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Retirement: Medicare and Medigap

medic

Over the next few years, a number of our clients and friends will become eligible for Medicare. Amazing how time marches on.

With this in mind, we thought it might be helpful to provide a brief review of Medicare and some information on Medicare supplement plans (sometimes referred to as "Medigap" plans). We asked one of Charleston's experts on the subject, Vasco Pickett, of Franklin & Associates, Inc. to help us with these details.

Medicare. Medicare is a health benefits program administered by Centers for Medicare & Medicaid Services (CMS). The program helps with the cost of health care, but does notcover all medical cost or the cost of most long-term care. For a complete description of Medicare go to www.medicare.gov and click on Medicare and You 2010.

Medicare has four parts:

Part A (Hospital insurance) - helps pay for inpatient care in a hospital and some skilled nursing facility care (following a three day hospital stay), some home health and hospice care. For 2010 there is a $1,100 deductible for a hospital stay or up to 60 days. Additional charges will be incurred for longer stays. Physicians' bills are not coveredunder Part A.

Part B (Medical insurance) - helps pay for physicians' services and other medical services and supplies that are not covered by hospital insurance. For 2010 there is a $155 annual deductible and then Medicare pays 80% of approved services.

Part C (Medicare Advantage plans) - People with Part A and B can select to receive their care through one of private provider organizations.

Part D (Prescription drug coverage) - Assists people who have Part A or Part B with the costs of medications that are filled at your local pharmacy.

To be eligible for free Part A you must be 65 and eligible to receive Social Security benefits or railroad retirement benefits. If age 65 you may also qualify through your spouse, if they are eligible. You may also be eligible if disabled and meet the requirements of the Social Security disability program.

Anyone who is eligible for Part A can enroll in Part B by paying a monthly premium.Most new enrollees in 2010 are paying $110.50, but higher income individuals (greater than $170,000 on a joint return in 2008) pay more.

You can enroll in Medicare during the 7 month period (3 month before, the month of, or 3 months after the month of your birthday by contacting Social Security (1-800-772-1213). Your coverage becomes effective the 1^st day of the month of your birthday unless your birthday is on the 1^st and then it becomes effective the 1^st of the previous month.

Medicare supplement plans (often referred to as "Medigap") are offered by private insurance companies to supplement Medicare coverage (i.e. the $1,100 hospital deductible, the $155 Part B deductible and the 20% for part B services). Medicare prescribes the benefits for each of these 12 plans (a few states have some exceptions). An insurance company does not have to offer all 12, but the plans they offer must adhere to those benefits dictated by Medicare. Thus, the benefits provided by a Plan F will be consistent for all companies.

Premiums vary by the plan's benefits, the company and region of the country. The monthly premium for a non-smoking female for the most popular Medigap policy, Plan F, is approximately $120.

Things to consider in selecting a plan:

The amount of premium you are willing to pay.
The benefits you want.
The reputation and financial stability of the company offering the plan.
The acceptability of the plan by your healthcare providers.

Thanks, Vasco.