At a recent social event, as so often happens, the conversation turned to Medicare. An acquaintance mentioned that, since he has long-term care (LTC
LTC
) insurance, he doesn’t need a Medigap policy.
His comment reminded me of some of the misconceptions I’ve heard about Medigap policies. If these are not clarified, Medicare beneficiaries can make some regrettable mistakes.
Misconception #1: Part B is a supplement.
A Medigap policy is the one and only Medicare supplement; Part B is medical insurance, the outpatient component of Medicare.
There is a valid reason for this confusion. In the 1960s, when Medicare became law, Part B was called Supplementary Medical Insurance (SMI). That’s likely because medical care in those days was very hospital-based. Over time, as medical care shifted to outpatient delivery, Part B services became more important, and Medicare Supplement Insurance (commonly known as Medigap policies) came into being. Somewhere along the line, Medicare.gov eased Supplementary out of the everyday title and now refers to Part B as medical insurance.
Bottom line: When you have a Medigap policy and need outpatient services, your costs will be limited. For example, those who have Plan G will pay only $226 this year (the Part B deductible) for Medicare-covered services.
Misconception #2: Long-term care insurance can take the place of a Medigap policy.
A Medigap policy only pays for medically necessary services that meet the coverage criteria for Part A, hospital insurance, and Part B, medical insurance. If Part A or Part B pays for a service, the Medigap policy will also pay its part. For example, Part B pays 80% of the cost for outpatient care and a Medigap policy covers the remaining 20%.
Medicare does not cover long-term care, so a Medigap policy won’t pay for any of the services. Bottom line: A LTC policy is not a substitute for a Medigap policy. Without a Medigap policy, those who choose Original Medicare will face unlimited costs. And, without some type of coverage for long-term care, you’re responsible for the costs.
Some Medicare Advantage plans offer daily maintenance benefits, services such as personal care aides, meals, and transportation. However, the plans cover these services, not Medicare. Check the plan’s Evidence of Coverage for details.
Misconception #3: A Medigap policy can supplement a Medicare Advantage plan.
No, a Medigap policy works only with Original Medicare, Part A and Part B. Those who elect Medicare Advantage are responsible for the cost sharing, including deductibles, copayments and coinsurance.
Plus, it is illegal for an insurer to sell a Medigap policy to someone who has a Medicare Advantage plan.
Misconception #4: Medicare Advantage plans supplement Medicare.
I have seen websites that say Medicare Advantage is supplementary insurance. Supplementary means completing or enhancing something. That is what a Medigap policy does for Original Medicare Part A and Part B.
Most Medicare Advantage plans provide Part A and Part B services and Part D, prescription drug coverage. A person must enroll in Part A and Part B before electing Medicare Advantage but then that becomes his or her Medicare.
Bottom line: Medicare Advantage is an all-in-one package, an alternative, not a supplement, to Original Medicare.
Misconception #5: Medicare Advantage and Medigap are one in the same.
By now, it should be clear that these are two separate and distinct types of coverage. When enrolling in Medicare, a beneficiary has the opportunity to pick the Original Medicare package that is Part A, Part B, a Medigap policy, and a Part D drug plan, or a Medicare Advantage plan with prescription drug coverage. Take time to study each option and determine what will work best for you.
With all the alternatives and possibilities available, it’s possible for you to design a program that will truly meet your needs while giving you the least amount of grief in the long-run. It might take some time and patience, but the tools are there. Just avoid the misinformation and misconceptions.