Medigap – You Can Keep Plan F, but Should You?

Many Medicare beneficiaries with Medigap (or Medicare Supplement) have Plan F, the most comprehensive plan.  It pays for both the Part A and B deductibles, the 20% of approved medical (Part B) charges that Medicare doesn’t pay, any Part B Excess charges, and the skilled nursing co-insurance. 

People have Plan F because they have been told that it “pays everything.”  But in truth nothing pays everything.  It does pay for everything that is approved by Medicare but is not fully paid by Medicare.

Starting on January 1 of 2020, as a result of the Medicare Access and CHIP Reauthorization Act (MACRA), people who are just coming on to Medicare in 2020 and beyond will not be allowed to purchase Plan F or Plan C.  Those two are plans that pay the Part B (doctor bills) deductible, which is $185.00 per calendar year. People who have Plan F now will be allowed to keep it.

The point of this article is to tell you that people are overpaying if they have Plan F, and it will get worse in the future.

Let’s start by comparing Plan F with Plan G, which pays everything that Plan F pays, except for the $185.00 Part B deductible.  There are two reasons why Plan G is the more strategic option, both for the future and for the present.

For the future, one only needs to consider that, with no new people coming in, the price of Plan F will rise more than that of Plan G.  As people get older, their claims more likely will increase. But now there will be no younger Medicare beneficiaries in Plan F, as there will be in Plan G.  The younger ones will usually have fewer and less expensive claims.  Rate increases in Indiana come with increases in age and with the company’s claim experience.  The future is not bright for price stability in Plan F.

But even more important is the situation for the present. The fact is that the difference in annual premium for Plan F vs. Plan G is much greater than $185.00!  I took the average of the premium difference in the two Plans for the present year.  I averaged the difference in seven companies’ Plans.  It came out to a surprisingly high $429.43.  If we subtract the $185.00, it turns out that that those with Plan F are overpaying by at least $244.43 – and that’s if they meet the 185.00 deductible for the year.  And if they don’t satisfy that deductible, they are overpaying by even more – by as much as over $400.00 per year.

The best strategy is clear:  If you’re turning 65 in 2020 and beyond, get Plan G.  And if you already have Plan F and are insurable, you should consider switching to Plan G.  (For an alternative to Medigap, see Considering Medicare Advantage.)