There are four different parts to the Medicare program. From its inception in 1965, it has been a government-run health insurance program for seniors aged 65 and people with disabilities and medical conditions. But, did you know it isn’t all-inclusive care? That’s where Medicare Plan G comes in.
Let’s start with a quick review of what Medicare covers and its four Parts A, B, C, and D.
Medicare Part A is your hospital insurance. It pays about 80 percent of all Medicare-covered inpatient costs. These include traditional hospital stays, nursing facility care, mental health inpatient facilities, and hospice care, too. When you need inpatient services, you pay a per benefit period deductible and coinsurance, equalling about 20 percent of the hospital costs, as an out-of-pocket cost.
Medicare Part B is your outpatient medical insurance. It covers about 80 percent of Medicare-approved medical services, including doctor visits, lab tests, and diagnostics. There are deductibles, copayment, coinsurance, and excess charges that you pay with Part B.
If you truly take the time to understand Original Medicare’s out-of-pocket costs, they will scare you, and they should. Let’s face it, healthcare costs in America are out-of-control, which is exactly why our health insurance costs so much, including Medicare.
The out-of-control costs are the number one reason the government added Medicare Part C, more commonly known as Medicare Advantage. Part C is a private health insurance option, with the same coverage as Parts A and B, plus the option to get additional benefits like prescriptions, vision, dental, hearing, and more.
What most Medicare beneficiaries don’t realize is that the Centers for Medicare and Medicaid Services, the government agency that manages the federal Medicare program, is quietly favoring Medicare Advantage plans over Original Medicare because it saves the government money. Read Is CMS Biased in Favor of Medicare Advantage?
And that gets us to Medicare Plan G and why it’s so important.
NOTE: Many people say “Medicare Part G,” but the actual name for this plan is Medicare Supplement Plan G or Medigap Plan G. An easy way to remember is that only Medicare speaks in “parts”. Private insurance companies sell “plans”. Plan G is a private insurance product.
What is Medicare Supplement Plan G?
Medicare Plan G is a Medigap policy, also known as supplemental Medicare insurance. There are currently 10 lettered Medigap policies (A, B, C, D, G, F, K, L, M, and N), and Plan G is one of the best because it provides comprehensive coverage. Plan G pays for the gaps (e.g., deductibles, copays, coinsurance, and excess charges) that are baked into Original Medicare.
Let’s talk a little more about the gaps in Medicare and why additional coverage is so important.
Medicare beneficiaries pay a monthly premium, deductibles, and coinsurance. Generally speaking, Original Medicare pays for about 80 percent of all covered services. That means you, the Medicare beneficiary, are responsible for the other 20 percent.
Your 20 percent share is the gap in coverage, and it can be a significant amount of money. It’s not too bad for most medical services (Part B), but it can be a whopper for inpatient care (Part A). Life-threatening medical care to treat a heart attack, stroke, or car accident can easily run up your out-of-pocket expenses into the thousands.
For this reason, about 90 percent of all Medicare beneficiaries have additional insurance. Some people have Medicaid because of their income, some people have TRICARE for Life because they served in the military, and other people have retiree benefits from the railroad or their employer. If you don’t have these benefits, there’s Medigap or Medicare Advantage.
Savvy seniors prefer Medigap, and Plan G is as good as you can get if you got your Medicare benefits on or after 1 January 2020. There are other plan options, but Plan G is the best.
Medicare Supplement Plan G Coverage
Medicare Supplement Plan G is easy to understand because it covers all of the gaps in Original Medicare, except one, the annual Medicare Part B deductible. This is the amount you pay out of pocket every year before Medicare kicks in and starts paying its 80 percent share of your doctor, lab, and diagnostic costs. Currently, this annual deductible amount is a little more than $200 per year. It adjusts every January.
To be more specific, Medicare Plan G covers your Part A deductible and coinsurance for inpatient care. It also pays your Medicare Part A hospice and skilled nursing coinsurance costs. And it covers 100 percent of the cost of your first three pints of blood if needed for a transfusion.
The great thing about Medicare Supplement Plan G is that all insurance companies must provide the exact same coverage. This means that no matter which insurer or insurance agent you choose, you’ll get the exact same coverage. The only difference is the monthly premium.
This Medigap plan also covers your Medicare Part B coinsurance and any excess charges from your doctor or specialist. Medicare Part B Excess Charges are additional costs (up to 15%) that your doctor can charge you if they do not accept Medicare assignment (standard rates). These costs would normally get paid by you, but Plan G covers them in full.
Is Plan G Better Than Plan F? What About Plan N?
The best way to understand Medicare supplement insurance plans is to look at coverage vs. cost. After all, they are insurance policies that are designed to cover your out-of-pocket risk. They are not health insurance. This is why you can be denied coverage.
Currently, Plan F is the very best Medigap policy available. However, Plan F and Plan C are no longer available to anyone getting their Medicare benefits on or after 1 January 2020. Blame Congress, they want to completely do away with insurance coverage of the Medicare Part B deductible. As a result, Plan G is now the best for new beneficiaries.
But, here’s the thing, overall Plan G is almost always cheaper than Plan F.
The only difference between Plan G vs. Plan F is the Part B annual deductible. So, if you annualize the cost of Plan G premiums and the Part B deductible and compare it to the annual cost of a Plan F policy, you will find that Plan G costs less.
In fact, if you are super healthy, it can cost a lot less, because your annual wellness exam is free. Many healthy seniors never pay the Part B deductible and still see their doctor every year.
And, that brings us to Medicare Supplement Plan N, which is an excellent option for healthy people. Although Plan N has a little less coverage than Plan G, what it does not cover does not affect healthy people, and it offers huge savings.
Does Medicare Plan G Cover Prescription Drugs?
We talked about Medicare Part A, B, and C above, but we skipped over Medicare Part D, which is Medicare’s prescription drug coverage program. The bad news is that it’s not included with any Medicare supplement insurance policies, including Plan G, but Part D plans are available for as little as $20 or so in most areas.
The nice thing about Medicare Part D plans is they are a stand-alone plan, so you can get the best prescription drug coverage for your specific needs. If you have regular prescriptions, you’ll need to do a little research to find the prescription drug plan that offers you the best price on your prescriptions.
What About a Travel Emergency, Does Plan G Cover Me?
If you travel outside the continental United States and its territories, Original Medicare and Medicare Advantage do not cover you if you have a medical emergency. Most Medicare supplement insurance policies, including Plan G, do cover you (up to the limit of the policy).
How much does Medicare Plan G cost?
Medicare Plan G policies are sold by private insurance companies and are not offered through Medicare.gov, and premium prices vary based on multiple factors.
There are three ways that insurance companies set their prices. One is that they can all be the same price (community-rated). Everyone pays the exact same amount regardless of age. Some are based on your age when you purchase your policy. If you start the plan younger, you pay less than if you start the plan when you’re older. And the third way is based on your current age. As you grow older the cost of the plan increases.
Medicare Part G can either have no deductible or a high deductible. Additionally, it can be used to help pay for the deductible for Medicare Part A. It also pays for the coinsurance for Medicare parts A and B, essentially covering the gap left by those policies. This is especially helpful for those with very high medical costs who need help playing for the 20% coinsurance on Original Medicare.
What About High-Deductible Plan G?
You might have heard that a high-deductible Medicare supplement can save you a lot of money. This is true in some circumstances, and there is a High-Deductible Plan G option. However, it’s not for everyone and it can be a bit risky. Here’s why.
High-deductible Medigap plans don’t pay a single penny of your out-of-pocket costs until you shell-out the full amount of the deductible. As of 2021, the deductible is $2,370 per year. And that’s a lot compared to the standard Plan G’s premiums. Think about it, if you can get a Plan G starting at around $150 per month, the annualized cost is $1,800. In most areas, a High-Deductible Plan G will start at between $50 and $60. So, add the annualized cost of $600 to $720 for the premiums to the $2,370 deductible and you’ll see the true cost in excess of $3,000, probably when you can least afford it.
Medicare Supplement Plan G works great for healthy wealthy people who can afford to self-insure. It is not a good policy for people with a limited budget or chronic health conditions.
Still Have Questions About Medicare Supplement Plan G? These FAQs May Help.
Are Medicare supplements worth it? It might seem as if Medigap plans are expensive. But, going with Original Medicare alone is not wise. The coverage gaps in Medicare add up fast, particularly if you have an emergency. Paying 20% of all your outpatient coverage might not seem so bad, but getting slapped with a $1,400 hospital bill really smarts. And that's just for the deductible! We answer this question in more detail here.
The answer varies based on your health. For super healthy seniors, Plan N offers great coverage and good savings. For people with one or more chronic health conditions, Plans F and G are more cost effective.
Most retirees have a fixed budget and can't afford to pay that much out of pocket. Without a Medicare supplement, you will not be protected from catastrophic medical costs. For more on this subject, see Do I Really Need Supplemental Insurance with Medicare?
Plan G is generally less expensive than Plan F. You can often save $25 to $40 per month by moving to Plan G. Even though you will have to pay the annual deductible out-of-pocket with Medigap Plan G, the monthly savings is almost always worth it. To compare Plan F vs G rates where you live, go here and enter your zip code.
Citations & References:
- How to compare Medigap policies | Medicare
- What’s Medicare Supplement Insurance (Medigap)? | Medicare
- Talk to someone | Medicare