Plan GCategory:

You may have been caught up in the recent political circus on TV and missed the political power play behind the scenes.  Congress voted to eliminate a Medicare supplement that provides first dollar coverage.  (First dollar coverage means you pay no co-pays, deductibles, or co-insurance.  Medicare and the Medicare supplement pay everything.)  This will change everything about how you approach your Medicare, and it is a cause for re-evaluation of your Medicare Supplement plan.

Congress’s change potentially creates a problem for beneficiaries who have a Plan F supplement.  Or, at least, it is reason for re-evaluation.  There are other supplement plans, but which one should you choose?

Congress Tinkers with Medicare Supplement

Congress is constantly trying to fund government programs.  The balancing act is to generate sufficient revenue to pay for adequate benefits without over burdening the taxpayer.  Congress discovered that Medicare beneficiaries who do not pay any co-pays, co-insurance, or deductibles unnecessarily over use the medical system and consequently Medicare.  The Medicare Trust Fund is stressed to the breaking point.  Congress found that beneficiaries who pay co-pays, deductibles, and co-insurance do not over use the medical system.  Their solution is to stop first dollar coverage.  That means, supplement plans cannot pay everything.  Beneficiaries must pay some kind of co-pay, deductible, or co-insurance.  There must be some disincentive to over using the system.

Medicare Supplement Plan F Going Away

The Medicare supplement plan that covers all co-pays, deductibles, and co-insurance is Plan F.  You will not be able to purchase a new Plan F after December 2019.  Those who have Plan F will be grandfathered in and may keep the plan.  The consequence of this change is that no new beneficiaries will be joining Plan F.  Insurance is built upon pools of people.  Of the 10,000 people turning 65 each day in the U.S., no one will be purchasing Plan F’s after 2019.  Those who have Plan F will age and die, reducing the number of persons who pay premiums.  If there are fewer people paying in less premium but more and larger medical claims being paid out, the insurance company will be forced to raise rates on the existing members of the plan to keep the plan viable.  While it is hard to know the future, it would be hard to say Plan F’s future will be positive after 2019.

Plan G is the New Plan F

The next plan up is Plan G.  The two differences between Plan F and G are: you pay the Part B deductible, which is currently $166.  It is a one time annual deductible.  After you pay the Part B deductible of $166, there are no more co-pays, deductibles, or co-insurance for the year.  Everything will be covered 100%.  Second, Plan G premium is noticeably less than Plan F’s.  The other point of interest is that Plan G’s have fewer and smaller rate increases than Plan F’s.

Shrinking Pool of Insured

Medicare trustees are trying to slow the drain on the trust fund.  Eliminating first dollar coverage that Plan F’s afford was the solution.  The problem is that no new members will join the pool of insured who have Plan F.  Traditionally, insurance companies raise premium rates when the pools of people who pay premiums becomes smaller.  Plan F members will be forced to look other places for more affordable coverage.  Plan G will likely become the new Plan F.

You may wish to reconsider your supplement plan if it is Plan F.  The ground is shifting.  Visit OmahaInsuranceSolutions.com for the most current education on Medicare.

Sheep get sheared.  They follow the other sheep into the pen, down the shoot, then in to the hands of the shearer and are fleeced.  The ram is a alert.  He doesn’t go with the flow he leads the way and butts heads when he is force to go where he doesn’t want to go.

How do people pick their Medicare supplement plan and company?  They talk with their buddy on the left and their buddy on the right.  ‘They both can’t be wrong.’  Everyone says Plan F is “the best.”  “I never have to pay anything”—no co-pays.  That’s great!  Sign me up.  That is the thought process of the sheep.  Insurance companies love it.  Insurance agents love it.  Plan F is the most expensive plan in all kinds of way.

There are ten possible Medicare supplement plan types that an insurance may offer–A–N.  In reality, they usually only offer 4 or 5.  Plan F is the most popular as well as the most expensive.  Insurance companies and agents like that because it brings in the most money and pays the highest commission.  But is it the best for a client?

Plan F does cover all the deductibles and co-insurance that Medicare doesn’t cover.  That is nice, but you pay a price for that convenience.  It raises the question whether Plan F is the best.

Is there an alternative?  How about Plan G?  Plan G is very close to Plan F.  The difference is that you pay the Part B deductible of $147.  It is a one-time annual deductible.  Once you pay your Part B deductible of $147, for let’s say a doctor’s visit, you are done for the year.  Everything else will be covered 100% which is similar to a Plan F.  So why plan G?  Because the premium is lower—quite a bit.

Let’s do some simple math.  Let’s say that a plan F is $150 per month for a 65 year old male and a plan G is $110 for the same person.  The difference is $40 per month and $480 per year less for the Plan G.  Subtract the $147 Part B deductible, and you are still ahead $333.  Putting it another way, you are paying $333 for the convenience of having the insurance company pay your Part B deductible so that you don’t have to write a check IF you go to the doctor or have some other procedure.  Multiply that times 10 years and you are at $3,330.

The second and more important consideration about Plan G is that the rate increases are smaller and less frequent.  Yes premiums go up because medical costs go up, but the unusual reality about Plan G policy holders is that they generally do not go to the doctor or emergency room as frequently as Plan F policy holders.  There is something about the $147 deductible that causes people to pause and think.  ‘Is this really medically necessary?’  The result is that, because Plan G policy holders do not over use medical benefits to the extent Plan F policy holders do, the claims and cost are not has high.  Consequently the rate increases for Plan G’s are fewer and smaller than Plan F.  Plan F is the best?

Don’t be a sheep.  Don’t follow the herd.  Stop and look at the different plans.  Ask yourself the hard question in light of the facts whether Plan F is the best.  Do some analysis, and you will save money in the short, long, and longer run.

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The question that I am constantly asked during the course of a consultation on Medicare is ‘which is the best plan?’  My answer to the question of the best Medicare supplement is always the same.  It all depends.  Each person is different.  Needs are different.  Perception of reality is different.  If you ask my wife, which is better—two piece or one piece swim suit?  Her opinion will differ greatly from mine.

When it comes to Medicare, the first fork in the road is a choice between Medicare Advantage or Original Medicare and a supplement.  Once someone makes that first choice, the second fork in the road is between Medicare supplements.  There are potentially ten possibilities—Plan A—N.

Plan F has been the most popular plan among the bunch.  Because of that, some would say that Plan F is the best Medicare supplement, even though it is the most expensive.  Its appeal, however, is convenience and a sense of security.  With a Medicare Supplement Plan F, there are no co-pays, deductibles, or co-insurance.  You don’t have to worry about maximum out of pocket expense.  You plop down your red, white, and blue Medicare card, your Plan F card, and you’re done.  The bills may make Medicare and the insurance company cringe, but no matter.  You are covered 100% for the services that Medicare covers.  For that sense of complete, comprehensive coverage and convenience of payment, Plan F’s are the most expensive among the various insurance companies.

Plan F’s are expense for other reasons as well.  As medical expenses go up, so do Medicare supplement premiums.  You can almost count on an annual rate increase from the insurance company, especially for a Plan F.  Why is that?  Because people on Plan F use their benefits frequently.  Whether they go to the doctor no times or fifty times a year, the price is still the same.  Whether they go to the hospital zero times or a hundred times, the price is still the same.  No co-pays.  Just the same monthly premium.  Consequently member over-use increases cost, which is reflected in regular rate increases.

Plan G, however, has a small deductible.  You pay the first $147 on Part B expenses, such as doctors’ visits, outpatient procedures, emergency room visits, etc.  After you pay the first $147, then the Plan G is like a Plan F.  Everything is covered.  The two benefits of a Plan G are 1) the premium for Plan G’s is lower, even with the deductible factored in, 2) the rate increases are smaller and less frequent.  Plan G people tend to not over use their benefits as much as Plan F folks.  A great deal is being written on this Plan G topic right now.  It is very arguable that Plan G is the best Medicare supplement.

Which is the best?  It all depends on you.  I tell my wife I would rather see her in a two piece bikini.  That is the best for me, and that is final!