If you are a Medicare beneficiary, then you have probably heard that Medicare supplement (Medigap) Plan F is going away. Where is it going? I’d like to add a little flavor to that story.
CMS, the Center for Medicare and Medicaid Services, is implementing the changes dictated by the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015. One of the items addressed in that law was Medicare supplement plans that provide “first dollar” coverage. This actually impacts both plans F and C. So what does it mean?
Effective January 1, 2020 these two Medicare supplement plans will no longer be available to Medicare beneficiaries whose Medicare part A effective date is January 2020 or later. So, for those aging into Medicare January 2020 and after, you won’t have the option to enroll in plan F or C. So…..if your Medicare Part A effective date is prior to January 2020 you will still have access to plans F and C. The question is: should you purchase one of them?
We think not! You see, as the average age of insureds covered by a particular plan increases, then the claims experience on these plans increases and the premiums must follow suit. Please understand, the premiums for nearly every Medicare supplement plan will increase as you age. However, because people “aging in to Medicare” after 2019 will no longer be able to enroll in Plan F or C, then the average age of people on these plans will rise every year. This will likely lead to rates that increase more than for the rates of plans that are still available to all Medicare beneficiaries. BUMMER!
Well, maybe not. First, if you are currently enrolled in Medicare supplement plan F or C, you will be able to keep your plan. However, it may be in your best interest to switch to a different plan that is still offered to all beneficiaries, assuming you can medically qualify. So, which one and why?
The answer to which one, is: either plan G or plan N. For most of our clients we find that plan G offers very competitive premiums and with little difference when compared to plan F. In fact the only difference in coverage is, with Plan G your are responsible for satisfying the Medicare part B annual deductible each year (currently $185). Once that is satisfied, then plan G combined with Medicare covers 100% of Medicare approved medical charges for the balance of the year. Here’s the part you will really like! For most people, the annual premiums savings for plan G vs. plan F is significantly more than the $185 deductible!! This simply equates to a better value.
Plan N can be an even greater value, but it does carry a little more risk. Let me explain. Plan N subjects you to the same Medicare part B deductible, plus you are responsible for doctors office copay of $20 for each visit. But, the risk is this: Plan N doesn’t cover Medicare part B excess charges. What are excess charges you ask?
Doctors who treat Medicare beneficiaries have two options for billing. They can either accept Medicare assignment (the Medicare fee schedule), or they can charge an extra amount called excess charges. A doctor can legally charge 15% more than the Medicare fee schedule for his/her services. Most Medicare supplement plan cover those charges, but plan N does not. This means if you are enrolled in Plan N, you are responsible if a doctor charges for excess charges.
Why is the government moving away from supplement plans that provide first dollar coverage? Well, it is human nature that if a product or service doesn’t cost anything, then that product or service gets used more than if it did cost something. Your government wants all of us to have “skin in the game” when it comes to spending healthcare dollars. And remember, if you are enrolled in original Medicare vs. a Medicare advantage plan, then in general, Medicare pays 80% of your medical expenses. If this plan change reduces the number of doctor office visits by one for every ten beneficiaries per year, they will have saved hundreds of millions annually.
So, while the government doesn’t always manage our tax dollars wisely, I’ll give them a solid A for this one.
Yes I know if you are accustomed to plan F or C, you enjoy not having the meet the part B deductible. But, times are changing and the government taking this small step to slow the rate of medical inflation for Medicare beneficiaries.
Lonnie Thibodeaux is the owner of Sargent Insurance and Financial Services. He specializes in Medicare health plans and prescription drug plans.