The federal government subsidizes original Medicare, Medicare Advantage plans and Part D drug plans, so they tend to be great bargains. Even healthy people usually receive more in benefits than they pay out in premiums and copayments.
Private Medicare supplement insurance, also known as Medigap, does not receive any subsidies, so people in relatively good health may not make out so well.
Premiums, which pay for benefits, agents' commissions and company profits, tend to be high — $2,000 to $5,000 a year. Over a lifetime, the average person who buys a Medigap policy would be better off financially by banking the premiums and self-insuring.
But if you are one of the unlucky ones, and need multiple surgeries and lengthy hospital stays, Medigap can suddenly turn into your best friend.
Medicare supplement policies work in tandem with original Medicare, by paying your deductibles and copayments — like $1,132 the first night you spend in the hospital, or 20 percent of approved doctor bills.
Some policies cover a big chunk of emergency care if you get sick in a foreign country, an important benefit to travelers. Medigap can also pay for doctor bills that run a little higher than Medicare's approved rate.
The more coverage you choose, the higher the monthly premium.
Some sales agents say Medigap policies "pay everything Medicare doesn't cover,'' which is not remotely true. It doesn't pay for drugs or long-term nursing home care, two of the most expensive components of health care. Original Medicare does not cover these services, so neither does Medigap.
If you intend to use original Medicare for your basic coverage, it's important that you consider Medigap coverage as you approach age 65 — particularly if you have serious health issues. Companies are not allowed to exclude you from coverage, including your pre-existing conditions, as long as you sign up for Medigap within six months of turning 65.
A few other things to remember:
• Health insurance provided by employers or unions often converts to a Medigap policy when people turn 65, so you might already have one if you continue working past 65.
• People on Medicaid do not need Medigap polices. Medicaid serves the same purpose.
• You cannot have a Medigap policy if you are on a Medicare Advantage health plan, which is based on a network of providers. Medigap works only with original Medicare, where you get to pick your doctors, hospital and other providers.
• Plan benefits are standardized into a handful of different coverage types, so the main difference between policies is the premiums companies charge and their level of customer satisfaction. These premiums can vary substantially, even for plans with the same benefits, so it is important to comparison shop.
• Premiums often vary with age and health conditions.
• A website at Florida's Office of Insurance Regulation — https://apps.fldfs.com/mcws/CWSSearch.aspx — lists the types of plans and estimated premiums for the companies that sell them.