Some People Won't Be Able to Enroll in a Medigap Plan, or May Have to Pay More. Here's What You Need to Know.
As you approach age 65, there's a big decision you need to be thinking about: which Medicare plan to sign up for in your later years. And there's a key reason why it's so vital to make the best healthcare decisions for yourself.
According to Fidelity, a 65-year-old person retiring in 2023 could expect to spend $157,500, on average, on medical and healthcare expenses throughout retirement. That doesn't even include long-term care, over-the-counter medications, and most dental services. A married couple should assume an average cost of $315,000. (Figures for 2024 will probably be released in June.)
Those are average numbers, though, so you'll probably end up paying more or less than that $157,500, and the kind of healthcare coverage you have can make a big difference in how much you must pay out of your pocket. Medigap plans are a particularly important part of Medicare to consider carefully as you make decisions.
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Medicare in a nutshell
Here's a quick refresher course on Medicare. When you enroll in it, which you can and typically should do as you approach age 65, you get to choose either "original" Medicare, which features Part A (hospital coverage) and Part B (physician/medical insurance), or a Medicare Advantage plan, sometimes referred to as Part C. Those who sign up for original Medicare typically add Part D prescription drug coverage and sometimes a "Medigap" supplemental coverage plan, too.
Got it? You're probably going to go with Parts A, B, D, and a Medigap plan, or you'll opt for a Medicare Advantage plan. There are pros and cons to both choices. For example:
Original Medicare lets you see almost any doctor in the U.S., and you'll often pay only 20% of various costs, with Medicare paying the other 80%. That can be great, but not if you end up with, say, massive hospital costs. (Medigap plans can cover these costs, though.)
A Medicare Advantage plan caps your out-of-pocket costs and generally offers dental, vision, and hearing coverage, as well. But to enjoy its low costs, you'll be restricted to using providers and facilities within your plan's network. And some Medicare Advantage plans have been criticized for denying certain care for members.
A big danger
Given this information, you can probably see that it's a tricky choice between the two options, as each offers some compelling features. Know that if you choose original Medicare, you can always switch to a Medicare Advantage plan later, during the annual open enrollment period. You can also switch from a Medicare Advantage plan back to original Medicare.
But there's a potentially costly catch: You may be denied the opportunity to sign up for a Medigap plan, or you may have to pay more for it or accept certain limiting terms.
If you sign up for a Medigap plan from the get-go, when you initially sign up for Medicare and choose original Medicare, the insurance companies that sell Medigap plans must accept you no matter what pre-existing conditions you have and must charge you their best rate. That's not the case if you're trying to switch into a Medigap plan later.
If you're worried about this potential problem, know that it's not always the same from state to state, so check with your state's State Health Insurance Assistance Program or State Department of Insurance to ask what rights your state might confer on residents regarding Medigap.
Due diligence is needed
Clearly, there's a lot to think through, and probably some numbers to crunch. Remember that even if you're quite healthy now, you might still develop a costly condition later in life, or may need expensive prescription medications. Try to estimate how much you can afford to pay out of pocket and let that help guide you in your deliberations.
Know that there are many Medicare advisors -- often referred to as agents or brokers -- out there, too, some of whom offer guidance for free. You can also call Medicare itself at 1-800-MEDICARE for help.
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