What Medicare and Homebuilding Have in Common

Owning a home is one of the American Dreams. Homes, like fashion, change with the times. Homes built in the 1960s and 1970s, for example, had low ceilings, while homes built in the 1980s having higher ceilings. Over the years, people have modified their homes, putting additions on, upgrades, landscaping, etc., all of which increase (we hope) its value. When purchasing a home, a buyer will usually have it inspected to make sure that everything is in working order with no uneven floors, faulty appliances, or plumbing leaks. Medicare is like an old house. Started in July of 1965, it was a nice program designed to help an aging population. Over the years, however, it started looking a little worn.

Last week we looked at Medicare and saw that the four parts of the program are lettered. The first two parts (A and B) covered hospitalization and doctors, respectively. The biggest difference between Medicare and the coverage you had before getting Medicare is one of ceilings. With pre-Medicare plans, you typically pay a portion of your medical care up to a certain amount (called Out-of-pocket—see Health Care Matters, Vol 2 - The ‘Ins and Outs' of PPO Plans) and then the insurance company takes over up to the policy maximum (a low ceiling on your costs). With Medicare, you also have upfront costs. But that is where the similarity ends. After Medicare pays a certain amount, they stop paying (NO ceiling on your costs). The burden of paying any expenses at that time falls onto you.

So how can you limit your expenses (or upgrade Medicare)? You have two options, you can purchase a Medicare Advantage Plan (which actually takes the place of Medicare) or you can purchase a Medicare Supplement (or Medigap) policy. Medigap policies are additional insurance that plugs the gaps left by Medicare. You can choose to plug all the holes, or just some of them. The cost is dependent on how many holes you choose to plug. As you can imagine, this could get complicated. To help people keep track of these plans, the federal government came up with a system that every private insurance company has to follow if they want to market Medigap plans. That system allows certain combinations of plugs to be put into packages. To differentiate between the plans, the government lettered each design. (If you live in Massachusetts, Minnesota or Wisconsin, you have specific plans that are allowed in your state that may not be part of the lettered system). Every insurance company that markets a Medigap policy only has to offer the "Basic" plan called Plan A (Except MA, MN or WI). The important thing to remember is that every plan A has to be the same between companies. In fact, EVERY plan design, has to be the same between companies. That means that if The Widget Insurance Company sells Plan E, it has to be the same as every other company's Plan E. This makes it easier to decide between plans. Since every plan A thru L has to be the same as every other company that sells that plan, then once you settle on a plan design, it's simply a matter of picking the company that has the lowest premium (providing they are a quality company). Currently there are 14 plan designs.

Did you catch that? Before I get e-mails telling me that the letter L is the twelfth letter, let me tell you that Medicare allows two plans, F and J, to have a higher-deductible option for a total of 14 different options for your Medigap policy needs. They are identical to regular Plan F and Plan J except that they have a higher amount that you need to pay before the plan kicks in and they have a separate $250 deductible for Foreign Travel Emergencies. It is extremely important to choose the plan you want the first time around and in a timely manner. You have a limited amount of time to choose a plan from the time you are eligible to be guaranteed coverage. You can switch at a later time, but only if you qualify health-wise. Also, it is illegal to have more than one Medigap policy.

Confused yet? For more help, you can go to the Medicare site at www.medicare.gov. You can view or download Publication #02110, 2008 Choosing A Medigap Policy: A Guide To Health Insurance For People With Medicare. There you can find a chart that illustrates the plan designs in an easy-to-read chart form.

Just as Do-It-Yourselfers have found it easier to upgrade their home with all the cable shows, how-to books, knowledgeable home store personnel, you too can upgrade your Medicare policy so that you won't be left with high health care bills if you understand how they work and what to look for. Next week we'll take some of the mystery out of the benefits included in the Medigap policies.

Until next time, stay healthy!