(MoneyWatch) This is my fourth post this week on enrolling in Medicare and buying medical insurance at age 65. The series continues with steps you should take to make sure you have adequate coverage.
It's time to determine whether you will need insurance to supplement Medicare. For most people who enroll in Medicare Parts A and B, buying Medigap insurance is a good choice -- unless you enroll in a Medicare Advantage (MA) plan. Medicare has substantial deductibles and copayments, and you can easily spend thousands of dollars each year for out-of-pocket medical expenses. Medigap insurance provides coverage for these "gaps" in your Medicare coverage and can save you money.
Monthly costs for Medigap plans currently range from $50 to several hundred dollars, depending on the type of Medigap plan you choose and where you live.
While I hate to repeat myself, it's absolutely necessary to purchase such a plan, especially in the event you haven't read my previous posts on this topic and have no plan in place. It is critical that you do your homework when shopping for this coverage because premiums and plan features can vary substantially. Medigap plans come in 10 standardized policies, lettered A, B and C, all the way up to N. Each Plan A has the same features, each Plan B has the same features, and so on. Once you select the type of plan suitable for you, you can then compare the premium costs among different insurance companies.
Depending on your circumstances, you may need certain features that not all the plans offer. For example, some Medigap plans offer emergency coverage while you're traveling overseas, while other plans do not. Choose the plan that provides exactly what you need. The more services the plan covers, the higher the premium.
You might also be eligible to buy. If that's the case, investigate the premium costs and the policy's treatment of prescription drugs. You might find it more advantageous to enroll in your employer's plan for both Medigap and prescription drug coverage. Another consideration is that while your employer can help you if there are claim disputes, you're on your own if you buy a Medigap plan, and if a dispute arises, it's just you against a big insurance company.
It should be noted that Medigap plans no longer cover prescription drugs, so if you purchase Medigap, you'll also have to buy Part D coverage (prescription drug coverage).
You'll have to weigh Medicare Advantage (MA) against enrolling in traditional Medicare Parts A and B and buying a Medigap policy. Medicare Advantage combines Medicare Parts A and B, often covers Part D and typically covers some of what you normally pay for Medicare's deductibles and co-payments.
The advantages of MA plans:
- They offer the convenience of getting all your coverage from one source.
- MA plans have the potential for lower premiums than the total you'd pay for Part D and Medigap plans combined.
- Some MA plans provide benefits not covered by Medicare, such as dental, vision and wellness.
The disadvantages of MA plans:
- You might be restricted to the doctors and hospitals in the plan's network.
- If you choose to go to a doctor outside your network, you might have to pay 100 percent of the cost.
- You may need to make a co-payment each time you receive medical treatment.
As part of your homework, compare the features and premiums of the MA plans in your area to what you'll get by enrolling in Medicare Parts A, B, and D and buying a Medigap plan separately. And make sure you live in the geographic area covered by the MA plan you're considering. If you have favorite doctors or specialists, check to see if they're in the network.
If you plan to select Medicare Advantage, however, you won't need Medigap insurance because that would duplicate your coverage. Learn the pros and cons of buying Medigap insurance as a supplement to Medicare as opposed to buying a MA plan.
There are rules that determine the date of enrollment in a MA plan and the point at which you can switch to regular Medicare Parts A and B. You can't make the switch anytime you feel like it, so read up on the regulations before you make any decisions.
Determining whether to obtain coverage from traditional Medicare plus Medigap plans or enroll in a MA plan that combines coverage will take time. There are many software tools available that can help you shop and compare plans. Be aware that these tools all have various sponsors with different points of view. You may want to start with the tools offered by Medicare and other nonprofit organizations that advocate for seniors. It's well worth your time to do the research and try out different tools. You'll learn a lot by investigating their individual recommendations.
Stay tuned for my fourth and final post this week on obtaining medical insurance after age 65, where I'll cover budgeting for premiums and expenses not covered by Medicare and medical insurance.
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