Medicare coverage can be deceptive, says Steve Mathieu, a fee-only financial and estate planner specializing in clients age 55 and up.

The Medicare program is designed to provide acute care and does not cover chronic or long-term conditions, he says. In the parlance of the program, that means Medicare “only pays for skilled care—not medical or custodial care,” the Manchester, New Hampshire-based planner explains.

So, if your client breaks her hip, Medicare will cover the initial cost of care. But when she’s released from the hospital, even though she still needs a wheelchair, physical therapy and help getting into and out of bed, she would have to pay for these things out of pocket, Mathieu says, unless she had a long-term care policy that covered her for all levels of care.

To supplement the coverage provided by Medicare, he says, a variety of different types of policies are available. These range from very basic, high-deductible plans, where the client pays much less but assumes more of the risk, to low-deductible, high-premium plans that cost much more but provide much more extensive coverage. Some different plan types include:


Medicare supplement plans are also known as Medigap policies. In cases where acute medical care is needed, Medigap insurance picks up where Medicare leaves off—including covering the cost of Medicare co-pays, co-insurance and deductibles, which can be quite substantial. Some Medigap policies also provide medical coverage for travel outside the U.S., which is not covered under Medicare.


Medicare Advantage plans work a bit differently. In return for an HMO-like policy that provides the basic services covered under Medicare Part A (hospital care) and Part B (medical care), plus supplemental coverage that fills the coverage gaps, the policy holder surrenders the premiums that the government pays for Medicare coverage to the insurer, along with what the policy holder was paying for Medicare part B and an additional charge for the supplemental coverage.

While there’s no real cost savings, the major benefit of these types of plans is that they provide one-stop shopping and greatly simplify the client’s insurance requirements. A drawback is that these are all state-based plans, so someone could run into problems obtaining medical services when traveling out of state.


Long-term care policies that cover chronic conditions and custodial care such as nursing homes. If they can afford them, Mathieu is adamant that clients procure these policies to protect their assets and receive the level of care they desire without bankrupting themselves.

To determine what level of coverage a client should obtain, the New Hampshire planner says there are really only two considerations: the client’s ability to pay and his or her state of health. If the client is healthy, he may want to opt for a low cost, high deductible plan. But if he’s sickly and can afford to lay out the cash, he’d be better off with high-cost, low-deductible coverage.

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