Medicare Supplement Plans
(Also known as “Medigap” Plans. Synonyms: Medigap = Supplement)
Before we delve-into Supplement (Medigap) Plans, here’s a quick break-down of Original (Basic) Medicare:
Part A: Inpatient Care
- $1,484 deductible per benefit
Part B: Outpatient Care
- 80/20 split. Medicare pays 80%, leaving you exposed to 20% co-insurance
- There is no maximum out-of-pocket expense. There is no limit.
What are Medigap/Medicare Supplement Plans?
- They are designed to help pay for some or all of the medical/hospital costs after Medicare pays its portion.
- They are offered by private insurance companies.
- They are called Medigap Plans because they fill in the gaps found in Original Medicare’s coverage.
- For 2020, there are 8 different Medigap Plans that vary in the types of coverage.
- They are government standardized plans.
- They must meet established standards in the coverage that the plan provides in order for it to be called a Medigap plan. (Highly regulated standards.)
How do you qualify for Medigap plan?
- You must be eligible for Medicare.
- You must continue to pay your Part B premium ($144.60/month in 2020)
- You must pay your Medigap Plan premium.
- Depending on the circumstances, you might have to pass “medical underwriting.”
-Definition: Medical Underwriting
The process that an insurance company uses to decide, (based on your medical history), whether or not to approve or deny your application for insurance, and whether or not to add a waiting period for pre-existing conditions (if your state allows it), and how much to charge you for that insurance.
-Guaranteed Issue:
An instance that means that the insurance company cannot ask health questions or exclude pre-existing conditions. The applicant is guaranteed to be accepted for the plan.
- Know that medical underwriting is only a “pass” or “fail.”
How does a Medigap plan work?
- Medigap plans supplement Original Medicare, meaning, if a service is not covered under Original Medicare (Part A and Part B), it will NOT be covered by the Medigap plan.
- Medigap plans help cover some or all of the costs associated with Original Medicare (A & B), such as co-pays, deductibles, and co-insurance.
- There are no provider networks associated with Medigap plans.
Rule: If a doctor or hospital accepts Original Medicare (and a vast majority do ~95%+), then they are required to accept a patient with a Medigap plan. Thus, any and all Medicare providers must accept a Medicare Supplement plan.
- Medigap plans travel with you, if you move are travel within the United States.
- You are not required to get referrals to see specialists.
What is the benefit of a Medigap plan versus just having Original Medicare?
- Medigap plans lower your out-of-pocket exposure and therefore cuts down on your costs.
What type of Medicare Supplement plans are there?
- There are 10 government standardized Medigap plans for those entitled to Medicare prior to 2020, and there are 8 Medigap plans for those who are NEW to Medicare starting in 2020.
- A, B, C, D, F, G, K, L, M, N (Received Medicare prior to 2020)
- A, B, D, G, K, L, M, N (New to Medicare in 2020) (C and F out)
- Plans F, G and N provide the most comprehensive coverage.
Plan F and Plan G are identical EXCEPT in one way:
Plan F pays the Part B annual deductible ($198 in 2020), however, Plan G costs less. As a general rule, since Plan G is less than $16.50/month ($198 / 12 months) than Plan F, it is more cost-effective to choose Plan G over Plan F. Also, the pool of insureds in Plan F are older, so the rate increases more aggressively than Plan G.
- With regard to medical underwriting, monthly premiums can depend on: county, gender, age, tobacco use, and sometimes height and weight.
- *Very important note: Medigap/medicare Supplement Plans DO NOT include a prescription drug plan (Part D). You must pay for a Part D (Prescription Drug Plan “PDP” separately).
How to compare Medigap policies:
- The chart below shows basic information about the different benefits/features that each Medigap policy covers for 2020. If a percentage is shown, the relevant Medigap plan covers that specific percentage of the benefit, and you’re responsible for the remaining percentage.
Important Factoids:
- All Medicare Supplement Insurance (Medigap) plans are guaranteed renewable (so long as you make your payment (monthly or annual) on time.
- The premiums on all plans increase over time (based on the group as a whole, and are not based on an individual basis).
Starting the 1st day of January 2020, Medigap plans sold to people who are new to Medicare won’t be allowed to cover the Part B deductible. Because of this, Plans C and F won’t be available to people who are newly eligible for Medicare on or after January 1, 2020. I you already have either of these 2 plans (or the high deductible version of Plan F), or are covered by one of these plans before January 1, 2020, you’ll be able to keep your plan. If a person was entitled to Medicare prior to 2020, then s/he may still enroll in Plans C and Plan F – even if they delayed their Medicare coverage. (It may not be cost-effective to do this, but it is an option for those who are “grand-fathered-in” or “grand-mothered-in.”)
Here’s How You Choose Plans…
Plan F is the most comprehensive Medigap plan on the market. Those in “sales” refer to it as the “Cadillac Plan.”
Plan F pays for the balance of the costs not covered or paid by Original (Basic) Medicare.
Clients with Plan F have no co-pays, no deductibles, no coinsurance it includes emergencies in foreign countries when traveling.
The only cost the beneficiary pays for on a Plan F is the monthly premium AND their part B monthly premium (which $144.60 in 2020).
They can see any doctor /hospital as long as the provider accepts Original Medicare.
Plan F is no longer available to those who received Medicare eligibility on or after January 1, 2020. This is actually a good thing mathematically, which will be demonstrated.
If a person is eligible for Medicare prior to January 1, 2020, then they are eligible for Plan today, however, it’s usually not the best choice for reasons we will be explaining.
The most comprehensive Medigap Plan on the market for those who become Medicare eligible after January 1st, 2020.
Plan G is identical to Plan F in every way, except Plan G does NOT cover the Part B annual deductible (which is $198/year in 2020).
For those who prefer Plan F but are not eligible, it is important to understand to that Plan G has a lower monthly premium than Plan F, and it in the long run typically saved the beneficiary money. Consider that $198 divided by 12 months equals $16.50 per month. Thus, if Plan G is less than $16.50 per month, the beneficiary saves money (and typically Plan G is more than $30 less per month than Plan F). The bottom-line is that it is almost always more cost-effective to choose Plan G over Plan F whenever it’s an option. Even those who are eligible for Plan F (and can pass medical underwriting will save money).
Plan N may be a strategic option for some, but may not be better than Plan G with regard to money, due to some additional costs associated with it, however, it can be a logical choice for some wanting a Medigap plan, but wanting a lower monthly premium than Plan G.
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Pros of the Plan N: |
Cons of the plan N: |
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Covers the Part B co-insurance, except for applicable co-pays: o Doctor visit: $20 or less o Emergency Room: $50 or less
Plan N typically has a lower premium than Plan F and Plan G
Can see any doctor/hospital so long as they accept Original Medicare.
Like Plan F and Plan G, Plan N does include foreign emergency travel |
The above-mentioned co-pays for doctor and emergency room.
Plan N does not cover Part B excess charges
Plan N does not cover the Part B deductible ($198/month in 2020).
If a doctor or hospital charges more than what Medicare sets as acceptable, the beneficiary has to pay the difference. This extra amount is referred to as “excess charges” and it may add additional costs to a person plan N.
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What is Part B “Excess Charges”?
The amounts that doctors are allowed to charge above the Medicare contracted “allowable limit’ – up to 15%.
Excess Charges are not extremely common, but excess charges can appear with certain surgeons and specialists.
There are 8 states by law, that cannot bill Part B excess charges:
CT, MA, MN, NY, OH, PA, RI and VT
This means that IF you live in one of these 8 states, you may save money by choosing a Plan N over a Plan G or Plan F (if applicable).
(Be sure not to confuse the word “Part” with “Plan” when understanding Medicare options. There is Part A, Part B, Part C and Part D for Medicare. There are Medigap or Medicare Supplement “Plans.”)
It is important to know that a “Plan G is a Plan G, and Plan F is a Plan F, and a Plan N is a Plan F” – so long as you are dealing with an A-rated carrier. There is no difference between any A-rate plan, so a Blue Cross/Blue Shield Plan G is the same as a Mutual of Omaha Plan G, because federal regulation requires the exact same coverage. A same plan is the same plan with all “A-rated” carriers, so don’t be tricked into any marketing/sales pitch. You’re not paying for a Carrier, you’re paying for the specifications of a certain coverage. (Never pay more for the exact same coverage, and there are some Carriers that charge more than others. Some carriers have a higher rate of increase of premium as well!)
Auto-Renewable
Supplement plans renew each month/quarter/year automatically, so long as you make your monthly payment on time.
(Good Advice: B-rated carriers are known to increase premiums more, so always go with an A-rated carrier.
When Can You Get a Medicare Supplement Plan?
Open Enrollment (OE)
Triggered by the Medicare Part B effective date (start date).
6-month period that starts …