By Mark Miller
Tribune Media Services
Say hello to M and N, and goodbye to E, H, I and J. The letters are part of the alphabet soup used to name Medigap insurance policies-an important tool for capping the out-of-pocket health care costs you can face in traditional Medicare.
Insurance companies sell Medigap policies to supplement Medicare's basic coverage. Typical policies cover deductibles and co-insurance for long hospital stays, and outpatient services. Medigap pricing varies by region and policyholder age, but the benefits offered are standardized nationally using a series of alphabetical labels for plan types.
In 2008, Congress approved changes to the program that become effective on June 1 this year. New M and N plan choices will be introduced, and E, H, I and high-deductible J plans will no longer be sold. At the same time, some new core benefits are being added to all of the plans.
The changes stem from the Medicare Improvements for Patients and Providers Act (MIPPA) of 2008, which encouraged modernization and streamlining of the Medicare marketplace.
If you have one of the plans that will no longer be sold, you can keep it. But ask your insurance carrier if it's possible to switch to a different plan; you might be able to buy a policy better suited to your needs. And, Medicare experts warn that premiums for the phased-out plan letters may rise over time as their pools of insured individuals shrink.
"The law allows insurers to let you change policies but they're not required to do it," says Mike Klug, senior program director for training for the Health Assistance Partnership, a non-profit Medicare education organization. "Check with your insurer to see if you have an opportunity to switch without (answering questions about your health)."
If you're enrolling in Medicare this year, timing is everything. As a rule, it's always best to buy a Medigap policy during your open enrollment period, which runs for six months and starts on the first day of the month in which you are age 65 and enrolled in Medicare Part B (outpatient services). Insurance companies are required under the law to sell you a policy during open enrollment. They can't exclude pre-existing conditions, or charge a higher premium due to past health problems.
All Medigap plans insure against the risk of high out-of-pocket Part A and Part B co-insurance costs. For example, if you're hospitalized in 2010, you'll pay a $1,100 deductible for the first 60 days; after that, you'd pay a daily fee afterward that starts at $275 and moves up from there. A Medigap policy covers you for those daily charges.
Beyond that basic coverage, Medigap plans provide escalating levels of coverage-and higher premiums-as you move through the alphabet of options. Generally, it's best to buy the most comprehensive coverage that you can. "Insurance all about risk," says Paul Gada, personal financial planning director at Allsup, which provides counseling on Medicare services. "You should evaluate your level of risk tolerance and your prospective health care needs."
The E, H, I and J plan terminations are aimed at getting rid of duplicative coverage and benefits that aren't relevant in light of other changes in Medicare in recent years. For example, the plans have a preventive care benefit that pays $120 per year, which pre-dates preventive benefits that have been added to Medicare coverage in the last 20 years, including screening mammograms, pap tests, bone density screening.
Meanwhile, the new M and N plans are being added to introduce some flexibility in the percentage of gaps that are covered, and to introduce several significant new benefit options. Plan M covers 50 percent of the Part A inpatient hospital deductible, but doesn't cover the Part B deductible. Plan N offers 100 percent coverage for Medicare's Part A inpatient deductible.
Another new feature for all Medigap plans is a Part A hospice cost-sharing benefit. This covers the 5 percent co-insurance charge for drugs, and also five days' worth of respite care to give family caregivers a break in their duties. There's been some talk that the new M and N plans will be less costly than existing plans, but Klug says the jury is still out. He also notes that prices can vary widely. "You can find a $500 difference in annual premiums for the same basic product," he says.
If you're shopping for a plan, your state insurance commissioner probably offers a Medigap rate comparison guide. Or, contact your State Health Insurance Assistance Program (SHIP), a government-sponsored counseling service for Medicare beneficiaries. To find the SHIP near you, visit http://www.hapnetwork.org/ship-locator/.
Millions of Americans are reinventing retirement, and Mark Miller is helping write the playbook for new career and personal pursuits of a generation. Mark blogs at www.retirementrevised.com; contact him with questions and comments at firstname.lastname@example.org
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This was printed in the April 25 to May 8, 2010 edition.