Medicare can be confusing.  Fortunately, the basics of all plans are identical and setup by Medicare. Both plans F and G have been offered for a number of years side by side.   The only differences are the cost of the premium and the deductible of $195 for 2020. 

Medicare has four basic parts: A, B, C, and D. Taken together, Parts A (hospital care), B (doctors, medical procedures, equipment), and D (prescription drugs) provide basic coverage for Americans 65 and older. The issue is often with health care costs that are not covered—such as deductibles, co-pays, and other medical expenses—which could wipe out your savings should you become seriously ill.

Grandfathered into plan F.  Good idea or bad idea?

People turning 65 prior to Jan 1, 2020 are grandfathered into Plan F.   One must ask themselves if staying in Plan F this is the best course of action.  Often it is not a good idea.  If you are in good health, the premium for Plan F can be 30-45% higher than plan G.  The cost savings even includes the small $195 deductible. Many ask themselves why didn’t my original insurance representative offer me Plan G?    

That’s where Part C comes in. Also known as Medicare Advantage, it’s one of two ways to protect against the potentially high cost of an accident or illness. Another option is Medicare Supplement Insurance, also called Medigap coverage. However, while Medicare Advantage and Medigap both help cover expenses that are not covered by basic Medicare, there are important differences between the two plans.

Top Facts to Remember

Medigap protects against bills for health care costs Medicare doesn’t cover.

Medicare Supplement Insurance, also called Medigap coverage, charges a premium in addition to what the person already pays for Medicare Parts A, B, and D.  

A 2018 study provided information that a retired couple can expect to spend over $363,000 in expenses not covered by Medicare A,B and D.  These costs can cripple a retired family of 2.

Medigap

Medicare Supplement Insurance, or Medigap, protects people who buy traditional Medicare against many of the additional costs a patient might pay.  In return, Medigap charges a premium in addition to what the person already pays for Medicare Parts A (many people get this free), B, and D.

Medigap or Medicare Advantage 

Let’s say a patient only has Parts A, B, and D. Here are what the holes or “gaps” in coverage would cost if a patient with Medicare were admitted to the hospital for, say, heart surgery, and complications required a long hospital stay followed by needing regular medication after it.

Because of the Part A deductible, the patient pays the first $1,408 (as of 2020), according to the Center for Medicare and Medicaid Services (CMS). After 60 days, Medicare starts paying a portion of each day’s cost.

For doctors and medical procedures (Part B premiums) at the hospital and at home, the patient typically pays 20% of all costs after meeting the $198 deductible. Unlike many other health insurance policies, there is no cap or maximum out-of-pocket amount on what a person could owe. The American Heart Association says that the minimum cost of bypass heart surgery is $85,891, in which case, the Part B co-pay could be over $17,000.  A Medicare Supplement plan from PatriotMediGap would cover the $17,000.

Because of how Medicare Part D works and depending on income, a patient could pay between 35% and 85% of the cost of some of their prescription drugs if they need enough medication. This is known as the notorious doughnut hole because Part D’s full prescription-drug coverage runs out after a person has spent $3,750 until their medication costs exceed $5,000 per year. (In 2019, coverage will end at $3,820 and begin again at $5,000.) During the coverage gap, the patient is responsible for 25% of covered brand-name prescription drugs.

Medigap policies will cover you whenever you see any doctor or facility that takes Medicare. If the doctor or facility does not accept Medicare patients, Medigap won’t cover any of those costs, even though it is a private insurance policy.

These coverage gaps mean that a particularly bad health year could leave a patient with tens of thousands of dollars in hospital bills. That’s why most people purchase Medicare supplement insurance, also called Medigap, or enroll in Part C, a Medicare Advantage Health Plan.

Both options are offered by private insurance companies. However, private insurance companies must follow Medicare guidelines regarding what they are allowed to sell.

Key Differences

It is illegal for an insurance company to sell you both a Medicare Advantage and a Medigap policy. That is, if someone has Medicare Advantage, it is illegal for a private insurance company to try to sell them Medigap coverage. Three things to consider before choosing which one to get:

Cost

Medigap coverage usually has a higher monthly premium but could result in lower out-of-pocket expenses than some Medicare Advantage plans. Medicare Advantage plans, on the other hand, generally cost less and cover more services, which can be the better option for your budget.

Choice

Medicare Advantage plans generally limit you to the doctors and facilities within the HMO or PPO, and may or may not cover any out-of-network care. Traditional Medicare and Medigap policies cover you if you go to any doctor or facility that accepts Medicare. If you require particular specialists or hospitals, check whether they are covered by the plan you select.

Lifestyle

Medicare Advantage plans often only operate within a certain region. If you’re a snowbird living in more than one state throughout the year, traditional Medicare plus Medigap is probably a better choice than an Advantage plan. This may also be true if you travel frequently because, while some Medigap plans provide coverage when traveling outside of the United States and cover you in all 50 states, Advantage plans generally do not.

Special Considerations

Figuring out the Medicare plan that’s most appropriate for your needs is probably not a do-it-yourself activity. Once you understand the basics of Medicare, get some help.

Medicare.gov provides tools that will allow you to compare plans, but the decision can be complicated.  Clients should work with a licensed insurance agent who can show you both Medicare Supplement Plans and Advantage Plans from multiple companies. Each type has its positives.”

The questions to cover, he says: “You need to understand the costs, doctor networks, coverage levels, and maximum out-of-pocket for each. Enroll in what suits your situation best.” Organizations such as Consumer Reports and the Medicare Rights Center can also help you research your decision. And you can also compare plans by going to Medicare.gov’s plan finder.