For New Medicare Enrollees

One of the questions a new Medicare beneficiary is likely to ask is, “Should I get a Medigap Plan F or Plan G?”

The answer, if this were 2014, would likely have been Plan F; the answer today, Plan G.

The basics

Once enrolled in Medicare Part A and Part B, a person has hospital and medical insurance. However, Part A and Part B come with a slew of out-of-pocket costs. For example, in 2019, there’s a $1,364 hospital deductible, a $167.50 per day co-payment for days 21-100 in a skilled nursing facility, and a 20% Part B coinsurance (once the deductible is met). And, most important, there is no maximum limit on out-of-pocket costs. A person stricken with cancer, for example, would be responsible for 20% of every radiation or chemotherapy treatment.

To control these costs, a Medicare beneficiary can purchase a Medigap policy, officially known as “Medicare supplement insurance.” This is coverage sold by private insurance companies to help pay bills that Medicare Part A and Part B do not cover.

In 47 states, Medigap policies are standardized. There are 10 plans, each labeled with a letter. Each letter-plan represents a different package of benefits and cost sharing. For example, Plan A is very basic, covering 100% of four benefits. Plans K and L offer coverage of six benefits. However, for five of the six benefits, the individual must pay a portion of the cost (50% or 25%).

Plan F has been called the “Cadillac of Medigap plans.” It covers the maximum allowed for all nine benefits. Pay the premium and there’s first dollar coverage, which means the plan pays from day one. The beneficiary faces no out-of-pocket costs when using healthcare providers who will accept Medicare patients. According to AHIP, in 2016, 55% of those with Medigap policies had Plan F or its high-deductible version.