You are turning 65 years old. Learning the ins and outs of Medicare is confusing. Figuring out all the options, like Medicare Advantage and medical supplements, is even more confusing. You know that Part A covers Hospitals and Part B covers Medical Services. But you’re not sure whether or not you need other coverage in addition to Original Medicare. Why do many people buy a Medicare Supplement Plan and what does it cover?
To answer that question, you first need to understand how Medicare Parts A and B work, and what is and is not covered. Medicare Part A covers most hospital costs, but not all of those costs. In 2011, there is a deductible of $1,132 per visit (as long as each visit is more than 60 days apart). If you are in the hospital for 61 to 90 days, you will have a $283 copay per day. If you are in the hospital for 91 to 150 days, you will have a $566 copay per day.
With respect to Medicare Part B, there is an annual deductible of $162 (in 2011) that you are responsible for. On top of that, you will be responsible for 20% of all medical expenses. This 20% can really add up. In addition to your regular doctor visits and tests, imagine if you would need a knee or hip replacement. That would require months and months of physical therapy – you’d be obligated to pay 20% of all those bills.
While Original Medicare covers most medical needs, it was never intended to cover all of your medical costs. As you can clearly see, there are many “gaps” in coverage that you are responsible for paying. For this reason, many people will buy Medigap or Medicare supplemental insurance. These two phrases, Medigap and Medicare Supplement are interchangeable, two names that describe the exact same insurance. Most Medicare Supplement plans will charge the hospital deductible and copays, as well as the Part B deductible and 20%.
For most people, being exposed to 20% of medical bills is what’s scary. A test battery could cost a small fortune. If you need physical therapy or rehab, those twice weekly visits, at 20% cost to you, really add up. Add in the potential Part A hospital deductible of $1,132 per visit and you have a hefty medical bill. For this reason, most people want to fill these gaps in coverage,
With a Medicare Supplement plan, you’re adding an extra monthly expense. However, the tradeoff is that you will have a known expense, as opposed to a potentially very high expense if you use the benefits.
If you have a Medigap plan in addition to your red, white, and blue Medicare card, this Original Medicare is your primary coverage. They pay their medical bills first. Then your Medicare supplement insurance will pay the gaps (deductibles/copayments/coinsurance) that Medicare doesn’t pay. And voila! If you have Original Medicare and a good Medicare Supplement Plan, you now have complete, comprehensive coverage with little to no out-of-pocket costs.