Medicare Supplement Insurance -- Part 3

Welcome back to the final post of this series on Medicare Supplements or Medigap Policies. In Part 1 we reviewed original Medicare, and in Part 2 we examined some of the general features of Medicare Supplements and the companies that offer them. Now let us turn to the plans themselves.

As we noted previously, there are currently 15 different plans to choose from; and they are designated with the letters A through L. The availability of these plans will vary from state to state and from company to company. However, all companies carrying any Medicare Supplements must carry Medicare Supplement A.

Medicare Supplement A is the basic supplement. It contains the core benefits that are also part of nearly all the other supplements, so it is worth taking a closer look at Supplement A in order to identify these core benefits. Medicare Supplement A pays for the following gaps in original Medicare:

1. Your first 3 pints of blood. Under original Medicare you pay 100% for these out of your own pocket.
2. Your co-pays for hospitalization between 60 days and 90 days. Under original Medicare you pay these co-pays each day you are in the hospital. Currently, the rate is $267 per day or more than $8,000 for the period; but the rate usually increases annually.
3. Your co-pays for hospitalization between 90 days and 150 days. Under original Medicare you pay these co-pays each day you are in the hospital. Currently, the rate is $534 per day or more than $32,000 for the period; but the rate usually increases annually. Also, please note that these are original Medicare's Lifetime Reserve Days, which means that you only get to use them once in your lifetime.
4. Your Part B co-insurance of 20% of Medicare's approved charges. Under original Medicare you pay this 20% of approved charges for any covered medical services received including outpatient treatment such as visiting your doctor.
5. 100% of your Part A hospitalization costs for an additional 365 Lifetime Reserve Days. Under original Medicare you pay 100% of these costs.

As you proceed further through the alphabet of Medicare Supplements, you will add to the benefits detailed above. For example, by the time you reach Medicare Supplement C you would have the following benefits in addition the the ones mentioned above:

1. Payment of the inpatient skilled nursing co-pays for days 21 through 100. Under original Medicare you pay these co-pays each day you are in a skilled nursing facility. Currently, the rate is $133.50 per day or more than $10,000 for the period; but the rate usually increases annually.
2. Payment of the Part A deductible. Under original Medicare you pay this deductible for any hospital stay between 1 and 60 days. Currently, the deductible is $1,068; but it usually increases annually. Additionally, due to Medicare's flexible benefit period you could pay this deductible up to 5 times per year. It is not an annual deductible.
3. Payment of the Part B deductible. Under original Medicare you pay this annual deductible for any covered medical services received including outpatient treatment such as visiting your doctor. Currently, the deductible is $135; but it usually increases annually.
4. Payment for foreign travel emergency. Under original Medicare you pay 100% of the costs for any emergency medical treatment that you may receive outside the United States of America. This Medicare Supplement C benefit will pay 80% up to 60 days of care after you pay a $250 deductible. However, there is a $50,000 lifetime limit to this benefit.

The next high-water mark is Medicare Supplement F. It covers all the core benefits of Supplement A and the additional benefits of Supplement C. To these it adds one more benefit -- 100% payment of Part B excess charges. At a glance this may seem a rather nominal difference from Supplement C. However, it carries more weight than it might appear because if you are billed excess charges; then under original Medicare you pay 100% of them. Please see Part 1 of this series for a more complete description and example of excess charges.

For a number of reasons, which no doubt include its excellent coverage (100% of Medicare approved charges plus 100% of excess charges plus foreign travel emergency), Medicare Supplement F has been popular. In fact, Supplement F has been so popular that there are currently 3 versions of it. The first is the standard version outlined above. The second is a high deductible version (Supplement J has a high deductible version as well.) that begins to cover expenses as outlined above only after you incur $2,000 in covered services. However, the third one is da bomb!

Medicare Supplement Innovative F is perhaps the most appropriately named of the supplements. In addition to providing the excellent coverage of the standard F, Medicare Supplement Innovative F pays 100% up to $800 per year for the following preventive benefits:

1. 100% up to $500 per year for preventive dental including oral exams once per 6 months, bite wing radiographs annually, complete series of panorex radiographs once per 3 years, dental prophylaxis once per 6 months, diagnostic casts once per 2 years, and extraoral radiographs twice per year.
2. 100% up to $100 for an annual physical exam.
3. 100% up to $100 for an annual vision exam.
4. 100% up to $100 for an annual hearing exam.
5. Free telephone access 24 hours per day and 7 days per week to a registered nurse by way of a nurse advice hot-line.

Of course, under original Medicare you pay 100% of the costs for any of the above services. There are only 2 disadvantages to Supplement Innovative F. The first is that in some states you may be required to pay a $5 co-pay for an office visit to a doctor. The second is that it can be hard to find an agent offering a Supplement Innovative F. Probably because it is one of the newer Medicare Supplements, it is not yet widely carried. However, I know of at least one nation-wide company that does carry it. If you would like more information, then please contact me. Although this blog is not for plugging insurance companies, I am always happy to provide whatever assistance I can to those searching for more information.

After Medicare Supplement Innovative F the benefits do not necessarily get more complete but rather emphasize particular areas. For instance, Supplement G offers less coverage than Supplement F (although the coverage is still very good) but has the advantage of $1,600 per year for at home recovery benefits. Medicare Supplement K, for another example, offers a significantly lower premium in exchange for increased cost-sharing in the skilled nursing, Part A deductible, and other co-insurances.

Hopefully, this post (as well as the series) will be helpful to you if you are trying to navigate the Medicare maze for yourself or for a loved-one. Please feel free to contact me if I may be of service to you. Unfortunately, it is difficult if not impossible to anticipate every question about Medicare Supplement Insurance, and post it in this blog; but I am available to answer more specific questions as they arise.

Medicare Supplement Insurance -- Part 2

In Part 1 of this series of posts we briefly reviewed original Medicare. In this post we will examine Medicare Supplement Insurance. Medicare Supplements or Medigap Policies are provided by private insurance companies and are designed to work with original Medicare. Therefore your first consideration should be to select a company because any policy is only as good as the company behind it. Existing customers are great sources of information about how well insurance companies are performing.

Another factor to consider is when the company was established. Of course, original Medicare did not begin until 1966; so you are not necessarily looking for a firm established a century ago. On the other hand, you probably don't want to find yourself being insured by an organization with less insurance experience than your grandchildren have life experience.

Especially in this economy, financial stability is important. Fortunately, there are agencies that do all the leg-work for you. Independent rating companies such as A.M. Best provide helpful ratings of many insurance companies' financial stability. Obviously, you don't want a policy from a company that cannot pay its claims. Finally, you should consider customer service. Even the best plans run into problems occasionally. Does the company offer live or automated customer service? Is there a local office? Do you have a local agent from that company?

On this note, I feel compelled to make a side-note regarding brokers. I know many people like working with brokers because they feel that a broker will get them the lowest premium for any particular type of plan. This is undoubtedly true in most cases. However, there is a downside to working with brokers; and that is customer service. Allow me to illustrate this point with my own personal dealings with a broker.

Many years ago my wife and I took out a life insurance policy with a friend, who also happens to be an independent and successful broker. Over the years due to various business interests our broker changed which companies he represents -- as is the way with nearly all brokers. Unfortunately, that left us without any local representation because, although the underwriting company is a large one, it now has no local agents, offices, or brokers in our area. Our friend, who was nearly as frustrated with the situation as we were, could only offer to change us to another life policy with a different company. All of this would have been avoided if my wife and I had done a little homework to see if the underwriting company had local agents or offices; but, alas, we were young and ignorant of such things at the time.

Now my situation is relatively benign even if annoying because it is life insurance, but imagine yourself in the same situation with your medical insurance. Perhaps you suffered a sudden stroke or accidental injuries. You are receiving daily mail and calls from the hospital about unpaid bills. When you call your insurance broker, are you going to be happy with a "Sorry to hear that. I stopped associating with that company years ago. (Didn't I mention it to you?) But, hey, I got this great new plan that you're gonna love?"

The bottom line is that brokers are paid to sell insurance -- period. Their independence disconnects them from the underwriting companies in a very real way. None of this is to say that brokers are bad people. On the contrary, the few I have met are helpful and kind persons. It's just that when you have a problem with your insurance, being able to speak to an agent of the company you are insured with or being able to visit a local office is definitely worth a couple extra bucks of premium. But I digress.

Medicare Supplement Policies are secondary coverage to Medicare Parts A & B. Depending on the supplemental plan you choose, it may pay

• Some or all of your deductibles and copayments.
• Some or all of your Medicare Part B excess charges.
• Emergency healthcare while traveling outside the U.S.

If you are enrolled in Medicare Parts A & B and continue to pay your Part B premium (which is currently $96.40 per month for most people), then you are eligible to enroll for a Medicare Supplement. Open enrollment begins with enrollment in Medicare Part B; however, you can switch or enroll in a Medicare Supplement without any medical underwriting up to six months before or up to six months after your enrollment in Medicare Part B. After that window of opportunity, you generally have to pass medical underwriting; so it is important to choose wisely when you have the chance, which brings us to the final and salient point of this post.

Currently, there are 15 Medicare Supplement plans to choose from designated Supplement A through Supplement L. Although 'A' through 'L' are only 12 letters, some plans have multiple versions such as High Deductible J or Innovative F. In the 1990s Medicare standardized all Medicare Supplements, which had two main effects on them.

The first is that all prescription drug coverage was removed from Medicare Supplements. This means that Medicare Supplements are strictly health care. Of course, you can still get prescription drug coverage via a stand-alone plan, which most serious Medicare Supplement companies offer to their customers.

The second main effect of standardization is that the benefits of each plan are exactly the same no matter what company offers the Medicare Supplement. This means that a G plan, for instance, will cover your medical costs in the same manner whether it's from Mega Insurance, Inc. or from Joe's Corner Insurance Shop.

Of course, there may be significant differences in other ways such as premiums, rate increases (How much, and how often?), is the policy guaranteed or collectively renewable. For example, a guaranteed renewable policy means that it cannot be terminated by the insurance company as long as you pay your premiums. It doesn't matter how old or sick you may become. Other renewing arrangements may leave the door open for the insurance company to cancel your policy.

There are a host of other factors to consider as well, but it is beyond the scope of this post to treat each one. I am happy to entertain questions; but your best option is to educate yourself the best you can, talk to existing customers whenever possible (especially those who have had to use their insurance), and talk to insurance agents.

Insurance agents -- especially ones dealing with Medicare -- had to study quite a bit and pass a fairly stringent exam to get their license. Additionally, they have continuing education requirements to maintain their license and are generally on the cusp of information about insurance in order to provide the best customer service possible and better compete. Stay tuned for Medicare Supplement Insurance -- Part 3 where the final installment of this series will examine specific Medicare Supplements and try to help you pick out the best one for you.

Long Term Care in New York Times

"My friend M. — you’ll understand in a moment why she’s terrified of my using her name — had to make a searing decision a year ago. She was married to a sweet, gentle man whom she loved, but who had become increasingly absent-minded. Finally, he was diagnosed with early-onset dementia.
The disease is degenerative, and he will become steadily less able to care for himself. At some point, as his medical needs multiply, he will probably need to be institutionalized.
The hospital arranged a conference call with a social worker, who outlined how the dementia and its financial toll on the family would progress, and then added, out of the blue: “Maybe you should divorce.”
“I was blown away,” M. told me. But, she said, the hospital staff members explained that they had seen it all before, many times. If M.’s husband required long-term care, the costs would be catastrophic even for a middle-class family with savings.
Eventually, after the expenses whittled away their combined assets, her husband could go on Medicaid — but by then their children’s nest egg would be gone, along with her 401(k) plan. She would face a bleak retirement with neither her husband nor her savings.
A complicating factor was that this was a second marriage. M.’s first husband had died, leaving an inheritance that he had intended for their children. She and her second husband had a prenuptial agreement, but that would not protect her assets from his medical expenses.
The hospital told M. not to waste time in dissolving the marriage. For five years after any divorce, her assets could be seized — precisely because the government knows that people sometimes divorce husbands or wives to escape their medical bills." -- excerpt from Until Medical Bills Do Us Part, Nicholas D. Kristof, The New York Times, 8/29/2009

Although Mr. Kristof confuses health care with long term care and therefore comes to a hopelessly flawed conclusion, his account of his friend's story does highlight the many difficulties faced by those needing long term care and their families. Unfortunately, the editorial utterly ignores the existence of Long Term Care Insurance, which would have protected his friend's assets, marriage, and dignity. For more about Long Term Care Insurance, please see the previous entries in this blog. Coming soon -- part 2 of Medicare Supplement Insurance.