Why You Need Both Supplementary Insurance and Medicare

May 7th 2016
While Medicare Parts A, B and D all provide extensive coverage, their benefits are not completely comprehensive. That's why many people buy supplemental insurance policies. This insurance, nicknamed Medigap, offers additional benefits to reduce your out-of-pocket costs. While you'll have to pay a separate premium for this type of coverage, the government guarantees your acceptance during open enrollment.
It's important to know that you won't qualify for supplementary insurance if you're enrolled in a Medicare Advantage plan. Medigap policies are only for patients enrolled in Medicare Part A and Part B. However, Medicare Advantage plans should provide coverage that is similar to many supplemental insurance plans. Also, many people qualify for supplemental insurance for previous military service or from a prior employer. Accepting these plans, instead of purchasing a Medigap policy, is often the most cost-effective option.
Hospitalization and Medicare Part A
Medicare Part A insurance covers lab work, hospitalizations and surgery for treating a specific condition or disease. If you need specialized medical equipment, like a wheelchair, Medicare Part A will also help cover the expense. Medicare Part A policies must also provide benefits if you must visit a nursing home or hospice.
However, copayments, deductibles and co-insurance fees are not covered by Medicare Part A. That means, depending on the length of your stay, you could have substantial out-of-pocket costs. Medigap policies will often cover a portion of your deductible and co-insurance. All Medigap policies will also pay for the first three pints of blood you need for a transfusion, extend your hospital benefits and cover the co-insurance for an additional 365 days after Medicare ends.
Outpatient Care and Medicare Part B
Preventative services and other outpatient treatments are covered by Medicare Part B. When you have the flu and decide to see a doctor, the doctor bills a portion of the cost of the visit to Medicare Part B. Although the majority of the costs for most doctor visits will be covered, sometimes you'll be responsible for co-insurance payments, copayments and the deductible.
All Medigap policies are required to pay for the co-insurance and copayments not covered by Medicare Part B. Depending on the supplemental insurance policy you choose, Medigap may also pay part or all of the deductible.
Prescription Drug Coverage and Medicare Part D
While some Medigap policies once provided coverage for prescription drug fees, they are no longer allowed to enroll new members. Instead, the government provides its own drug insurance coverage through Medicare Part D. Medicare Part D can be paired with Original Medicare, Medicare Private Fee-for-Service Plans, Medicare Cost Plans and Medicare Medical Savings Account Plans to help you save on prescription drug costs.
Once you have a Medicare Part D plan, you should expect to pay regular premiums. When you use the benefits provided, you can also expect to pay co-insurance and have your coverage subject to an annual deductible. If the cost of your prescription drugs is unmanageable under your current income, you may qualify for Extra Help coverage. This program, which is part of Plan D, is estimated to be worth about $4,000 per year.
Unique Supplemental Insurance Benefits
Medigap policies often pay a portion of the deductible, co-insurance and copayments required by Medicare Parts A and B, but they also provide coverage in areas that these government plans overlook. One of the most significant benefits available from some policies is overseas coverage. If you intend to travel out of the country, it's essential that you have some type of insurance in case of an emergency. Although travel agencies often sell medical insurance to travelers, good supplemental insurance is often less expensive and more comprehensive for frequent adventurers.
While supplemental insurance is not required, the government only guarantees that you can buy a Medigap policy during open enrollment periods. This open enrollment period lasts for six months and begins during the month you turn 65 or when you enroll in Medicare Part B. If you wait to buy insurance, you may be denied coverage or your premiums could be substantially higher.
Many people skip Medigap coverage, but it can provide some useful and unique benefits. If you're concerned about prolonged illness and the effect it could have on your finances, you should consider purchasing supplemental insurance. Also, if you've dreamed about globetrotting during your retirement, Medigap policies could offer you necessary coverage.
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