Medicare was established in 1965 to give older citizens a way to obtain healthcare. It especially had retirees in mind who were no longer in the work force receiving medical coverage benefits from their employer. Medicare does not cover everything though and does leave some coverage gaps. In order to cover those gaps, Medicare supplemental insurance, also known as Medigap, was made available.
It is estimated that the average couple would face close to $250,000 in medical expenses that are not covered by Medicare. This is why 90% of Medicare recipients have elected to sign up for one of the available Medicare supplemental insurance plans.
Unlike Medicare, Medicare supplement plans are sold by private insurance companies. They are regulated by the state governments, but not issued by the government. There are 10 standardized plans available in 47 of the 50 states. Wisconsin, Massachusetts, and Minnesota are the lone exceptions. These three states have elected to create their own Medigap plans. That means outside of these three exceptions, if you are buying a California Medicare supplement, you will be afforded the same coverage as a consumer buying the same Florida Medicare supplement.
Because the plans are standardized, no matter which insurance carrier you elect to do business with, your coverage is going to be identical. Medigap Plan A from Mutual of Omaha is going to give you the same health coverage as Medigap Plan A issued by Aetna. When shopping around for a policy, once you decide on which plan is best to fit your needs, you really are simply comparing prices and the quality of service offered by the different insurers.
I do want to emphasize that last part. While price is important, it should not be your overriding deciding factor. A cheaper price bundled with lousy service and constant difficulty in doing business is going to leave you wishing that you had chosen a different insurance provider, no matter how much money you are saving.
In order to be eligible for a Medicare supplement plan, one must already participate in Medicare Part A and Medicare Part B. These policies only cover one person. If a couple wishes to have coverage, each spouse will need to purchase their own policy.
The best time to sign up for a policy is within six month of turning 65 and enrolling in Medicare Part B. This is the Medigap Open Enrollment period. During this timeframe, you cannot be turned down for coverage. There is also no health screening. The policy must cover all pre-existing health conditions at the same premium that a healthy individual would pay. In other words, someone who has been a pack a day smoker for the past 25 years is going to pay the same amount for their plan that a non-smoker would pay, even though in reality they are a much bigger health risk.
If you do not sign up during this time, you could be refused for coverage in the future or face higher premiums for pre-existing health conditions.
It is also important to note that Medicare supplement policies only work in conjunction with Original Medicare. If you are enrolled in a Medicare Advantage Plan, you do not need a Medicare supplement.