Yesterday a reader asked, “My local hospital said that it would only accept a select 4 Medicare Supplements. Is this legal?”
Since I am not a lawyer and do not understand all the various state laws, I cannot comment on the legalities that are involved. All I can do is direct you to call you state department of insurance if you want to know if something is legal in your state.
However, what I can do is share my suspicions on what is causing the confusion for this reader. Here is what I would say.
Medicare Supplement insurance, a.k.a. Medigap, pays the portion of your medical bills that Medicare does not. Most people who buy it do so because Medicare B, the part of Medicare that pays for doctor visits and outpatient treatment, has no limits on how much you could potentially be charged.
After you pay your nominal annual deductible, Medicare B will pay 80% of Medicare approved charges for your health care. That means that you will pay 20% of your healthcare bill.
If your doctor bills for the year are only $1000 then you will pay $200 for your health care. However, if your doctor bills are $10,000 for the year, you would pay $2000.
That is the case if you elect to use a doctor who accepts what Medicare pays as payment in full. Some doctors do not.
If a doctor does not accept Medicare’s approved amounts as payment in full for his services, he has the option to charge you up to 15% more for your health care.
When that happens, Medicare will still pay the doctor 80% of the Medicare approved amount for your health care. However, you must pay your doctor the additional 20% of Medicare’s approved amount plus the 15% “Excess Fee.”
If you do not have the appropriate Medigap plan to go along with your Original Medicare, you would be personally responsible for, as much as, 35% of your doctor’s bill.
The most recent numbers that I have seen indicate that the average American, who reaches age 65, will accumulate $220,000 of medical bills. If all their health care is done in the doctor’s office or as outpatient treatments, they will pay at least $44,000 out of their retirement savings for what Medicare B does not pay.
However, occasionally people have conditions that require them to be admitted to the hospital. Those bills are covered by Medicare A.
Medicare A has a relatively large deductible that you have to pay each time you are admitted to the hospital. However, after you pay your deductible, Medicare will pay all of your hospital expenses.
Just keep in mind that under Medicare’s current system, your hospital charges are paid under Medicare A but your doctor’s bill is still paid under Medicare B even while you are in the hospital.
Also, keep in mind that there is a major difference between being “admitted” to the hospital and staying at the hospital for “observation.” If you are admitted, Medicare will pay under the Medicare A rules. If you are only held for observation, that claim will be processed under Medicare B rules. You will be held liable for 20% of the bill.
WHAT IS A “SELECT” MEDICARE SUPPLEMENT?
As you probably know, Medicare is a federal program for health insurance for Americans who qualify. It is regulated by a division of the Department of Health and Human Services known as CMS (Center for Medicare and Medicaid Services.)
Medigap, however, is different. CMS has some authority over the various plans of coverage that are offered, but since Medigap is offered by private insurance companies, the main regulatory body over Medigap is going to be your state government.
Many states will allow you to buy a “Select” Medigap plan. “Select” plans are less expensive than regular Medigap plans but they are also more restrictive.
States that allow “Select” policies have designated certain hospitals, “Select Hospitals.” That title is a bit misleading. It does not mean that they provide better care than another hospital. All it means is that if you have a “Select” Medigap plan, you need to use that hospital.
Although “Select” Medigap plans pay Medicare B bills identically to regular Medigap, they pay Medicare A bills differently. If you must be admitted to the hospital, you must use a “Select” hospital. If you do not, even if Medicare pays part of your hospital bill, your “Select” Medigap will not pay the Medicare A deductible.
My observation is that most “Select” hospitals are in more rural communities. I live in a huge metropolitan area. There are relative few “Select” hospitals in my area.
What is confusing is that “Select” Medigap plans are typically priced lower than regular Medigap plans. If you have a Medigap plan, and are not already used to how it works, I encourage you to pull the ID card out of your wallet, or the policy out of your files, and look for the word, “Select.”
If you find that you do have a “Select” policy, make certain that you are satisfied with the hospitals that are available to you. If you end up needing to use a hospital that is not a “Select” hospital, the benefit in your Medigap policy that pays the Medicare A deductible is worthless.
By reviewing your policy while you are healthy, you can save yourself a bunch of aggravation if you are hospitalized in a “non-select” hospital and your Medigap claim is denied.