Original Medicare And Medigap
Medicare had its beginnings in 1965 when Lyndon Johnson was the President and Ladybird was the first lady. Most of us remember very little about the Johnson presidency other than for maybe what we saw in the movie Forrest Gump. When Medicare had its beginning, those us who are turning 65 in 2021 were only 9 years old and I doubt any of us were thinking, “Someday I get to have that.”
But here it is 56 years later and in another 9 years, Medicare will be 65 years old which will make Medicare eligible for Medicare. Most of us have been paying into Medicare for a long time, too. If we started work at age 20 then we have been paying into Medicare for 45 years which is nearly as long as Medicare has even been around. And now, after 45 years, it is finally our time to reap the benefits.
The usual way that people become eligible for Medicare is by turning 65. Some people, however, become eligible sooner through disability. More about that in the Disability section.
You have two Medicare paths. The first path, Original Medicare is just that. Much as Original Coke is still Original Coke, Original Medicare, with some minor tweaks, is pretty much the Medicare that we’ve had for 56 years. Think of your second option, Medicare Advantage, birthdate 1997, as being like New Coke. Only where New Coke was a flop, Medicare Advantage has been a huge success, today sharing the market equally with Original Medicare.
So let’s start with the question I am often asked by clients; in fact, it is the number one question I get asked: “Which is better Original Medicare or Medicare Advantage?”
As a Medicare expert, I recognize that the answer is like a lot of other Original Version versus Newer Version comparisons: Which is better Original Dorito or Flaming Hot? Original pizza crust or cauliflower dough crust? Which is better is not a “definitely this one” answer but is a matter of what you are looking for in a Dorito flavor, pizza crust, or a Medicare plan.
In the Medicare world, those who sign up for Original Medicare versus those who opt for Medicare Advantage seem to be divided on their preference 50/50.
The Main Characteristics of Original Medicare Are:
1. Medicare stays in the picture and administrates the plan, When decisions need to be made—for instance, if a particular test will or won’t be covered—it is Medicare (CMS) itself that decides. This is very different from Medicare Advantage where the carrier itself, such as Humana or Aetna, substitutes for Medicare. The carrier then makes all of the coverage decisions although they do have to follow Medicare’s rules as to what needs to be covered.
2. With Original Medicare, Medicare itself pays only 80% of your medical costs. The 20% that you are responsible for has no ceiling so if the bill came to $500,000 you would be responsible for $100,000 of the cost as your 20% share. This is where a Medigap Insurance Supplement (usually Plan G) comes into play, picking up most of the 20% which you are responsible for.
3. Medigap Supplements are sold by private healthcare insurance companies such as AARP United, Humana, and Aetna who are often the same companies that sell Medicare Advantage plans as well.
4. The various Plan names have letters to them: Plans A, B, D, G, K, L, M, and N along with there being a second Plan G called high deductible Plan G. Many people get confused between the parts to Medicare, which are also identified by letters: Part A is hospital costs, Part B other medical costs, and Part D prescription drug costs and Medigap Plans. If you are Part A confused, and Plan G confounded, join the club because even we veteran agents stumble occasionally and say Part A when we meant to say Plan A.
5. Each Medigap Supplement plan such as a Plan G is set by the government so that if there are 25 different carriers selling a Plan G or a Plan N in your area, as there probably are, then all 25 plans must be identical (standardized) in their coverage and copays. This way one plan cannot decide to beat the competition by making their annual deductible $100 where everyone else’s is $203. Think of it this way: Every Plan G is a G is a G, no matter if you get it from Carrier A, B, or C. No one is allowed to modify their Plan G to make it a better G. Gee!
6. The once-popular Medigap Plan F as well as Plan C are still available but only to people who turned 65 before January 1, 2020. The only difference between Plan F and Plan G is that Plan F has no deductibles of any kind and Plan G has a once-a-year deductible of $203. Plan F is also more expensive, often even after accounting for Plan G’s $203 deductible. Clients who meet the age requirement to purchase Plan F usually opt for Plan G because G is the better deal.
7. Carriers are free to price their plans, such as for a Plan G, at any price they want to and because some carriers do a better job controlling their overhead costs than others, prices vary greatly. When carriers set their prices with the State Insurance commission that price becomes locked in until they submit and are approved for a price change.
8. A carrier cannot offer a special price discount if you buy directly from them. In knowing this, you can get the expertise of a Healthcare Plan expert such as we at MedicareIGetIt are on your side and it never costs you one single dime in extra costs to do so.
9. Medicare does not cover prescription drug costs. This is where a stand-alone Prescription Drug Plan comes in which you will need to purchase separately. Even if you don’t take any drugs you will still need a stand-alone Prescription Drug Plan if you choose Original Medicare because otherwise, you will face a stiff accumulated fine added to the cost of your Medicare each month for life. You will not however be fined if you have other credible drug coverage such as through Group Health Insurance or the Veterans Administration. NOTE: If you go with Medicare Advantage you won’t a need stand-alone Prescription Drug Plan
10. Original Medicare does not cover dental, vision, or hearing. If you want dental coverage with Original Medicare there are separate plans that cover dental. See the section on Dental and Vision.
Medigap Plan Choices
This section places the Medigap Plans in order of popularity of the various lettered plans. Just to make it fun, call it more appetizing to think about, we’ll also compare each plan to the list of America’s favorite pies. By far the most popular plan is Plan G which we will compare with what is by a country mile the most popular pie in the USA. You guessed it, apple.
Plan G covers 100% of your Part A (hospital) and Part B (doctor, lab tests and other medical) costs. Your only cost, besides your monthly premium, is a once a year Part B deductible of $203 in 2021. Plan G covers the Part A deductible in total.
Plan G is also the only letter plan (other than Part F) that covers Excess Charges.
Medicare (CMS) has a prescribed amount for each service and procedure. For instance, if you dislocate your pinky finger Medicare might say a doctor can bill $150 to put a splint on it. An index finger that is needed to make a “peace sign” might, with peace being important, might be worth $200. After all, a middle finger gesture without a functioning index finger isn’t very peaceful.
Doctors and healthcare providers can choose to participate with Medicare called “Accepting Medicare Assignment” or they can choose not to accept the assigned amount and bill you up to 15% more than the Medicare allotted amount, called “Excess Charges.” As an example, if you go to a clinic and a particular procedure has a Medicare assigned cost of $5,000 then a doctor or clinic could charge up to 15% more or in the example $5,750. With a Plan G Medigap Supplement, this extra amount would be picked up by your Plan G carrier, but with any other supplement, it would not be.
More and more doctors and clinics are requiring this 15% excess amount.
Plan N is similar to Plan G in that it covers all of your Part A and your Part B costs (except for the $203 deductible) but with an exception. You also pay a $20 doctor visit copay for doctor office visits and $50 for emergency room visits, neither of which you pay for a Plan G.
Plan N does not cover Excess Charges. If they are charged, the 15% cost would be out of pocket. Pumpkin is #2 in pie popularity!
Plan G+ is also known as “High Deductible” Plan G. It functions exactly how a regular Plan G works including covering the excess charges the same as regular Plan G does.
Here is the difference and the kicker: Plan G has a deductible of $2,340 that you would first pay before your plan begins to pay dime one of your costs. This amount is reset by the government each year, meaning it goes up and not down. Pecan is #3 in pie popularity!
Plan A is like the meat pie that you see in the picture, a meal on a budget. You pay the Part A deductible of $1,484 in 2021 as well as of the Part B deductible of $203. It does not cover foreign travel emergencies or skilled nursing care facilities as the other plans do; with both you are on your own. It is also the least expensive plan.
Plan B is Plan A’s cousin. It is identical to Plan A other than it covers the $1,484 Part A deductible which Plan A does not. Think of it as being a meat pie with a little more meat and crust. Meat pie is #4.
Plan K is a halfer. It’s motto is, “You pay half and we pay the other half.” Plan K covers all Part A costs but you pay 50% of the deductible which is $740. All the Part B costs such as doctor visits, lab and tests and skilled nursing are split 50/50 until you reach the limit of $5,880 where the plan then covers 100% of the rest of your costs.
Plan L is Plan K’s big brother. It works identically to little brother other than it picks up 75% and your out-of-pocket limit is reduced to $2,940. Blueberry is #5 in pie popularity! And tops for pie popularity! And tops for pie eating contest.
Select Plans: Such as Plan G Select
Select Plans give you a small discount but in exchange for the discount, it limits you to hospitals (and sometimes to doctors as well) that are in that carrier’s network. I equate it to getting a small discount to stay at a beach resort but the catch is you are only allowed to use certain parts of the beach.
The problem is, what if the restricted parts of the beach are the best? The same thing can be said for restricting hospitals and doctors.