Medigap Plan F Versus High Deductible Plan F

Medicare Supplement (Medigap) High Deductible Plan F suffers from a horrible name, but don’t overlook it.  The premiums can be very affordable and the coverage is better than the name suggests.

Let’s begin with shortening up Medicare Supplement (Medigap) High Deductible Plan F for readability.  Let’s use HD-F from now on.

Deductible

Next, let’s make sure you understand with the word – deductible.  A deductible is the amount you pay each year before your health insurer begins to cover your medical services.

The deductible in 2016 for HD-F is $2,180.

Just to be crystal clear, this means before your Medicare Supplement insurance company pays anyone or anything… the first $2,180 is out of your wallet.

The thing is, the deductible really isn’t all that high, especially when you compare it to what they are in individual ACA (Obamacare) plans.  Right now, the average the average combined deductible for 2016 is $5,765 for bronze plans (up from $5,328 in 2015) and $3,064 for silver plans (up from $2,556 in 2015).  So, if you’re currently paying for your own individual coverage, odds are $2,180 doesn’t scare you.

If it does, I’m about to show you how the differences between premiums for these plans can more than pay for the deductible in a very short amount of time.

Price

Then there’s the price: They’re cheap.  Obviously, prices vary from state to state and carrier to carrier, but they’re generally half – if not less than half the price of a regular Medicare (Medigap) Supplement Plan F.

Let’s take a look at both of them side-by side (premiums are illustrative only).  Here’s a hint:  The only things different are the monthly premium and MOOP!

We’ll start first with Medigap Plan F

Medicare SupplementPlan F
Monthly Premium$180 per month
Annual Deductible ExpenseNone
Annual Coinsurance ExpenseNone
Annual Maximum Out-of-Pocket (MOOP)Zero
NetworkYou can see any doctor who accepts your coverage; no referrals needed for specialists
Other Out-of-pocket CostsNo copays for doctor's visits or hospitalization
Prescription Drugs Does not include prescription drug coverage

Well, that was nice.  Let’s now look at Medigap HD-F

Medicare SupplementHigh Deductible F
Monthly Premium$80 per month
Annual Deductible Expense$2,180
Annual Coinsurance ExpenseNone
Annual Maximum Out-of-Pocket (MOOP)$2,180
NetworkYou can see any doctor who accepts your coverage; no referrals needed for specialists
Other Out-of-pocket CostsNo copays for doctor's visits or hospitalization
Prescription Drugs Does not include prescription drug coverage

Break Even

I’ve done a bit of quick math for you below.  If you assume a monthly premium of $180 for Medicare Supplement (Medigap) Plan F, and an $80 monthly premium for HD-F, the chart shows you’ll break even in a little under 2 years.  Another way of saying that, is: by paying less monthly premium for HD-F, you’ll effectively save enough money (if you don’t use it) to cover the deductible in just under years.

 Medicare Supplement Plan F Monthly PremiumMedicare Supplement HD-F Monthly Premium
Jan$180$80
Feb$180$80
Mar$180$80
Apr$180$80
May$180$80
Jun$180$80
Jul$180$80
Aug$180$80
Sep$180$80
Oct$180$80
Nov$180$80
Dec$180$80
Total Annual Premium Cost$2160$960
Annual Savings$1200
Number of Years to Break Even1.81

But there’s yet another way of thinking about this: If you buy an HD-F when you turn 65, by the time you turn 67 you will have already saved enough money to cover an entire yearly deductible.  By the time you’re 69, you’ve already got more than two and on your way to three year’s worth of maximum deductibles saved up.

The Takeaway

So, which one is the right choice for you?  To get there, the central questions you must ask yourself (and answer) are these:

  1.  Do I want to give the insurance company $180 per month for 100% coverage and 100% peace of mind?
  2. Or do I want to give them $80, save $100 a month in premium and stick that $100 it in my back pocket just in case I get sick and need it?
  3. Should I just go with a Medicare Advantage plan?

 

Do I Have Medicare or Medicaid?

You may have Medicare, Medicaid or maybe both!  Other than sounding similar, the words Medicare and Medicaid are very different government-sponsored health insurance programs, but they can work together.  If you have both, you may qualify for a special type of Medicare Advantage plan.

Medicare and Medicaid are two government programs that help people pay for their health care.   By now, you already know Medicare is generally for people who are older or disabled.  If you need a refresher, head on over to the Medicare 101 page by clicking here.  Medicaid is for people with low incomes.  Essentially, these are the poor.  These folks don’t have the money to pay for their own health health insurance.

What is Medicaid?

Medicaid is an assistance program.  It serves low-income people of every age and benefits vary from state to state.  People on Medicaid usually pay no costs for medical expenses, however in some states small co-pays are required and they vary from state to state. It is run by state and local governments within federal guidelines.  Qualifying income and resource levels are set by the feds.  Every state decides what they’ll use to qualify applicants when calculating whether or not they’ll qualify.

Medicaid Is Not the Same as Medicare, but Both Can Work Together

If you are eligible for both Medicare and Medicaid, Medicare and Medicaid will work together to provide you with very complete health coverage.  This means both working together should cover most, if not all out of pocket costs and you won’t get a bill.

Can I Have Both Medicare and Medicaid?

People who qualify for both Medicare and Medicaid are said to be “dual eligible.”  If you have Medicare and Medicaid, you may be eligible to enroll in a special Medicare Advantage plan that can provide additional benefits above and beyond what you get with either.  This is accomplished by enrolling in a “Dual Special Needs Plan” also known as a “Dual-SNP” (pronounced “dual- snip”) plan.  These plans are exploding in popularity, mainly because the insurance companies are paid handsomely by the federal government to manage the dual-eligible (Medicare and Medicaid) population due to their health status.  The only problem is they’re hard to find and largely only available in metropolitan areas.  I’ve got an article I’ve got queued up all about D-SNP plans which I’ll publish in a week or so.  When I do, I’ll link back here.

In the meantime, if you think you qualify for Medicaid, click here to check out more information and apply.  If you’re brave enough to research D-SNP plans in your area before I post, click here  or call 1-800-MEDICARE (1-800-633-4227).

Why Choose a Medicare Advantage Plan?

Medicare Advantage plans (MAPD) have exploded in popularity since re-introduced around a decade ago.  Is it the best plan for you? What makes these plans so popular?

It’s no secret prescription drug costs are rising much faster than inflation, and overall health spending is up.  Every year, it seems the government raises the Medicare Part B premium, Medicare Supplement (Medigap) and Medicare Part D (PDP) plans cost more, too.  Although I assume by now you already know what a Medicare Advantage plan is (click here if you don’t for a primer) there are very distinct reasons why according to Kaiser Family Foundation 31% of all seniors are now enrolled in a Medicare Advantage plan.

Medicare Advantage plans come in 3 flavors.

  1.  PPO – “Preferred Provider Organization” – you can use doctors and hospitals in and out of the plan’s network.
  2. HMO – “Health Maintenance Organization” – you cannot use doctors out of the plan’s network
  3. HMO-POS – “Health Maintenance Organization – Point of Service” – while rare, these plans let you go out of the plan’s network, often requiring a referral from a doctor who is in the network.

So, why choose a Medicare Advantage Plan?

Combined Medical and Drug Coverage

Remember the acronym in the first sentence?  Medicare Advantage is the same thing as an “MAPD.”  That stands for Medicare Advantage Prescription Drug.  By far the biggest reason people enroll in these plans is because they get their medical coverage and their prescription drug coverage all in one plan, with one company.  It doesn’t matter if you’re at the pharmacy, in your doctors office or at the hospital; one card in your wallet is all you need.

Premiums Are Inexpensive (or $0!)

The number of plans available to you varies depending on where you live.  Cities get more choices, rural areas only a few.  Generally, the availability of these plans increase where there are more people in a geographic area who have Medicare.  For most of you, there are usually multiple insurance companies in your area offering $0 premium MAPD HMO plans.  They can afford to not charge you a premium, because they’re getting reimbursed from the government for your care and prescription drugs.  You can usually find HMO plans with better benefits for an additional premium ranging between $19-$40 per month.  PPO plans are available too, although typically there are fewer options and they’re more expensive at $30-$150 per month, depending on the plan.

Limit Out-of-Pocket Costs

Original Medicare Part A and Part B have significant drawbacks to them, and never cap the amount of money you can potentially spend should you get really sick.  Click here for a post I wrote a while back on this subject.  MAPD plans have a feature called the MOOP.  MOOP stands for Maximum Out OPocket.  Medicare mandates MAPD plans pay 100% of your medical care after a maximum of $6,700 out of your pocket in a calendar year.  Many plans have a lower MOOP and this is a KEY factor you should be shopping for, by the way.  The lower the MOOP, the better for you.

Low Co-pays for Doctor Visits and Prescriptions

Medicare Advantage insurance companies want you to see your primary care physician, and as soon as possible.  While that might not make much sense on the surface, it does if you have a medical condition.  If you have a medical condition and the doctor notes it in his or her chart, the insurance company can file for additional reimbursement from the government for your care.  Good for them.  All this really means to you is your doctor copays on a Medicare Advantage are low (usually $5-20 per visit, sometimes $0!).  Insurance companies also want to make sure you’re taking your prescriptions.  That’s right!  If you don’t, they get dinged in the wallet by the government in a variety of ways.  That’s why prescription drug copays are generally less expensive on MAPD plans than they are on Medicare Part D (PDP) plans.

Extra Benefits Not Offered by Medicare

The government allows Medicare Advantage plans to offer some bells and whistles to their plans to sweeten the deal for potential buyers.  Many, but not all plans offer built-in dental coverage, vision insurance, hearing aid coverage and even an over-the-counter purchasing allowance.  You get none of those items I just mentioned on Original Medicare, Part D or a Medicare Supplement plan.  If you were actually able to find a dental plan to purchase outside of an MAPD plan, I’d a) be amazed and B) tell you not to buy it because it’s not worth the money.  More on that in another post.

There you have it.  Four pretty good reasons to elect a MAPD plan for your Medicare coverage… low (or no) premiums, a limit on your yearly financial exposure, low co-pays for doctors and prescriptions and some dental, vision and other “freebies” thrown in for good measure.

Will Your Medicare Coverage Travel with You?

Summertime means the beach, BBQ and travel.  Will your Medicare coverage travel with you?  Should you buy a travel insurance policy before going overseas?  What if you have a Medicare Advantage plan?

The answer: It depends.

If you’re on original Medicare (not a Medicare Advantage plan), travel throughout the 50 states and US territories (District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa) means your health care is covered just like it is at home, no problems.  If you have a Medicare Advantage plan, traveling overseas, and even traveling away from home within our 50 states gets trickier.  More on that below.

The Medicare website on travel offers an easy explanation that isn’t 100% complete, nor does it do a very good job of highlighting when you’re not covered while traveling.   I’ve pasted and excerpt from the webpage below for your convenience.

Medicare may pay for inpatient hospital, doctor, ambulance services, or dialysis you get in a foreign country in these rare cases:

You’re in the US when a medical emergency occurs, and the foreign hospital is closer than the nearest US hospital that can treat your medical condition.
You’re traveling through Canada without unreasonable delay by the most direct route between Alaska and another state when a medical emergency occurs, and the Canadian hospital is closer than the nearest US hospital that can treat the emergency.
You live in the US and the foreign hospital is closer to your home than the nearest US hospital that can treat your medical condition, regardless of whether an emergency exists.
In some cases, Medicare Part B (Medical Insurance) may cover medically necessary health care services you get on board a ship within the territorial waters adjoining the land areas of the US Medicare won’t pay for health care services you get when a ship is more than 6 hours away from a US port.

Medicare drug plans don’t cover prescription drugs you buy outside the US

Will My Medicare Part D Card Work?

Ooh, there’s a zinger right there at the end!  Did you miss it?  Here it is again:  Medicare drug plans don’t cover prescription drugs you buy outside the US.

Prescription drugs purchased overseas are never covered by Medicare Part D. Huh.  That means your PDP plan is worthless overseas.  Better stock up before you go. I must say, it’s also interesting to see if you go on a cruise, you better only get sick if you’re close to the US or one of its territories.  It also makes no mention of what happens if you have a Medicare Advantage plan.  Here’s one more item of note from the site.

Foreign hospitals aren’t required to file Medicare claims. If you’re admitted to a foreign hospital under one of the situations above, and if that hospital doesn’t submit Medicare claims for you, you need to submit an itemized bill to Medicare for your doctor, inpatient, and ambulance services.

This is a nice way of saying if you get sick overseas, you’ll very likely have to pay, either with cash or credit card for your health care at the time of service.  You’ll then have to take all of the paperwork home with you, and fill out gobs of Medicare paperwork.  Look, they make it easy for you on their website! (Heavy sarcasm here, folks)  There are only potentially NINE forms you need to fill out.  If you want your son or daughter to help out, they need to fill out a form, too.   You better do it right as you get home; if you wait 12 months you’re out of luck.

What If I have a Medicare Advantage Plan?

So, I’ve teased it twice already; what do you do if you have a Medicare Advantage plan?  First of all, if you’re on an HMO, you may be out of luck if you get sick even in the next county over from you.  An MAPD HMO plan has a defined service area (usually by county) and there are ZERO out of network benefits.  If you have an HMO and live in Sarasota, forget getting routine care while on your visit the kids in Denver.  Oh sure, there’s emergency care… if you’re admitted, if you’re in an ambulance, etc. In all seriousness, aside from what the government mandates HMO plans include in their coverage, most do NOT have travel coverage.  To get the skinny, you need to pull out your Summary of Benefits booklet that came with your policy, or call the company and ask.

If you have a Medicare Advantage PPO plan, those by nature DO have out of network coverage if you’re travelling out of your service area in the US.  Often it’s way, way less than you enjoy in the network, but at least it’s there.  They also must have out of pocket limits so you won’t go broke if you get really sick on vacation and need to be in the hospital for a long time.  However, that does NOT mean you have overseas coverage.  To find out, you need to look at your Summary of Benefits or call the company.

Some Medicare Advantage companies tack on an additional feature to their plans to include some sort of travel insurance.  Most do not.

The Takeaway

We know by now there are restrictions on getting medical care overseas if you’re on Medicare, and can be even more if you’re on a Medicare Advantage plan.  Your Medicare Part D plan will not work overseas. What are your options?  Buy overseas travel medical insurance if you have an MAPD plan that does not cover it, or are on Original Medicare only.

If you have a Medicare Supplement plan you are in luck, my friend.  Medicare Supplement (Medigap) Plans C, D, F, G, M, and N provide foreign travel emergency health care coverage when you travel outside the US and  Plans C, D, E, F, G, H, I, J, M, and N pay 80% of the billed charges for certain medically necessary emergency care outside the U.S. after you meet a $250 deductible for the year. These Medigap policies cover foreign travel emergency care if it begins during the first 60 days of your trip, and if Medicare doesn’t otherwise cover the care.

Be safe out there!

Medicare Supplement Plan F and the Medicare Excess Charge

Medicare Supplement Plan F, also known as Medigap Plan F, is and has been by far the most popular plan purchased by seniors looking for the most complete Medicare coverage. It’s also the most expensive, with premiums ranging from $150-$250 per person, per month. I say most complete, because Plan F pays the rest of the charges Original Medicare doesn’t charge plus an additional amount called, “excess charges.” What are excess charges? The vast majority of doctors and hospitals across the country accept what’s called, “Medicare Assignment.”

What is Medicare Assignment?

In plain English, that means Medicare says they’ll pay them a certain amount for a procedure or a doctor’s visit, and those doctors and hospitals essentially say, “OK.” These folks are considered to be “participating” in Medicare. In return, they’re not allowed to bill the person receiving medical care any additional amounts. If the doctor, hospital or facility does NOT accept Medicare Assignment (non-participating) they can still bill Medicare, get paid and then bill YOU an additional 15% above and beyond what Medicare paid them. This is called the Medicare Excess Charge. Of course, doctors and hospitals that opt out of Medicare altogether can bill you whatever they want.

Before you get all worried about these charges, it’s important to put them in perspective. Over 99% of doctors and hospitals across the country accept Medicare Assignment. The doctors and hospitals that don’t are usually specialty cancer centers or research institutions.

The Takeaway

Medicare Supplement Plan F is the only Medicare supplement product that covers that additional 15% should you need it. Odds are you won’t, but if you like that security blanket (and it seems many do, based on the popularity) then Medicare Supplement Plan F is for you.

Of course, and this is true with all Medicare Supplement buyers, most folks buy these because they want the freedom to choose any doctor or hospital they want, don’t want the hassle of a network (PPO or HMO) and they can afford the monthly premium.

One last note: Medicare Supplement Plan C (second most popular plan) is essentially Plan F, without the excess charge coverage. If there’s a meaningful difference in premium between the two in your state and your doctors and hospitals take Medicare assignment, it may make sense to go that route.