Now that you have signed up for Medicare Part A and Part B (referred to as Original Medicare), is this all you need to do to have great health coverage?
For most people, the answer is “No!” As I explained earlier, Medicare works on a fee-for-service basis. Medicare pays a portion of the costs to providers, usually about 80%, and you pay the remaining 20%, plus the deductibles.
The problem is the 20% does not have a ceiling. In other words, 20% of $100.00 is affordable, but 20% of $100,000.00 is serious money. You can cover this gap (20% difference) if you have access to retirement health benefits from your employer. But these days, fewer people than ever have retirement health benefits, so the options are purchasing a Medicare supplement (also known as a Medigap plan) or you can choose a Medicare Advantage plan.
Medicare Advantage and Medigap are not at all similar products and, in fact, should be viewed as apples and oranges.
I can’t emphasize strongly enough that the decision to go with a Medigap or Advantage plan is not an easy one to make. You should definitely consider asking an insurance professional with Medicare experience to assist you and reduce the chance of making what could turn out to be a very expensive choice.
All about Medigap
Again, you need to understand that original Medicare does not cover all medical costs and has no out-of-pocket ceiling on how much you have to pay for health services. Medigap plans pick up those uncovered charges. Medicare supplements (designated A through N) are federally standardized and have a standard plan design. All supplement plans are issued by private insurance companies and every one of the plans, regardless of the insurance company, has the same benefits. Example: A Medicare Plan F from Blue Cross Blue Shield is exactly the same as a Plan F from Aetna.
What is different is the price you pay for the plan and how the insurance company calculates the rate either based on a community rating schedule or age-based pricing structures. Your claim history and health status will not affect your rate or single you out for cancellation.
Medigap plans do not use provider networks. They cover you anywhere in the USA. That means you can use any provider you would like as long as they accept original Medicare. Most Medigap plans have coverage for foreign travel, also.
The chart below shows the Medigap plans that are available and the coverage.
|Medicare Supplement Benefits||A||B||C||D||F*||G||K||L||M||N|
|Medicare Part A coinsurance hospital costs up to an additional 365 days after Medicare benefits are exhausted||X||X||X||X||X||X||X||X||X||X|
|Medicare Part B copayment or coinsurance coverage||X||X||X||X||X||X||50%||75%||X||X***|
|First 3 pints of blood||X||X||X||X||X||X||50%||75%||X||X|
|Part A hospice care coinsurance or copayment||X||X||X||X||X||X||50%||75%||X||X|
|Skilled Nursing Facility (SNF) care coinsurance||X||X||X||X||50%||75%||X||X|
|Medicare Part A deductible||X||X||X||X||X||50%||75%||50%||X|
|Medicare Part B deductible||X||X|
|Medicare Part B ‘excess charges’||X||X|
|Foreign travel emergency coverage (up to plan limits)||80%||80%||80%||80%||80%||80%|
|Medicare Part B preventive care coinsurance||X||X||X||X||X||X||X||X||X||X|
* Plan F also offers a high-deductible plan. If you choose this option, this means you must pay for Medicare-covered costs up to the deductible amount of $2,180.00 in 2016 before your Medigap plan pays anything.
** After you meet your out-of-pocket yearly limit and your yearly Part B deductible, the Medigap plan pays 100% of covered services for the rest of the calendar year.
*** Plan N pays 100% of the Part B coinsurance, except for a copayment of up to $20.00 for some office visits and up to a $50.00 copayment for emergency room visits that don’t result in inpatient admission.
Which Medigap plan is the best for you?
The best plan is the one that provides you with the benefits you need for the best price. However, not all insurance companies are the same and you should be aware of the average premium rate increases for each of the companies. If you review the historical rate trends for the various insurance companies (ask your insurance agent) you will find a select group of generally larger companies that have a premium rate trend averaging an increase of less than 5% a year. Those are the companies you should consider. I always suggest selecting a Medigap plan that you can keep for life.
Plan F or Plan G?
Plan F is scheduled to be eliminated in 2020 and the changes coming are a result of the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015. You may have heard it referred to as the “doc fix” law. After 2020, Medigap plans can still cover the Part A hospital deductible, but as of 2020, the plans can no longer cover the Part B deductible for new enrollees.
Currently (2017) this deductible is $183.00 per year. Since Plan F covers that deductible, it is going to be phased out for new enrollees. If you sign up for a Plan F prior to 2020, you will be able to keep your plan. The goal of this measure, in the view of Congress, is to make Medicare beneficiaries put a little more “skin in the game.” So the big question is will Plan F increase in price for existing customers more rapidly after 2020? No one can answer that question with certainty; however, it is important for you to know the differences between F and G.
Many people don’t know which plan to select, or even understand they are different. This is easy to explain because there’s only one benefit difference between Plan G and F: Plan F covers the Medicare Part B deductible and Plan G doesn’t. That would suggest if the price for Plan G is less than $183.00 per year over plan F, then Plan G could be a better value. One other caveat to consider is anyone who is applying during a Medigap Special Enrollment Period (SEP). Plan F has guaranteed issuance status during SEP where Plan G may not have this status for every insurance company.