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April 7, 2016

Why the Medicare Supplement Plan F Works Best

Why the Medicare Supplement Plan F Works Best

Your mailbox is full. After turning 64 and 1/2, you’re suddenly the most popular person on the block and the poor mailman can barely find room to stuff all those shiny brochures into the box. In terms of Healthcare, turning 65 really is a second birthday welcoming you to the world…of Medicare. Assuming you don’t have a better group option or other coverage, Medicare should reflect a significant reduction in your out of pocket medical expenses and a big part of this is the Medicare supplement insurance plans that work in conjunction with traditional Medicare. Let’s take a look at these plans and how they differ but most important, look at which plans stand out as best options to cut through some of that mailbox overload where everyone’s trying to sell you something.

First, a quick introduction is in order. The Medicare supplements plans are different from Advantage plans, the other primary option available on the market. The Advantage plans are typically less expensive on a monthly basis (if not free) but have more constraints on how care is accessed (like traditional HMO”s) and share more medical costs that are incurred as a trade off. This last piece is an important distinction which we’ll address in more detail with our Medicare supplement versus Advantage article, but let’s stay with Medicare Supplemental plans for now. The supplements in a nutshell, fill in the holes of traditional Medicare with the deductibles (physician and hospital) plus the 20% co-insurance being the primary financial pitfalls of original Medicare. This filling in of the “gap” inherent in traditional Medicare is why these policies are interchangeably referred to as “Medigap” plans. There are other smaller gaps in traditional Medicare but these two, especially the 20% coinsurance can really pose a problem without supplemental coverage. The Supplement’s coverage increase from alphabetically from A to K with a few letters missing in the middle. The traditional supplements run A, B, C, D, and F. These have been pretty established for decades now. Make a mental note on the F plan as that tends to be the darling of the Medigap world.

Let’s discuss the really critical pieces of Medicare in terms of gaps we need to fill now that medication is taken care of with Part D. We want to make sure that we do not have uncapped exposure to medical expenses especially since we are more likely to see facility based care (loosely translated as very expensive) as we get older. Fixed deductibles are one thing but an unlimited percentage of a $50K bill is quite another not to mention $250K of charges over a year’s time. Granted, the Medicare supplement plans cover the 20% coinsurance but let’s look at excess. This is critical. Excess is the amount that providers can charge above the allowed Medicare rate and it amounts to 15%. With more pressure on the finances of Medicare going forward, the trend of providers charging this excess amount will likely intensify. This becomes a primary concern for Medicare recipients looking to protect themselves and the F plan becomes are plan of choice to cover this excess charge.

Now let’s look at all the high deductible and/or fixed max out of pocket plans. Here’s the issue. These plans will be less expensive in terms of premium for sure but we’re entering a period of time when the likelihood of hitting any high deductible or max out of pocket is at it’s highest. On average, health care expenditures increase with every decade of a person’s life so to be conservative, let’s assume at some point we will hit the full deductible or max out of pocket. Now the premium savings isn’t such a good offset against the richer benefits of the F plan. If you’re gambling on being healthy and keeping the premium savings, the house might have the odds against you. The problem is that we likely will be unable to change plans if health deteriorates so we’re really making a decision for a long period of time. Again, in the long run, this points to the F plan. Obviously, you need to find the right plan for your health and financial situation but definitely keep in mind both current and future concerns. The future is right around the corner.

An article by Dennis Jarvis

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