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Do My Parents Need a Medicare Supplement Plan?

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Summary: Having a Medicare Supplement insurance plan can result in no charge for certain outpatient and inpatient services once your premiums and deductibles are met. Medicare Supplement insurance plans also protects your parents from Original Medicare’s lack of out-of-pocket maximum.

If your parents are on a fixed income, medical expenses can be a huge concern. For some people, one serious illness or injury could be financially devastating, even if they have Medicare. If that’s a possibility for your parents, they should definitely consider a Medicare Supplement Insurance Plan.

What does a Medicare Supplement insurance plan cover?

There are up to 10 Medicare Supplement insurance plans currently available in some states. Each covers a different combination of out-of-pocket costs under Part A and Part B. Each Medicare Supplement insurance plan pays 100% of Part A coinsurance costs, including an additional 365 days after Medicare benefits are exhausted.

Medicare Supplement insurance plans all cover between 50% and 100% of:

  • Part B coinsurance and copayment amounts
  • Part A hospice coinsurance
  • first three pints of blood

This means that after the Part B deductible, your parent may have no charge for:

  • emergency room visits
  • ambulance services
  • urgent care
  • outpatient lab/x-rays
  • outpatient surgery

From there, the plans cover some or all of the Part A deductible, skilled nursing facility coinsurance, and Part B excess charges. Some even include benefits for foreign travel emergencies. Depending on the plan you choose, your parents could get first-dollar coverage which means the plan pays the very first time they need care.

Plans that pay the Part B deductible are being phased out as of January 1, 2020. If your parents buy a Medicare Supplement insurance plan C or Plan F, the two plans that cover the Part B deductible, they’ll be allowed to keep it. No new Plan C or Plan F policies can be sold after December 31, 2019.

One thing a Medicare Supplement insurance plan does not cover, however, is prescription drug costs under Part D. With the exception of foreign travel, Medicare Supplement insurance plans only cover expenses under Medicare Part A and Part B.

Is there an out-of-pocket maximum with Medicare if my parents don’t have a Medicare Supplement Plan?

Unfortunately, there is no limit to what your parents could have to pay out-of-pocket with Original Medicare. In the case of a major illness such as a heart attack or stroke, your parent’s costs could be several thousand dollars.

If your parents choose to get Medicare coverage through a Medicare Advantage plan, however, they are protected by an annual out-of-pocket maximum. The government sets an annual limit for Medicare Advantage plans, but plans can set their out-of-pocket max anywhere up to government limit. It makes sense to shop plans and compare monthly premiums, deductibles, copayments, and out-of-pocket maximums before your parents decide between Original Medicare with a Medicare Supplement insurance plan or Medicare Advantage.

Keep in mind that even though most Medicare Advantage plans include Part D coverage for prescription drugs, out-of-pocket prescription drug costs don’t generally count toward the plan’s out-of-pocket maximum. Part D prescription drug costs fall into a different coverage system. Once your parents reach a certain amount in medication costs, they fall into catastrophic coverage and their prescription drug costs go down significantly.

How much does a Medicare Supplement insurance plan cost?

You do pay a separate monthly premium for Medicare Supplement insurance plans. These are actually private insurance plans, so premiums are set by the individual insurance company. Because basic benefits are standardized, it’s easy to comparison shop once you find the plan that best suits your parents’ needs. Plan C with one company has essentially the same benefits as Plan C with another; the main difference is in premiums and the reputation of the insurance company offering the plan.

Pay attention to how the plan is rated, or priced, because this can have a dramatic effect on premiums. A Medicare Supplement insurance pan can either be community rated, issue-age rated, or attained-age rated:

  • Community rated plans charge everyone the same premium regardless of age. Premiums typically go up based on inflation and other operating costs.
  • Issue-age rated plans base premiums on your parents’ age when they buy the plan. They may go up each year for inflation and other costs, but not dramatically.
  • Attained-age rated plans increase premiums as you get older. Premiums typically start lower than community rated or issue-age rated plans, but go up quickly the older your parents get. These plans tend to be the most expensive over time.

Generally speaking, you pay more for a comprehensive Medicare Supplement Insurance Plan like Plan C or Plan F, and less for basic coverage plans like Plan A. Some plans have a high-deductible option that offers comprehensive coverage once your parents pay a certain amount out-of-pocket. These plans are a compromise between basic plans offering catastrophic coverage and more costly “first-dollar” plans.

If your parents decide to go with Original Medicare and a Medicare Supplement insurance plan, make sure they think carefully before switching to a Medicare Advantage plan later on. Your parents have guaranteed issue rights during the Medicare Supplement Open Enrollment Period when they are first eligible, but once they drop coverage, they may not be able to get it back if they aren’t happy with Medicare Advantage. Insurers may look at your parents’ medical history and pre-existing conditions before selling them a plan if they don’t have guaranteed issue rights.

To look for a Medicare Supplement plan in your area, enter your zip code on this page.

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