New to Medicare - Signing Up for a Medigap/Medicare Supplement Plan

Once eligible for Medicare, there are two Medicare plans types to consider - Medicare Advantage or Original Medicare combined with Medigap (also called a supplementary plan, or supplement). These two options are similar in that they are two different ways of covering many of the same services. There are four key criteria to consider when choosing a Medicare plan type:

1. Difference between Original Medicare and Medicare Advantage

Option one is Original Medicare (i.e. Medicare Part A + Medicare Part B), which is run by the federal government and covers basics like hospital services (Part A) and doctors’ visits (Part B). It is called Original Medicare because it was the first type of Medicare program created. Adding the optional Part D plan to Original Medicare covers prescription drugs; adding a Medigap plan ( supplemental coverage) covers the cost gaps in Original Medicare. This article reviews how Original Medicare combined with Medigap compares to Medicare Advantage.

Option two is the Medicare Advantage (MA) plan, which is a privately managed alternative to government-run Original Medicare. A Medicare Advantage plan covers all of the services of Original Medicare and typically includes Part D (drug coverage). This plan may offer additional services that Original Medicare does not cover (such as dental, hearing or vision coverage).

Example: The choices between Original Medicare and Medicare Advantage are similar to a gym membership. Original Medicare is like a monthly membership, while the Medicare Advantage is similar to paying per class. Using this example, a monthly gym membership maybe $50 a month and an exercise class could be $10 for a class. A monthly approach is a flat fee, but the per-service structure could be higher or lower than the flat fee depending on personal use. Medicare Advantage plans charge by the visit, much like paying per exercise class. With Original Medicare + Medigap, the Medigap policy charges one set price per month, like a monthly gym membership.

2. Advantages of choosing Original Medicare combined with a Medigap policy (versus Medicare Advantage)

The most significant advantage is that it provides a better fit for individuals with ongoing medical issues. Purchasing a Medigap policy within 6 months of starting Part B at age 65 or older, the insurance agency cannot reject the application for any reason. Having a history of cancer or a recent diagnosis of heart disease, chronic obstructive pulmonary disease (COPD), diabetes, or another chronic condition that will require frequent doctor visits, may indicate a Medigap policy is a better fit. The monthly payment will be the same every month, no matter how many doctor visits occur -- so a Medigap policy may reduce total costs. This can be especially helpful when trying to diagnose a new health condition and need to seek second opinions.

Original Medicare offers more flexibility with treatment options.

Choosing a Primary Care Physician (a requirement of some Medicare Advantage plans) is not a requirement. The plan allows the patient to see any physician who accepts Medicare. Conversely, Medicare Advantage plans are more restricted in terms of the provider networks they work with. Individuals in rural and isolated areas may have difficulty finding MA plans that work with their local healthcare services.

Medigap has 10 types of policies that each pay for the same things, which makes comparing costs relatively simple. These 10 policy types are used all over the country, making decisions easier when moving to another state. Medicare Advantage plans differ by state and often go by different names depending on the state.

3. What are some of the disadvantages of choosing Original Medicare combined with a Medigap policy (versus Medicare Advantage)?

The main disadvantage is it is more expensive. Medigap plans can be two to three times the cost of an Medicare Advantage plan. There are also more details to consider. With Original Medicare, a Part D drug plan and Medigap there are three cards to keep track of and two monthly bills to manage. There are more decisions to make and sometimes too many choices can be a burden. Medicare Advantage plans are designed to navigate the system, contain costs and increase communication. Many people value having a Primary Care Physician (common with many these plans) to take charge of some of the decisions and find the appropriate specialists.

To get drug coverage, a Part D plan needs to be selected, which can be challenging but a Medicare Advantage plan includes drug coverage. If selecting a Medicare Advantage plan, ensure that plan covers all existing prescriptions at an affordable price.

4. What if I sign up for a Medigap policy and then change my mind? Can I drop it and just use Original Medicare, or switch to a Medicare Advantage plan?

Both options are available. When purchasing a Medigap policy, there is a 30-day trial period. It is allowable to switch within 30 days one type of Medigap policy to another – or cancel it and get a refund. After the first 30 days, the Medigap policy can still be cancelled but not refunded. To cancel the Medigap policy, contact the insurance company.

If Medicare Advantage is preferred, it is possible to switch from a Medigap policy to Medicare Advantage during the annual 7-week Medicare Open Enrollment period from October 15 through December 7. During this time, anyone with Original Medicare can switch to a Medicare Advantage plan. It is important to also cancel the Medigap policy as it does not work with the Medicare Advantage plan.

For more information on plans, consider discussing these options with a licensed Medicare benefits adviser. They can be accessed for free by taking our Questionnaire, created by the nonprofit National Council on Aging or call your local State Health Insurance Assistance Program (SHIP) for federally-funded Medicare counseling. Seeking professional advice (and doing research upfront) can make a huge difference to both health and finances for years to come.

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