It has long been assumed that Medicare Advantage plansMedicare Advantage (MA), also known as Medicare Part C, are health plans from private insurance companies that are available to people eligible for Original Medicare (Medicare Part A and Medicare Part B). are the way to go if you need a low monthly premium. The risk trade-off, of course, is higher out of pocket costs until you reach the annual spending limit. However, the premiumsA premium is an amount that an insurance policyholder must pay for coverage. Premiums are typically paid on a monthly basis. In the federal Medicare program, there are four different types of premiums. are so low on most of the basic plans that many seniors wonder, “are Medicare supplement plans worth it?”
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 and the insurance wonks at MedicareWire think it’s worth a look.
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It All Comes Down to Costs vs. Benefits
Like Medicare Advantage plans, Medigap Plan K offers partial coverage for the coverage gaps baked into traditional MedicareOriginal Medicare is private fee-for-service health insurance for people on Medicare. It has two parts. Part A is hospital coverage. Part B is medical coverage.. Plan K beneficiaries pay all cost-sharing for covered services and benefits until they reach the annual out-of-pocket limit ($5,880 in 2020). When the beneficiaryA person who has health care insurance through the Medicare or Medicaid programs. 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 $7,550 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, but it does offer 50% coverage on most Medicare benefit gaps. Comparatively, with a maximum out-of-pocket expenseOut-of-Pocket Costs for Medicare are the remaining costs that are not covered by the beneficiary's health insurance plan. These costs can come from the beneficiary's monthly premiums, deductibles, coinsurance, and copayments. of $7,550 (if you use in-networkDoctors, hospitals, pharmacies, and other healthcare providers that agree to health plan members' services and supplies at a set price are in-network providers. With some health plans, your care is only covered if you get... providers), many Medicare Advantage plans have co-payments for hospital inpatient and medical services that exceed Plan K’s out-of-pocket costs.
NOTE: As of 1 January 2020, Medicare supplement policies are no longer allowed to offer first-dollar coverage, as provided by Plan F and Plan C. If you have one of these plans you can keep it, but new policies can’t be issued.
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 in Medicare Advantage plans. This includes service area changes, which occur frequently.
Plan K is a guaranteed renewable policyAn insurance policy that can’t be terminated by the insurance company unless you make untrue statements to the insurance company, commit fraud or don’t pay your premiums.. 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 AMedicare Part A is hospital coverage for Medicare beneficiaries. It covers inpatient care in hospitals and skilled nursing facilities. It also covers limited home healthcare services and hospice care. coinsuranceCoinsurance is a percentage of the total you are required to pay for a medical service. and hospital costs, including an additional 365 days of coverage after Medicare benefits are exhausted
- Preventive care Medicare Part BMedicare Part B is medical coverage for people with Original Medicare benefits. It covers doctor visits, preventative care, tests, durable medical equipment, and supplies. Medicare Part B pays 80 percent of most medically necessary healthcare services. coinsurance
Plan K pays at 50%:
- Medicare Part A
- Inpatient hospital deductibleA deductible is an amount a beneficiary must pay for their health care expenses before the health insurance policy begins to pay its share.
- Skilled nursing facility coinsurance
- First 3 pints of blood
- HospiceHospice is a special way of caring for people who are terminally ill. Hospice care involves a team-oriented approach that addresses the medical, physical, social, emotional, and spiritual needs of the patient. 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 the annual out-of-pocket limit)
- Part B excess chargesA Medicare Part B excess charge is the difference between a health care provider’s actual charge and Medicare’s approved amount for payment. (do not apply to the 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 $7,550 for in-network providers and $10,000 for out-of-network providers).
The most significant difference between a Plan K policy and an Advantage plan is your ability to see any physician or specialist you want without restrictions. Additionally, Plan K allows you to enroll in a stand-alone prescription drug plan (see here) that meets your needs, not what’s bundled with a Medicare Advantage plan.
You can compare Medicare Supplement Plan KMedicare Supplement Plan K is one of two unique Medicare supplements with shared-cost coverage and an annual out-of-pocket limit. This is a plan that works for people looking for help with certain Original Medicare costs... rates here.
Need a Little More Coverage without a Lot More Cost? Look at Plan N.
Many seniors say they are frightened away from Plan K due to the potential out-of-pocket costs. This is just one of the reasons that Medicare supplement Plan NMedicare Supplemental Plan N is one of the ten standardized Medigap plans. Although it is one of the newest plans available, Medicare Plan N is quickly becoming a favorite with Baby Boomers aging into their... is becoming extremely popular.
Although Plan N does not have an annual limit, like K, it is a cost-sharing plan. Medigap Plan N covers all but two of the same benefits as Plan F. The two costs it does not cover are the annual Part B deductible and Part B excess charges.
Plan N’s cost-sharing component works on two costs, the Medicare Part A deductible, and the Part B coinsurance. With a Plan N policy, you pay 50% of the Part A deductible (when admitted to the hospital as an inpatient) and a $20 copaymentA copayment, also known as a copay, is a set dollar amount you are required to pay for a medical service. when you see your doctor. You’ll also pay a $50 copay for emergency room visits that do not result in an inpatient admission.
It’s worth comparing these costs with the average costs in Medicare Advantage. For example, the Medicare Part A deductible is $1,600. With a Plan N policy, you’d pay a $720 deductible. Easy math. However, most Medicare Advantage plans have a daily copay, for the first 5 days, averaging $295 per day. As a result, a simple 3-day stay in the hospital with a Medicare Advantage plan will likely cost you $900 or more. Most urgent care and emergency room visits cost more under Medicare Advantage, as well.
Two Superior Options for Healthy Seniors
If you’re leaning towards Medicare Advantage because the quotes you’re getting for top-tier Medicare supplement insuranceMedicare Supplements are additional insurance policies that Medicare beneficiaries can purchase to cover the gaps in their Original Medicare (Medicare Part A and Medicare Part B) health insurance coverage. is too steep, it’s worth comparing your actual costs in Medicare Advantage vs. Plan K and Plan N. These two Medigap plans are an excellent way for healthy seniors to save money in their sixties and seventies while ensuring peace-of-mind in their eighties and beyond.
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