Time and time again, the biggest concern I hear from seniors and those approaching retirement is how to pay for health care.
For seniors, a key source is Medicare, the federal program for people age 65 and older.
But Medicare doesn't cover everything.
What the government pays in benefits doesn't always cover what the doctors and hospitals charge, said Bob Moos, spokesman for the Centers for Medicare & Medicaid Services. People with traditional Medicare must pay deductibles and often 20 percent of the cost of their doctor visits and tests.
Those out-of-pocket expenses can add up. To bridge the gap, you can buy Medigap insurance, also known as Medicare Supplement Insurance.
Medigap insurance helps pay some of the health care costs or gaps that Medicare doesn't cover.
There's one important distinction to make: A Medigap policy isn't the same as a Medicare Advantage Plan, which is a health plan offered by a private insurance company that contracts with Medicare. Prescription drug coverage, hospital insurance and medical coverage are included.
Not everyone should consider buying a Medigap policy, Moos said. You don't need to supplement your Medicare coverage if you're on Medicaid or signed up for a private Medicare Advantage plan or enrolled in a group health plan through an employer or former employer.
There are 10 kinds of Medigap plans, so you can choose which gaps you'd like to fill.
Each plan is labeled with a letter, from A through N. All insurers selling a particular kind must offer the same package of benefits.
All 10 Medigap health plans cover these basic benefits: co-insurance for extended hospital stays, co-insurance for doctor visits and outpatient services, co-insurance for hospice care, and the cost of the first three pints of any blood you might need.
Beyond those fundamental benefits, different Medigap plans pay for other out of-pocket expenses, like the coinsurance for skilled nursing care, the hospital deductible, the outpatient deductible, and the cost of medical emergencies while traveling outside the country, Moos said.
Because each standardized Medigap policy must offer the same basic benefits, cost is usually the only difference among policies.
Here's how to shop:
COMPARE PREMIUMS: Although insurers must offer the same benefits within a certain kind of plan, there can be big differences in their premiums, so it's smart to shop around for the best price, Moos said.
For example, annual premiums for a nonsmoking 65-year-old for Plan F, the most popular Medigap plan, range from $1,097 to $4,030, according to the Texas Department of Insurance. Your premium will depend on your individual circumstances.
Each insurance company decides how it will set a Medigap policy's premium, so ask how an insurance company prices its policies.
Medigap policies can be priced in three ways:
• Community-rated. That means that generally, the insurer charges the same monthly premium to everyone regardless of age. However, premiums may increase because of inflation and other factors.
• Issued-age-related. The premium is based on your age when you buy the Medigap policy. Premiums are lower for people who buy when they're younger and won't change as you age. But prices may go up because of other factors.
• Attained-age-related. The premium is based on your age and rises as you get older. Premiums may be the least expensive at first, but they can eventually become the most expensive. They may also go up because of other factors.
Beyond researching the initial price, find out how often an insurer has raised premiums.
That's the second-biggest piece they should focus in on, said Chris Renfro, owner of Next Generation Insurance Services in Dallas, a health insurance brokerage company. What is the historical rate increase of that policy from year one to year two to year three and on up? What's their philosophy on rate increases?
An insurance broker would have that information.
ACT PROMPTLY: If you're buying a Medigap policy, be sure to do it within six months of turning 65 and enrolling in Medicare's Part B medical insurance.
During that time, insurers can't refuse to sell you a policy, or charge you more than other people, because of a health problem, Moos said. If you try to buy after those six months, there's no guarantee an insurer will cover you.
It's also wise to read your Medigap policy as soon as you receive it. If you're not satisfied, you have 30 days to return it and get a full refund. Otherwise, you can keep your insurance as long as you pay your premiums.
• The Centers for Medicare & Medicaid Services provides information on Medigap as well as a database to find a policy in your area. www.medicare.gov/medigap
• Medicare and the National Association of Insurance Commissioners have developed a comprehensive guide to buying a policy called Choosing a Medigap Policy: A Guide to Health Insurance for People With Medicare. You may call Medicare toll-free at 1-800-633-4227 and request a free copy or find it at www.medicare.gov/Pubs/pdf/02110.pdf