Medicare was designed in 1965 to provide senior citizens and those with certain disabilities with affordable health care funded by the American public. The plan is currently divided into four different plans that include Part A, Part B, Part C, and Part D. While Medicare does a very good job of providing a great deal of affordable coverage to roughly 45 million Americans, it is not a perfect system and there are times that individuals will be forced to pay out of their own pocket to cover their health related costs.
Medicare Part A and Part B are designed to provide eligible beneficiaries with coverage for general health care related to hospitalization (Part A) and regular doctor visits for preventative care (Part B). While Part A comes with no monthly premium for eligible individuals, the coverage only goes so far on providing help when paying for hospital related expenses and those that occur from subsequent stays in skilled nursing facilities or other rehabilitative centers. Costs not covered by Part A include the following:
- Daily co-pays for hospital stays beyond 60 days
- Daily co-pays for stays in a skilled nursing facility beyond 20 days
- Coinsurance costs
- Annual deductible for services rendered
Medicare Part B is required for those who are enrolled in Medicare Part A (though individuals may pass on it if they are willing to pay a penalty). Unlike Part A however, Part B does have a monthly premium payment that must be made out of pocket by the beneficiary. Other costs that beneficiaries face under Part B coverage include:
- Deductible (on some plans)
- 20% of the cost of services after deductible amount is met
Medigap policies, also referred to as Medicare Supplemental Insurance, are designed to help eligible beneficiaries cover the out of pocket costs that exist in the “gaps” in Medicare’s coverage. However, Medigap policies are not all inclusive and come with extra costs of their own. Medigap policies are sold by private insurance companies that are contracted through Medicare to sell approved policies. In order to purchase Medigap insurance, an individual must have Medicare Part A and Part B. In addition to paying the monthly premium for Part B coverage, beneficiaries must pay a monthly premium for their Medigap policy.
Medigap insurance is governed by Federal and State laws that are designed to protect beneficiaries. Medigap providers offer as many as 12 different Medigap plans, named Medigap Plan A through Plan L. Plan A offers the most basic service and comes at the lowest price while Plan L offers the most benefits but has the highest monthly premium. Each policy in the list offers slightly more than the plan below it, but a little less than the plan above it. Policies offered by private insurance companies must be clearly defined as “Medicare Supplemental Insurance” and the number of Medigap policies offered can vary as private insurance companies can decide not to offer all 12 policies.