Uncertainty about medical costs and bills can ruin retirement. Since Medicare is the health insurance coverage most Americans rely on in retirement, it’s important to have a sound understanding of how it works and how much it costs. Knowing these facts will help you make a plan for protecting yourself against the impact of medical costs in retirement. One of the products available to help with these expenses is Medicare Supplement Insurance. Read this article to learn more about the true costs of Medicare, and how Medicare Supplement Plans in South Dakota work.
As mentioned in the introduction, high medical costs in retirement can be a major cause of anxiety, and while it may be tempting to assume that Medicare will cover you fully, that would be a mistake. Medicare won’t cover all of the costs you experience. It will pay for most of the cost for your care, but the parts that are not covered can be significant.
The expenses that you’ll face in Medicare can be thought of as gaps in your coverage, or missing pieces. In other words, Medicare covers everything except for these missing pieces. These costs include:
The thing you most need to understand about these expenses is that there is no cap on them. Unlike other health insurance that you’ve had in the past, which came with an annual limit on your spending (an Out of Pocket Maximum), Original Medicare does not protect you from runaway medical costs. You pay these costs all year long; it doesn’t matter how much you’ve already spent during the year.
While most of the costs you’ll face in an average year are fairly small, the costs for hospitalization or cancer treatments can be large and uncomfortable. Because people are not comfortable having an unknown and uncapped liability hanging over their heads, they often turn to Medicare Supplement Insurance for protection.
Medicare Supplement Insurance (also called Medigap coverage) is a private, additional coverage that works with your Medicare benefits. It doesn’t change your basic Part A and Part B benefits in any way. In this way, it’s much different from Medicare Advantage coverage, which is actually an alternative to Medicare. Instead, with Medigap, you get an additional layer of coverage that directly limits how much you spend on medical care when using your Medicare coverage.
In a certain sense, Medigap plans are very simple. They do one job: pay for some (potentially all in certain cases) of the costs that you would normally have to pay when you use your Medicare benefits. That's all they do; they don’t provide any direct medical benefits on their own. They simply stand between medical bills and your wallet, protecting you from high medical spending.
On the other hand, there are definitely elements of complexity when it comes to the total number of options available and the rules relating to eligibility and enrollment into these plans.
Medigap plans are regulated by the federal government as well as by the individual states. Federal law has established certain rules that all Medigap plans must follow in a basic way. On the state level, South Dakota is one of 47 states that have created standardized Medicare Supplement Insurance plans. In these states there are a total of 12 standardized Medicare Supplement Plans available. Each of these 12 plans, which are named by letter (Plans A, B, C, D, F, G, K, L, M, and N, plus two high deductible versions), has its own unique level of coverage. Each one covers a unique number and arrangement of the gaps in Medicare.
When we say that the plans are standardized, we mean that each of the individual Plans (A, B, C, ect.) has the exact same level of coverage in each of the 47 states. This is true regardless of which insurance company you buy your coverage from (there are dozens of insurers that offer Medigap in South Dakota). This feature makes it very simple and easy to compare plans and choose one based on the level of coverage you want.
You use your Medigap Plan in conjunction with your Medicare benefits, so you’ll pay for your care with both of your insurance cards. Assuming that you’ve already hit the Part B deductible, Medicare will pay for 80% of the cost for your provider visits. Your provider will bill the other 20% to your Medigap Plan. Depending on which standardized Supplement Plan you chose, your Plan will pay most (or all) of the balance. In a Part A situation, like if you’re admitted to the hospital, most Medigap plans pay for the entire Part A deductible on your behalf. The exceptions are Plan A, which doesn’t cover it at all, and Plans K, L, and M, which only cover a portion of the Part A deductible).
Anyone who is enrolled in Parts A and B of Original Medicare is eligible for Medigap coverage. In most cases, people have this right when they turn 65 years old. In this case, they will have an Initial Enrollment Period during which they can claim their Medicare benefits. Once they have their Medicare number they can enroll in the Plan of their choice.
For people who delay their Part B benefits because they work past age 65, they have the ability to get it whenever they retire or lose their coverage. Once they add Part B, they’ll have their chance to get Medigap coverage, too.
Others actually enter Medicare before age 65 when they meet certain disability or illness guidelines. Federal law allows each state to set its own rules about Medigap coverage for people under 65; there is no requirement that Medigap Plans cover those under 65. Medicare Supplement Plans in South Dakota are required to cover people under 65. However, while the state does limit the cost for this coverage, it can still be much more expensive than for people who enroll in Medigap at age 65.
This enrollment period starts only when you are age 65 or older and also enrolled in Part B. In South Dakota, there is a second Open Enrollment Period for people who get Medicare before age 65. It lasts for six months.
Yes, you can apply for Medigap coverage at any time (there are no enrollment periods like for other Medicare plans). However, if you apply outside of your Open Enrollment Period, your acceptance may be based on your health history, and your application could potentially be declined.
Yes. This can be done during the Medicare Annual Election Period from October 15th to December 7th.
No. You should consider adding separate coverage for these services.
No. If you choose to use Medigap, you’ll need to also add a separate Part D drug plan.
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