The Independent Investor: 'Watch the Gap Please'

If you haven't realized it by now, Medicare has a lot of "gaps" in its coverage. In order to close that gap, various private insurance companies offer plans that cover a lot of out-of-pocket costs — for a price.

Bare-bones Medicare coverage can leave you with some steep medical bills. As we discussed in our last column, if you are admitted to the hospital, for example, your first bill will tally $1,216 or more, which is the deductible you pay just for being admitted. After that, you pay 20 percent of the fee for every doctor visit, lab test, MRI, X-Ray and on and on. Remember, too, that there is no yearly limit for what you may have to pay beyond your basic Medicare Part A and B coverage.

Depending on which plan you choose, a Medigap plan will pay some or all of these expenses. Some plans will pay the coinsurance for hospital stays; others could pay for the coinsurance expense for outpatient care. Other plans pay for additional costs like Part A and B deductibles, coinsurance for nursing care, and even emergency care outside of the U.S.

As you might expect, the most comprehensive plans have the highest monthly premiums, although once you pay that premium, your insurance company pays everything else. That means you pay nothing for that quarterly medical checkup, that emergency room visit, or admission to the hospital.

Here in Massachusetts, you have a guaranteed right to buy any Medigap policy sold in your area, beginning on the first day of the month after turning the age of 65. You do have to be enrolled in Medicare Part B to qualify. Those Medigap insurers cannot deny you coverage or charge you a higher premium due to existing health conditions. In most cases, Medigap will cover a pre-existing condition immediately, but some policies will delay coverage of out-of-pocket expenses for the first six months. Any doctor that accepts basic Medicare coverage will also accept your Medigap insurance.

There is another option called Medicare Advantage. These plans offer all your Medicare coverage benefits in one package plan. Hospital care, medical care and prescription drugs are covered. Some plans even cover vision and dental care plus other services. Most Medicare Advantage plans also provide financial protection. They place a limit on how much you pay out-of-pocket per year. Under this program, you share in the costs of your health care by paying co-pays or coinsurance. After you pay up to the plan's out-of-pocket limit, the Medicare Advantage plan pays 100 percent of all your medical costs. One caveat, though; it does not include your prescription drug costs.

Under Medicare Advantage plans, you will pay less if you receive care from doctors, hospitals and other providers that participate in the plan's network.  Each plan will build different networks of medical providers who provide quality care. There is a "star" quality rating that ranks these plans and naturally the higher the stars, the more customers they get.

As with Medigap, Medicare Advantage Plans provide consumers an array of choices. How do you choose? First, you check to see if your doctors are on the insurance company's plan  and which hospitals each plan offers. Make sure your physical therapists and pharmacy are also on the plan. If none or some of the above are not listed, would you be willing to switch in order to save money?

Some more questions you might ask are: does the plan you are considering provide good coverage of the health services you use now, or what you may use in the future? Does the plan cover all the existing drugs you need and what are the co-pays? Do you need or want extra benefits such as vision or dental?

Finally, figure out how much you will have to pay per month and year for the medical benefits each plan offers. That means the premium, deductible, co-pays, coinsurance and out-of-pocket expenses. Remember while making your decision, a plan with a low premium might not be the best bet if the co-pays are higher for certain services you use frequently.

Note: Several weeks of Mr. Schmick's columns in January & February disappeared into the ether on their way to iBerkshires. They are being back posted to the dates on which they should have appeared.

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires.  Bill's forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.