COLUMN: How to avoid costly overinsurance with Medicare

This was a Medicare beneficiary with an unusual circumstance, one that very likely had an interesting story behind it. Although the beneficiary’s situation was rare, it nevertheless contained lessons for many people who have (or soon will have) Medicare.

Simply put, this beneficiary was wildly (and expensively) overinsured.

Based on honorable military service, he had both medical and prescription drug insurance through the Veterans Administration. Besides that, he had a Medicare supplement (Medigap) insurance policy costing him far more than $300 per month.

He made an appointment with a Senior Health Insurance Benefits Assistance (SHIBA) volunteer counselor because, he said, the insurance policy had become “way too expensive.” He said he had the policy in case he needed a service outside of the VA, such as urgent care.

If all he wanted was access to auxiliary services such as urgent care, the SHIBA counselor told him, he could enroll in a premium-free Medicare Advantage insurance plan. Twelve such zero-premium plans are available to Marion and Polk county residents.

But let’s consider worst case – that is, suppose in the future he loses the VA medical coverage. Were that to happen, and if the beneficiary wanted robust insurance, he almost certainly could again enroll in a Medigap policy. If he had a pre-existing health condition he would probably pay a premium surcharge, but he could shed that around his next birthday by using Oregon’s Medigap birthday rule.

And the lessons? These are among them, with one or more applying to persons with Medicare:

  • If you are about to enroll in Medicare, review all the insurance options. In the story above, it’s possible that the beneficiary didn’t know that he could enroll in low- or no-premium insurance for the few non-VA services he wanted.
  • Regardless of what kind of Medicare insurance you have — Medicare Advantage or Medigap — check occasionally to see if you could save money by enrolling in the same level of insurance with a company that offers a lower premium. Just by doing that, the beneficiary cited here could have saved $160 monthly with the insurance type he had.
  • If you have a Medigap Plan F policy, you’ll almost certainly realize net financial savings by changing to Medigap Plan G.

If you would like to make an appointment with a SHIBA volunteer Medicare counselor, or to ask a question to be answered here, please see the end of this column. 

I’ve heard that some Medicare insurance will pay your Part B premium. Can this be true?

It’s partly true, although this benefit may be less generous than your question suggests. The Medicare Part B monthly premium this year is $174.70, and a handful of Medicare Advantage insurance plans will pay a portion of that.

In reviewing such plans, be sure to ask questions to ensure that you aren’t giving up something important in exchange for a partial Part B premium reduction. For example:

  • One such plan refunds $50 a month. However, the plan delivers no coverage for prescription drugs. Most Medicare beneficiaries want such coverage either because they take prescription drugs or, if not, because they want to avoid a late-enrollment penalty later. (An exception is a beneficiary who has VA drug benefits, and can therefore skip other drug coverage without risking a late-enrollment penalty.)
  • Another insurance plan refunds $24 a month of the Medicare Part B premium. However, that plan has an $8,850 ceiling on your annual out-of-pocket cost for medical expenses. The maximum out-of-pocket expense is as low as $3,450 with another plan, and ceilings of $4,500 to $6,000 are common. The $8,850 ceiling may be fine if you don’t expect high medical costs, or if you can afford to self-insure, but you want to make an informed decision.

On this subject, it’s worth pointing out that Medicare beneficiaries with limited incomes may avoid the Medicare Part B premium altogether.

An individual would be eligible for that benefit with a gross monthly income not exceeding $1,715, and a couple with a monthly income not exceeding $2,239. This benefit has no assets test. To apply, call Oregon’s Aging and Disability Resource Connection at 503-304-3420.

A surprisingly high percentage of eligible Medicare beneficiaries don’t apply for this benefit. 

Jim Sellers of Salem is a certified Medicare counselor with the Senior Health Insurance Benefits Assistance (SHIBA) program. To ask a question to be answered in this column, e-mail [email protected]. To schedule a free SHIBA phone, Zoom or in-person appointment with a volunteer Medicare counselor, call 800-722-4134.

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