“You Shall Love Your Neighbor As Yourself” (Leviticus 19:18)
|Medicare is one of the most important government benefits for seniors.
But the Medicare program is complicated, and there are important decisions that every Baby Boomer needs to make. And, the wrong decision may create irreversible harm later in life.
The reason seniors need to make decisions is that Medicare does not pay all medical expenses.
Without supplemental coverage, medical bills can still bankrupt families.
What does Medicare pay?
Medicare pays approximately 80% of covered medical bills (hospital and doctor visits).
However, many services are not covered, and there is no limit on co-payments and deductibles.
So, if you are like me and have large annual medical bills you can still be on the hook for massive co-payments and deductibles.
And, this is where Medigap insurance plans (and prescription drug coverage) comes into play.
What is Medigap (also known as Medicare Supplement Insurance)?
Private insurance companies sell Medigap insurance and the objective of these plans is to plug gaps in traditional Medicare coverage so that seniors are not faced with large medical bills.
Typically, Medigap plans limit financial exposure to co-payments, co-insurance, and deductibles.
Medigap insurance plans also expand certain covered services beyond Medicare (such as travel outside the U.S.).
Is Medigap the same as Medicare Advantage?
Medicare Advantage plans are essentially HMOs and PPOs that take the place of Medicare.
Medicare Advantage plans are generally less expensive than a combination of traditional Medicare and a good Medigap plan.
But, seniors that sign up for Medicare Advantage give up a great deal of choice, i.e., they are required to use doctors and medical facilities in the applicable Medicare Advantage network.
If the network provides inadequate care, seniors have little recourse. And, to the extent seniors travel, coverage is even more limited.
The biggest problem with Medicare Advantage Plans is the likely waiver (for life) of pre-existing condition protection!!
Everyone that qualifies for Medicare is granted “guaranteed issue rights.”
This means Medigap insurance companies cannot deny coverage or charge more because of past or present health problems, i.e., preexisting conditions.
But, there is a catch:
YOU MUST MAINTAIN CONTINUOUS QUALIFYING MEDIGAP COVERAGE TO MAINTAIN GUARANTEED ISSUE RIGHTS.
With minimal exceptions, Medicare Advantage Plans are not qualified Medigap plans and will result in you losing pre-existing condition protections.
This means if you sign up for a Medicare Advantage Plan, you are most likely waiving, for life, protections against pre-existing conditions.
So, why do people sign up for Medicare Advantage Plans?
Medicare Advantage Plans are inexpensive.
But, sometimes inexpensive means cheap, and unfortunately, many Medicare Advantage Plans are just that…cheap.
Medicare Advantage Plans are generally offered and sold by for-profit companies and agents that are motivated by maximizing profits and self-interest.
As a result, salespeople often don’t mention the disadvantages of Medicare Advantage Plans or the long-term consequences.
So, what should Baby Boomers do?
Generally, Baby Boomers should keep traditional Medicare, sign up for Medigap coverage (and make sure it never lapses), and also purchase a Medicare prescription drug plan.
There are exceptions to this advice, and everyone needs to consider their individual circumstances and needs.
However, before dropping Medigap coverage, please consider the potential lifetime waiver of pre-existing condition protections and understand this decision may come back to haunt you later in life.