• Understand Supplemental Health Insurance
• Learn About Programs for People with Low Incomes

If you want to stay in original Medicare, you may want to look into your options for supplemental coverage. Without such coverage, your out-of-pocket costs could be high if you require medical care. Supplemental insurance helps pay the deductibles and coinsurance costs that original Medicare does not cover.

You may be able to get supplemental insurance from a former employer or union (retiree coverage). If not, you can buy Medicare supplemental insurance (Medigap) directly from an insurance company. Depending on your income and savings, you may also qualify for Medicaid.

Retiree Health Coverage

As a rule of thumb, if you can get supplemental retiree coverage from a former employer or union, you should. Retiree policies are often more generous than Medigap. They also may be cheaper than Medigap policies, since employers tend to pay at least part of the cost. If you are not yet on Medicare, find out what benefits you may be eligible for from your employer when you go on Medicare and ask how these benefits coordinate with Medicare.

If you want to buy a Medicare supplemental insurance policy, known as Medigap, you must decide which benefit package to buy and which insurer to use. Before making a decision, you should clearly understand what benefits are covered and how to compare plans. 

There are 12 different standardized Medigap plans, labeled A-L (except in Massachusetts, Minnesota and Wisconsin). Not all plans are available in all areas. Each Medigap plan pays for a particular set of benefits.

Plan A offers the fewest benefits and is usually the least expensive of policies sold. The most popular Medigap plans are C and F because they cover major benefits. Some Medigap plans offer limited coverage of prescription drugs, long-term custodial care at home or in a nursing facility, vision and dental care, hearing aids, or private duty nursing.

Plans H, I, and J are typically the most expensive and prior to 2006, included some prescription drug coverage. These plans are no longer being sold with drug coverage since the Medicare drug benefit went into effect, but those enrolled prior to 2006 can remain in them, either with or without drug coverage. However, it is important to note that the drug coverage offered by Medigap plans H, I, and J is not considered to be as generous as the Medicare drug benefit, which could result in a late enrollment penalty if you decide to sign up for a Medicare drug plan in the future (see the Medicare and Prescription Drug section for more information). 

Medigap plans K and L have high deductibles meant to cover catastrophic costs. Compared to Medigap options, these plans are designed to provide more protection when you are very sick and include less coverage of your initial expenses. For example, neither plan covers the Part B deductible and both cover all hospital inpatient costs. The first plan covers 50% of anything else you owe under Medicare Part A or Part B, and it pays for everything after you reach an annual out-of-pocket limit of $4,620. The second is similar, but covers 75% of your cost-sharing and everything after you spend $2,310 in one year. In exchange for paying a high deductible, your monthly premium should be lower.

The cost of your Medigap policy depends on the type of Medigap plan you choose, the company from which you buy it, and the cost of Medigap plans in the state where you live. Once you have chosen the plan you want, it pays to shop around. Plans with the same letter name offer the same benefits, but the premiums vary from company to company. If you buy your Medigap policy during your open enrollment period or other federally mandated times, your premium cannot vary based on your health status.

No insurance policy fills gaps in coverage for Medicare HMOs or any of the other Medicare private health plans. Should you select an HMO, PPO, or other type of plan, you should budget for any costs that the plan doesn't cover.  Many have a cap on the annual out-of-pocket costs that you are required to pay.

For free assistance with understanding your options, contact your local SHIP (see Additional Resources). More information about Medigap plans can be found at: www.medicare.gov/mgcompare/home.asp.

¹Plan H, I, and J policies no longer provide prescription drug coverage.  However, policies that were purchased prior to the January 2006 start of Medicare Prescription Drug Benefit may continue to provide drug benefits.

Do Your Medigap Homework

After you have chosen a Medigap plan, you must select an insurance company that sells it. The following four steps will help you decide wisely.

1. Call the insurance department in the state where you live for a list of companies that offer Medigap. Compare the premiums; they may vary a lot and may rise at different rates each year.
   
2. Understand how premiums are calculated and how they will change as you get older. Policies that base their annual premium on age (attained age policies) may seem like a good deal when you are 65 but may be far costlier than other policies by the time you turn 75.
   
3. Determine whether the Medigap insurer has arranged for Medicare to file Medigap claims automatically. Automatic claims filing can save time and headaches.
   
4. Check the insurer's reputation with your state insurance department. Generally, companies rated "A" or better are reputable.

Plan for Medigap Enrollment

Once you turn 65, you can sign up for any of the twelve Medigap plans (A-L) during a six-month open enrollment period. Once you are enrolled, the Medigap insurer must renew your policy for life, as long as you pay your premiums. If you miss a premium payment, you may risk losing your coverage.

Under federal law, once your open enrollment period ends, Medigap insurers can refuse to offer you a Medigap plan because of your age or health status. However, you may have special protections if you want to buy Medigap because you or your employer drop coverage. State laws on Medigap consumer protections differ. For example, some states give you the right to buy a Medigap policy at any time, regardless of your health or age. You should check with your state’s insurance department about your Medigap rights and protections.

Find out about programs for low-income people on Medicare. Many low-income people on Medicare are eligible for financial assistance under Medicaid, but they do not apply.

Learn About Programs for People with Low Incomes

Like millions of seniors, you may be living on a limited income and unable to afford supplemental insurance. If so, you may be able to get assistance from Medicaid or a Medicare Savings Program. If you qualify, you could save hundreds of dollars on your monthly Medicare Part B premiums. You might be able to save even more if you qualify for additional Medicaid benefits, such as long-term care.

Below are some of the basic rules for programs that exist for people on Medicare with low incomes. To get additional information about whether you may qualify for full Medicaid benefits or one of the Medicare Savings Programs in your state, contact your state Medicaid program (see Additional Resources). Another option is to use the online tool provided by the National Council on Aging (www.benefitscheckup.org). 

Medicaid Benefits to Supplement Medicare

Medicaid is a federal and state program that covers medical care for people with low incomes. The Medicaid program varies a great deal from state to state. Each state has its own way of determining eligibility depending on your age, family size, medical condition and financial situation.

If you receive cash assistance under the Supplemental Security Income (SSI) program, you are eligible for full Medicaid benefits. To receive SSI, your income cannot exceed $637 a month in 2008 ($956 per couple) and your assets must be less than $2,000 ($3,000 per couple). Some states allow people with Medicare to have higher monthly incomes to be eligible for Medicaid (up to $867/individual and $1,167/couple in 2008).

If you have a higher income, but fairly high medical or long-term care expenses, you may qualify for Medicaid if your state has a “spend-down” program for the medically needy. For more information, contact your state Medicaid program (see Additional Resources).

 Medicare Savings Programs: Qualified Medicare Beneficiary Program (QMB)

Called QMB for short, this program is for people whose income is at or below 100% of poverty (up to $867 a month for singles, and $1,167 a month for couples in 2008) and whose savings are limited (up to $6,000 for singles, $9,000 for couples in 2009). For those who qualify, the state will pay Medicare premiums and may pay some or all of the deductibles and coinsurance.

Medicare Savings Programs: Specified Low-Income Medicare Beneficiary Program (SLMB)

The Specified Low-Income Medicare Beneficiary (SLMB) program pays Medicare's Part B premiums for people whose income is between 100% and 120% of poverty (up to $1,040 a month for singles, $1,400 a month for couples in 2008) and whose savings are limited.

Qualifying Individual Program (QI)

The QI-1 program pays Medicare's Part B premiums for people whose income is between 120% and 135% of poverty (up to $1,170 a month for singles and $1,575 a month for couples in 2008) and whose assets are limited (some states do not have an asset test for QI-1).

To learn more about these programs or to apply, contact your local Medicaid office (see Additional Resources).