It has long been assumed that Medicare Advantage plans are the way to go when you need a low monthly premium. The risk trade-off, of course, are higher out of pocket costs until you reach the annual spending limit.
There is, however, one Medicare supplement that has similar premiums and an annual out of pocket limit, just like Medicare Advantage. It’s Medigap Plan K.
Like Medicare Advantage plans, Medigap Plan K offers partial coverage for the gaps in original Medicare. Plan K beneficiaries pay all cost-sharing for covered services and benefits until they reach the annual out of pocket limit ($5,560 in 2019). When the beneficiary reaches the annual spending limit, their Plan K kicks in and begins paying all (100%) Medicare-approved costs for the rest of the year.
According to the Kaiser Family Foundation, in 2015, 46% of all Medicare Advantage enrollees have plans with a $6,700 out-of-pocket limit. This suggests that a Medigap Plan K policy would offer cost savings to nearly 50% of all people presently enrolled in a Medicare Advantage plan.
No First Dollar Coverage
Plan K does not offer “first dollar” coverage like the popular Plan F, but it does offer 50% coverage on most Medicare benefit gaps. Comparatively, with a maximum out of pocket expense of $6,700 in 2019 (if you use in-network providers), many Medicare Advantage plans have co-payments for hospital inpatient and medical services that exceed Plan K’s out-of-pocket costs.
More benefits of Medigap Plan K vs. Medicare Advantage Plans
Unlike Medicare Advantage plans, Plan K beneficiaries are not required to use provider networks or get referrals to see a specialist. This is a significant benefit, particularly if you want complete control over your healthcare options.
Plan K beneficiaries do not have to worry about the annual changes of Medicare Advantage plans. This includes service area changes, which happen frequently.
Plan K is a guaranteed renewable policy. This means the insurance carrier cannot cancel your plan if you continue to pay the premium. Medicare Advantage plans terminate at the end of each year. Renewal is not guaranteed.
Plus, Plan K benefits are fixed and cannot be modified by the carrier. Medicare Advantage plan benefits change on a yearly basis. There is no guarantee that a policy you sign this year will not change drastically next year.
Medigap Plan K Coverage
Plan K offers the following coverage on Medicare benefits:
Plan K pays at 100%:
- Medicare Part A coinsurance and hospital costs, including an additional 365 days of coverage after Medicare benefits are exhausted
- Preventive care Medicare Part B coinsurance
Plan K pays at 50%:
- Medicare Part A
- Inpatient hospital deductible
- Skilled nursing facility coinsurance
- First 3 pints of blood
- Hospice co-payment and/or coinsurance
- Medicare Part B
- First 3 pints of blood
- Co-payment or coinsurance benefit
All cost-sharing applies to the annual out-of-pocket limit.
Plan K pays at 0%:
- Part B deductible (applies to annual out-of-pocket limit)
- Part B excess charges (do not apply to annual out-of-pocket limit)
Plan K Simply Adds Up
A Medigap Plan K policy cuts your Medicare Part A and B co-payments by half, and all co-payments apply to the $5,560 annual out-of-pocket limit. If you reach the out of pocket limit, you will have paid less than if you enrolled in most Medicare Advantage plans (in 2019 the maximum out of pocket limit is $6,700 for in-network providers and $10,000 for out-of-network providers).
The most significant difference is your ability to see any physician or specialist you want without restrictions. Additionally, Plan K allows you to buy a stand-alone prescription drug plan that meets your needs, not what’s bundled with a Medicare Advantage plan.
Also see: Guide to Long-Term Care Insurance