Which Medicare Supplement Is Best for You?
by John Claeys
What Are You Looking For?
In some ways, the question, “Which Medicare supplement is the best?,” is like asking, “Which car is the best?” That question needs to be countered with, “Well, what are you looking for? Do you want a car that is reliable, or are you looking for comfort, or do you want great gas mileage, or would you like one that is a head-turner . . . ?”
Notice the focus on you in this last series of questions. Whenever I meet with someone, I want to help and guide them toward the best for them. Thus, the better question is not, “Which Medicare supplement is best?”, but, “Which Medicare supplement is best for you?” This helps to narrow the field. (This article focuses on Medicare supplements; note that there are definitely differences between supplements and Advantage Plans.)
The Top Ten Choices
While, there are not nearly as many choices when it comes to Medicare supplements as there are when buying a car, there are some. If you want the lowest premium and don’t mind the risk of paying an annual deductible of $2,180, you might go with the high-deductible Plan F. Or, perhaps, you want a low premium but don’t want a high deductible on your plan—and don’t mind taking the risk of no cap on your out-of-pocket spending, then you may want Plan N. Or, maybe you want the Cadillac of all supplements, so you choose Plan F. So you do have choices; after all, there are ten different Medicare supplements, which have varying deductibles (or no deductibles), copays, and coverage. (However, there are some things they all have in common—what Medicare supplements do not cover.)
Understand How Medicare Works
Therefore, we could get very complex in this article, but I have made it a practice to make the complex simple; so, let’s narrow down the list. However, before reading further, it is important for you to understand how Medicare works in order to better understand how the supplements work. Keep in mind that a Medicare supplement can only provide coverage on a medical event that Medicare covers; it works in conjuncture with Medicare. So, you might want to read (or re-read) my blog post on “How Does Medicare Work?”
Narrowing the List of Medicare Supplements
The most popular Medicare supplement is Plan F, followed by Plan G, then Plan N. The high-deductible Plan F drops to halfway down the list in terms of popularity. Due to the amount of potential out-of-pocket costs (money you would have to pay for deductibles, copays, and not covered expenses), people tend to avoid the seven least popular supplements; and I concur with that avoidance. So, let’s fast-forward to the three most popular supplements and analyze them.
What’s Wrong with Plan N?
The third most popular supplement is Plan N. In my opinion, it sits in this position because of its low premium (at least with some insurance companies) and because of its appearance of fairly low out-of-pocket costs. I say “appearance” because one could actually have an extensive bill with the N Plan; and here is where we approach its downside.
Like Plan F and Plan G, the N Plan does a great job of covering Part A out-of-pocket potential expenses. On medical events covered by Medicare (keep in mind the basic adage that if Medicare does not cover something, the supplement will not cover it, either) under Part A, Plan N will pick up the rest, including the Part A deductible, the per day hospital stay and the per day skilled nursing stay (that is, from days 21 to 100). However, expenses could still be incurred in the hospital under Plan N—those which fall under Part B Medicare.
Under Part B coverage, Plan N has a deductible, which, currently, is $183. After meeting the deductible, which applies for doctor office visits, doctor charges in the hospital, and outpatient medical (labs, tests, x-rays, MRIs, etc.), there is a $20 copay for each Part B charge. In addition, there is a $50 copay for each emergency room visit. However, the two most problematic issues with Plan N are: the excess fee and no maximum out of pocket on the insured’s expenses.
The excess fee applies to doctors who choose not to accept a Medicare assignment (that is, they choose not to limit themselves to Medicare’s contractual payment to doctors). Those particular doctors can charge an extra 15% over and above Medicare’s contractual agreement. So who gets stuck paying the extra 15%? The insured who possesses the N Plan gets to pay it, which can really add up.
Suppose you have a hospital stay in which half a dozen doctors bill you (not unusual at all!). Let’s say two of those doctors have not accepted a Medicare assignment (entirely possible). This would mean you get to pay two bills of an additional 15% charge! Depending on the original charge, this could be a significant hit to the pocketbook!
On top of that, with Plan N, you will get charged a $20 copay for each bill the other doctors charge you. Even worse, there is no cap on your out-of-pocket spending with the N Plan. You could just keep getting billed!
For these reasons, I do not recommend Plan N. But we have two more supplements to examine.
Plan F: Is It Worth It?
The F Plan is currently the most popular of all the supplements; however, it will soon be replaced in that position by Plan G. Its coverage and convenience have made Plan F the choice of many in the past. On any medical event covered by Medicare, the holder of the F Plan should have zero out of pocket! This makes this plan very convenient, as the insured does not have to mess with copays and deductibles; just show your card, and that’s the end of it.
Up till recently (the past year, or so), Plan F, among many insurance companies, has been a good buy. But two things have occurred which have caused me to recommend the G Plan.
First, a number of insurance companies have lowered the premium on Plan G. With some companies, the Plan G premium is low enough that the insured will save approximately $200 per year with the G Plan versus Plan F, even after meeting the Plan G deductible.
Second, as of 2020, Plan F and Plan C will no longer be offered, plans which pay the Part B deductible. Because insurance premiums are based, largely, on claims and the size of the pool of insureds (that is, for example, the amount of people in a particular area who have Plan F), when a plan is no longer offered, the size of that insured pool will eventually shrink. When it shrinks, it will not have the ability to absorb claims as well, which will cause premiums to go up. This all means that, eventually, Plan F will become very expensive to have. And because, outside of your introductory open enrollment, you need to health-qualify to change supplements, it is better to get the right plan now. (Look for another article on this topic.)
Plan G: The Winner!
This leaves Plan G as my recommendation for a supplement. It provides the best value when looking at coverage versus premium. However, with the supplement decision solved, there still remains the choice of insurance company which carries Plan G.
Which Insurance Company Is the Best for You?
Many insurance companies offer Plan G, so which one is the best for you? In answering this question, it is important to realize that Medicare has designed all of the supplements but has handed them over to private insurance companies to administrate and to sell. In addition, Medicare is in control of the coverage, as Medicare determines what is covered; and the supplement, then, follows Medicare’s lead in payment of claims.
All of this means that Plan G will be exactly the same plan from one insurance company to the next. There will be no difference in how your Plan G pays claims, even if you get the plan with the most expensive of insurance companies.
In fact, there will only be two differences in a Plan G from one insurance company to the next: 1) the premium the insurance company charges for that plan currently; and, 2) the rate increases the company may have in the future. While no one can predict the future, a good, experienced, independent (all key terms) insurance agent should be able to tell you about past performance (past rate increases) of companies, which can be used as a predictor of future rate increases. Such an agent should also be able to let you know about companies with the lowest Plan G rates in your area.
Based on all of this information, what is the best Medicare supplement for you? In my opinion, it is Plan G with the insurance company with the lowest premium and lowest history of rate increases in your area. Just find the agent who will help you enroll on that plan, and you will be doing yourself well with your Medicare coverage.
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