Don’t Buy Medicare Supplement Plan G (And Drop Medicare Supplement Plan F!)

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                   Read This First!

Whether you are just turning age 65 or have been on Medicare for years, it is confusing! 

You have Part A of Medicare, Part B of Medicare, Part C which isn’t actually Medicare and Part D for your Prescription Drugs.  What does it all mean?

If you own the Medicare Supplement Plan G (or the Plan F) you were told that it is the Cadillac of all Medicare Supplement Plans. Your insurance agent told you that you could use any doctor or hospital in the country and you would have zero out of pocket costs with the exception of the Medicare Part B deductible which in 2020 is $198. If you have the Medicare Supplement Plan F, you do not even pay the Part B deductible. What could be better than that? As it turns out there are two plans choices that could be significantly better and cost less than either the Plan G or the Plan F.

If you have already read my paper Turning Age 65, Understand Your Options you already know that if you enroll in Traditional Medicare and do not buy a Medicare Supplement you are subject to the Part A hospital deductible of $1408 (in 2020) per period of confinement. You also know that you are responsible for the $198 Part B deductible for outpatient care plus 20% of any Medicare approved charges. What drives most people to enroll in the Medicare Supplement Plan G is the fear of a serious medical event, where the Part B deductible plus the 20% of the Medicare approved charges may amount to significant medical bills that would be your responsibility. There can be no doubt that there is security in knowing that your medical costs are limited to the $198.00 Part G deductible.

Enrolling in Medicare creates a host of new and confusing choices

But at What Cost?

The Medicare Supplement Plan G is the most expensive of all the Medicare Supplements and this is where the rubber meets the road.  Sadly, there is a far more affordable and better alternative to the Plan G but it is rarely talked about. This supplement is the Medicare Plan G Prime. Many insurance agents will refer to this plan as the High Deductible Plan G but that is a very misleading description!

 

The reason that most agents refer to this plan as the High Deductible Plan G is because you have a potential out of pocket cost of $2340.00 before the supplement begins to pay any benefits. Once you have paid $2340 out of pocket (very difficult to get to without a hospitalization) the Plan G Prime pays 100% of all other Medicare approved charges. 

Comparing Medicare Supplement Plan G Prime to Supplement Plan G

 

To begin let us look at the best monthly premiums for both the Medicare Supplement Plan G and the Plan G Prime.  All premiums come from the North Carolina Department of Insurance website

 

Age

Lowest Plan G

Lowest Plan G Prime

Difference

Annual Saving

65

104.62

33.66

70.98

851.52

75

133.28

45.74

87.54

1050.48

NOTE: I represent the insurance company with the lowest Plan G Prime premium

As you can see, at age 65 you save $851 annually when buying the Plan G Prime instead of the standard Plan G. So, the real question is this: is it worth the $851 in savings?

The short answer is that if you are relatively healthy, you are definitely better off buying the Plan G Prime instead of the Plan G or F!

As you can see the chart above, the difference in premium between the Plans G and G Prime increases as you age. But if we simply assume a savings of $851 annually, over three years you save $2553. That is more than the potential annual out of pocket cost exposure of $2340 in 2020. If you saved the difference in premium in a separate bank account, you would be prepared for most of the medical events that can happen. That of course leads to another very important question: what happens if you do need medical care? So, let us look at some actual procedures that a someone age 65 or older might experience.  The numbers are straight from https://www.medicare.gov/procedure-price-lookup/cost

Total knee replacement in hospital outpatient facility

Medicare approved charge: $11,900 / Patient Responsibility: $1408 (Part A Deductible)

Total knee replacement in ambulatory surgical facility

Medicare approved charge: $8609 / Patient Responsibility: $1721 (20% of the Part B Medicare Approved Amount)

Catheter Insertion of Stents in Major Coronary Artery

Medicare approved charge in outpatient facility: $6057 / Patient Responsibility: $1211

Medicare approved charge as a hospital inpatient: $9908 / Patient Responsibility: $1408

 

As you can see, the patient responsibility is not financially catastrophic. In the end the real question is this: in light of the potential “patient responsibility” above, is it worth paying $850 a year extra to insure against a potential loss of $2340?

Offsetting the Medicare Part A Deductible

The truth is that in the absence of a hospitalization, it is unlikely that you will incur the full $2340 out of pocket under the Medicare Supplement Plan G Prime. If the Medicare Part A deductible is a concern, there are affordable insurance products that can eliminate that risk. One of the insurance companies that I work with offers a unique supplemental health insurance policy that can offset the Part A deductible in its entirety for around $37 monthly.

 

Even when adding $37 to the Medicare Supplement Plan G Prime premium of $33.66 a male age 65 would still save $33.96 monthly or $407.52 annually versus the Supplement Plan G!

A Word About the Medicare Supplement Plan F

Prior to 2020 the Medicare Supplement Plan F reigned supreme as the Cadillac of Medicare Supplements. With the Plan F you did not have to pay either the Part A deductible, the Part B deductible, the 20% of Medicare approved charges or any excess charges (rare that they are). A Medicare beneficiary with the supplement Plan F simply handed both his/her Medicare ID Card and the Plan F ID Card to the medical provider and walked away.

As of January 1, 2020, the Centers for Medicare and Medicaid Services (CMS) decreed that Plan F could no longer be sold. If you currently own a Plan F or Plan F Prime you can keep your plan. None-the-less, unless you have been diagnosed with a major health condition my suggestion is that you change to the Plan G or preferably the Plan G Prime as soon as possible.

 

There are several reasons to change to the Plan G or the Plan G Prime, not the least of which is that you will save far more than the Part B deductible. The biggest reason is this: as premiums continue to increase, healthy individuals will change to the Plan G since it is identical to the Plan F in every way except that it does not pay the Part B deductible and the premium differential is greater than the added liability. As healthy individuals drop their Plan F, the existing pool will be left with a greater number of unhealthy individuals with higher than average medical claims. Since no new individuals can enroll in the Plan F, premium increases will gradually get larger each year. Then, when you most need your coverage, it will also become the incredibly expensive!

Nurse helping senior sick man with drinking

Conclusion

 

There are a lot of reasons why a Medicare beneficiary will choose to enroll in a Medicare Supplement rather than a Medicare Advantage Plan. When you are first turning eligible for Medicare Parts A and B you also have a seven-month window during which you can enroll in any supplement regardless of health. If you are relatively healthy my advice is to enroll in the Medicare Supplement Plan G Prime. It has the lowest monthly premium and limits your maximum financial liability to $2340 (including the Part A $1408 deductible and the Part B $198 deductible in 2020). Once you understand how Medicare Part B works it is easy to see that you will likely save hundreds of dollars every year in premium.  Over time those savings can be considerable!

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