Planning for Medicare requires you to figure out a number of variables. These variables often interact with each other to create new variables, which can make it hard to create a sound plan. One of the tried and true ways to make the most of Medicare is to use Medicare Supplement Insurance. While this is a great strategy for many people, it can become expensive in later years. These higher prices at older ages can force people to abandon their coverage, which can expose them to higher health care costs. One strategy to avoid this is to use a high deductible Medicare Supplement plan. In this short article, we’ll look at how High Deductible Plan G works and what can make it a good fit for your retirement plan.
What Is High Deductible Plan G?
It may sound obvious, but it’s worth starting with the basics here: High Deductible Plan G is exactly like “normal” Plan G, but with a higher deductible. Plan G is the most comprehensive Medicare Supplement plan available for Medicare beneficiaries who become eligible on or after January 1, 2020. Prior to that date, Medicare Supplement Plan F was the most comprehensive plan available.
Plan G closes almost all of the gaps in Medicare. Gaps are the costs that you’re expected to pay out of pocket. Regular Plan G covers:
- Part A daily hospital co-insurance, and 365 extra hospitalization days beyond what Original Medicare covers
- Part B co-insurance
- Blood (your first three pints – Medicare covers any needed beyond that amount)
- Part A hospice co-payments
- Part A skilled nursing facility co-payments or co-insurance
- Part A deductible
- Part B excess charges
- Emergency coverage outside the United States
There is only one cost that Plan G doesn’t cover: the Part B deductible. With Plan G, you pay the Part B deductible and then the plan will cover 100% of the rest of your Medicare-approved medical expenses the rest of the year.
High Deductible Plan G works the exact same way, expect that the deductible you must meet is much higher. For 2022, the deductible is $2,490. You must pay this amount before your Plan will begin paying benefits. In exchange for the higher deductible, the monthly premiums are significantly lower than for regular Plan G.
What Are The Pros Of High Deductible Plan G?
The biggest benefit of High Deductible Plan G is the lower premium. This coverage is much more affordable on a monthly basis. So, High Deductible G could appeal to someone who had a fixed income but substantial savings. Since medical expenses are normally sporadic, someone in this position might not mind dipping into savings occasionally to pay medical bills; they’re more concerned about making their fixed income go as far as possible.
Another benefit to High Deductible Plan G is that the premiums are very stable. This means that they tend to increase in a slow and steady way. This is the case because policy owners tend to pay most of their own claims; the insurance company saves money every year due to the deductible. If you enroll in High Deductible Plan G, you can be confident that you’re premiums won’t be tremendously higher in ten or fifteen years, like they have been for many people with Plan F.
The really great news is that Medicare continues to pay their share of your Medical bills, even if you haven’t reached the deductible. So, if you use Part B services, for example, Medicare will pay 80% of the amount (once you’ve met the small Part B deductible). You’re only paying 20% of the cost. You’re not paying full price for procedures when you’re still working towards your deductible.
This means that you’re fairly unlikely to hit the deductible in most years. You’re only incurring expenses at 20% of cost for Part B services. The only way you’ll meet the deductible amount is if you have a lengthy hospitalization, skilled nursing stay, or many Part B charges. But, the great news is that if you do have a medical crisis or emergency, your spending is capped at the deductible amount – $2,490 for 2022. In this way, High Deductible Plan G combines the premium cost savings of a catastrophic coverage policy with the comprehensiveness of low deductible health insurance. Once you meet the deductible, your Plan will pay 100% of Medicare-eligible costs for the rest of the year. The deductible resets in January of each year.
The Cons Of High Deductible Plan G
There are some negatives to this plan. The main two being the unpredictability of medical costs and the possibility of “locking yourself in” to a High Deductible plan and not being able to move to more comprehensive coverage.
Your out of pocket costs can be variable with High Deductible Plan G. Obviously, you know you’ll be paying somewhere between $0 (if you don’t use any medical services during the year) and $2,490 (the deductible amount for 2022). For many people, that’s a big range. One of the reasons people choose to go with regular Plan G is that it limits their total medical spending to just a couple hundred dollars. People like knowing their costs are capped at a very low level. If that kind of thing sounds good, then you might be better off paying the higher premiums for normal Plan G.
The other potential problem is that if you choose High Deductible Plan G when you first enter Medicare, you may not be able to switch to another, more comprehensive, plan at a later time. Once you pass your Medicare Supplement Plan Open Enrollment Period, which lasts for six months and begins when you are both at least age 65 and actively enrolled in Part B, you are not guaranteed enrollment into a different Medicare Supplement plan. You can still apply for different coverage, but you’re likely to need medical underwriting. If your health has declined since you first entered Medicare you may not be eligible to switch to a different Medicare Supplement Plan. Or, you might be charged a higher rate which would make switching unappealing. In other words, it’s possible to get “stuck” in a Medicare Supplement plan. The question is, do you want to be “stuck” in a high deductible plan?
If the answer is no, then you’re probably better off just choosing normal Plan G from the start. It may be possible to move to the high deductible version later in life. Depending on the insurance company, moving from regular Plan G to the high deductible version may not require underwriting, since it is a “downgrade.”
Final Analysis Of High Deductible Plan G
After weighing the pros and cons of High Deductible Plan G, who is it a good fit for? This plan is definitely of interest to those who want a low and hard cap on spending, but for a minimum monthly premium. It is a budget version of Medigap Plan G and it will work well for you as long as you’re prepared to pay up to the deductible amount each year. This plan provides airtight coverage against costs higher than $2,490 for 2022. If you want more information about High Deductible Plan G, or if you want to know how much money you can save by switching to it, contact us today. You’ll speak with a licensed insurance agent who can help you compare quotes from multiple companies and help you pick the one that’s right for you.