Did you know the costs for a Medicare supplement plan can vary widely? According to the 2016 National Medicare Supplement Price Index that compares rates for the top 10 metropolitan areas in the U.S., the difference between the lowest and highest costs can vary by as much as 68 percent. This means you have the potential to save hundreds of dollars in premiums each month by doing some careful shopping.
Before digging into this price survey, let's review a few basic facts. Medicare aims to provide just basic health care coverage, so significant health care costs aren't covered. Retirees have two choices when deciding how to insure for those uncovered costs: Buy a Medicare supplement plan, also known as Medigap insurance, or elect to be covered by a Medicare Advantage plan, also known as an MA plan or coverage under Medicare Part C.
All retirees can buy these types of coverage on an individual basis, and some may be eligible through their former employer.
Medicare supplement plans help pay for costs that Medicare doesn't cover, such as co-payments, co-insurance and deductibles. These plans generally give you the freedom to choose among providers that accept Medicare payment. Medicare Advantage plans will also pay for costs Medicare doesn't cover, but they typically restrict consumers to specific networks of health care providers, similar to an HMO or PPO.
Medicare supplement plans provide standardized policies that must cover basic benefits. The Medicare Supplement Price Index compares premiums for 65-year-old men and women for an individually purchased Medigap Plan F, which the American Association for Medicare Supplement Insurance says more than 60 percent of Medicare-eligible consumers buy today.
Here are some additional findings from the survey the association's index is based on:
- The highest monthly Medigap premium in 2016 for a 65-year-old man was $444 per month in Manhattan. The lowest monthly amount was $126 in San Antonio, Texas.
- The highest monthly premium for a 65-year-old woman was $444 per month, also in Manhattan. The lowest monthly amount was $118, also in San Antonio.
- The average gap between the lowest and highest premium plan was 39 percent for men and 34 percent for women.
- The largest gap between the lowest and highest premiums was 68 percent for both men and women in Manhattan, representing the location where careful shopping might pay off the most.
- The next highest gaps between the lowest and highest premiums were in San Antonio (53 percent), Chicago (47 percent), Phoenix (43 percent) and Dallas (38 percent).
- The lowest gaps between the lowest and highest premiums were in Los Angeles (14 percent for both men and women), San Diego (16 percent gap) and San Jose, California (22 percent gap). This suggests that shopping in these locations might not result in premium savings as substantial.
Here are a few notes on these figures:
- These premium amounts don't include the Medicare Part B premium that you must pay to Medicare.
- Medigap policies don't cover prescription drugs, so the above amounts don't include these costs. If you buy a Medigap plan, you need to purchase a separate policy covering prescription drugs under Medicare Part D.
Medigap policies generally don't cover costs for long-term care, vision or dental care, hearing aids, eyeglasses or private duty nursing.
If you're comparing these amounts to premiums you might pay to a Medicare Advantage Plan, you need to make sure you're comparing apples to apples. Some MA plans are called "zero premium plans" and require no additional premiums above the usual Part B premium. Also, most MA Plans include coverage for prescription drugs.
To compare your total premium costs under an MA plan vs. a Medigap plan, you'll want to include your Medicare Part B premium, the premium paid to your MA provider or the premium paid for the Medigap insurance, and if you go the Medigap route, the premium paid for Part D prescription drugs.
Retirees are typically restricted from changing their plans until Medicare's open-enrollment period, which is Oct. 15 to Dec. 7 each year. If you attain age 65 during 2016 before these dates, however, you can enroll as soon as you're eligible.
If you're confused and need help shopping for MA or Medigap insurance, you're not alone. But help is available. You can use the Medicare Plan Finder on the Medicare website, which you can use to search for and compare different policies.
In addition, Medicare shopping services such as Sixty-Five Incorporated can provide unbiased help with shopping for Medicare policies for a fee. The convenience and money you save may be a worthwhile investment.
If you're approaching age 65 or if you're a current retiree, you'll want to start your homework now instead of waiting until your 65th birthday or Medicare's open-enrollment period. This will help you make a careful, informed decision -- which can save you substantial money and heartache down the road.