skilled nursing facility to aid in rehabilitation and regain strength so you can take care of yourself when you return home. If you need more than 20 days, you’ll have to pay a portion of the daily fee, which is called a coinsurance fee. Eight of the Medigap plans pay for that coinsurance amount charged after 20 days.

Two Medigap plans cover your $155 annual Part B deduction for doctor services. This deductible increases each year, so Medigap pays 100 percent of the Medicare deductible for any given year.

Even after you meet the Part B deductible, you’re only covered for 80 percent of the Medicare pre-approved amount. When doctors don’t accept that Medicare-approved amount, they bill you for the difference between what Medicare will pay and what they’re legally allowed to charge. As we all know, doctors charge wildly different amounts for the exact same procedure. Medigap Plan F pays 100 percent of all these additional costs. That can really lower your out-of-pocket costs! For a slightly lower premium, Plan G pays 80 percent of the physician’s deductible.

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If you had hoped to travel in retirement, keep in mind that Medicare won’t pay a penny for emergency medical care you need while traveling abroad. Seven Medigap plans cover 80 percent of your emergency medical care, even if you’re traveling abroad. These plans cover you for up to 60 days of travel with only a $250 deductible. However, check each plan for a lifetime maximum to make sure you’re getting what you expect.

If you kept your insurance premiums low with high-deductible policies before you turned 65, you’ll be pleased to learn that certain insurers also offer high-deductible versions of Medigap Plan F and J. These plans pay the same benefits as the standard versions of Plans F and J after you reach a $2,000 annual deductible.

Control your healthcare costs

With a choice of 10 Medigap plans, you can choose the benefits you need. As long as you are relatively healthy, you can change plans when your situation calls for a different set of benefits. Without a Medigap supplement, you can find out way too soon how the gaps in Medicare coverage really pile up and threaten you with out-of-control health care costs.