If you’re shopping for a Medicare Supplement, and you’re wondering how you can save some money on your monthly premiums, your insurance agent might show you Plan K and High Deductible Plan G as viable options.
Plan K and High Deductible Plan G are the lowest-cost Medigap plans available in most areas. But, do they really save you money?
Key Takeaways
- Medicare Supplement Insurance helps fill some of the cost gaps in Original Medicare.
- Some people can afford full coverage, and the premiums do not matter.
- Some people need full coverage, and their premiums save them money.
- Some people can’t afford and/or don’t need full coverage. These people can save money with a plan that lets them share out-of-pocket costs.
- Medigap Plan K is a cost-sharing plan with an annual limit.
- With High Deductible Plan G, you pay all costs until the deductible is met, then the plan pays all costs.
Introduction
Medicare Supplement plans, also known as Medigap, are supplemental insurance policies you can buy to pay some of the cost gaps in Original Medicare. There are 10 standardized plans, each pays a different combination of deductibles, copayments, and coinsurance built into Medicare Part A and Part B.
In recent years, the cost of top-tier Medigap plans, including Plans C, D, F, and G, has increased significantly, forcing many people to scramble towards lower-cost plans or driving them into a Medicare Advantage plan.
The two lowest-cost Medicare Supplements are Plans K and High Deductible Plan G. In most areas, these plans start at between $40 and $55 per month, making them look like a very attractive option. But are they?
The reason the monthly premiums on these two plans are so low is that the policyholder takes on a significant amount of the initial risk. As a result, the private insurance companies that sell these plans pay out far less in claims.
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Plan K Explained
Medicare Supplement Plan K is one of two shared-cost Medigap plans. The other is Plan L.
Medigap Plan K covers 50% of all basic benefits until the annual plan maximum is reached. This year, the out-of-pocket maximum is $7,060.
The best way to compare Medigap policies is to look at a chart:
As you can see, Plan K pays 50% of most costs, but not all. And it pays 100% of the Part A coinsurance.
If cost is a concern, and you’re asking yourself, do I really need a Medicare Supplement, be sure to discuss this plan option with a licensed insurance agent.
Part B Deductible
One of the costs that Plan K does not cover is the Part B deductible. Only Plan C and Plan F cover this cost. However, these two plans are no longer available to new Medicare beneficiaries.
Excess Charges
Another cost Plan K does not cover is Part B excess charges. Exactly what are Medicare excess charges? They are additional medical costs doctors and other healthcare providers can add to your bill if they do not accept Medicare’s standard rates.
Is Plan K Worth It?
Can you afford to pay 50% of the Medicare Part A deductible if you are hospitalized? This year, the Part A deductible is per benefit period.
Can you afford 50% of the Part B coinsurance if you become seriously ill or injured? Medicare beneficiaries pay a 20% coinsurance. So your costs with Plan K would be 10% of all doctor, specialist, testing, medical supplies, and durable medical equipment until you’re spent $7,060.
Generally speaking, the healthier you are and the more money you have saved, the more risk you can take with your Medigap coverage.
Why is that?
Healthy people require fewer healthcare services and are less likely to need hospitalization than individuals with chronic health conditions. These people have less risk of high healthcare costs.
People with strong retirement savings are not impacted as greatly by out-of-pocket healthcare costs. These people can afford the risk of higher healthcare costs.
What is your level of risk? Have that discussion with your insurance agent.
High Deductible Plan G Explained
Medicare Plan G is currently the most popular supplemental plan bought by new Medicare beneficiaries. The reason for this is the plan’s comprehensive coverage. It covers all gaps in Original Medicare except the annual Part B deductible.
Continuing our discussion above about healthy people having less risk, the same applies to the High Deductible Plan G (HDG) option. However, with an HDG policy, you pay all costs until your Part A and Part B out-of-pocket costs reach the annual deductible.
This year, the high deductible limit is . Every couple of years, this amount adjusts for the cost of inflation.
Is High Deductible Plan G Worth It?
High Deductible Plan G is an excellent option for people who are generally healthy and have the ability to cover their out-of-pocket costs until the annual deductible is met.
For most healthy people, an HDG plan is really insurance in case of a serious illness and/or hospitalization. It works because healthy people typically don’t have annual out-of-pocket costs that exceed the Part B deductible. They have their annual checkup, get their annual vaccinations, and might have a couple more visits with their primary care physician.
For healthy people, an HDG Plan is insurance that covers Medicare’s hefty inpatient care costs and Part B costs for surgery, doctor-administered drugs (e.g., cancer treatments), diagnostics (e.g., MRI, EMG, EEG, etc.), and durable medical equipment. These costs add up very fast, so having coverage is very prudent.
If you’re wondering, how much do medicare supplements cost, and the rates shock you, High Deductible Plan G is generally the lowest-cost plan in most areas.
Plan K vs. High Deductible Plan G
In most areas, Plan K and high-deductible Medicare Supplement Insurance plans have similar monthly premiums. In most areas, you can get into a Plan K or HDG policy at age 65 for around $50 per month.
That’s about where the similarity ends.
With a Plan K policy, you and your insurance company share 50% of the big costs until your spending reaches the annual limit of $7,060.
With a High Deductible Plan G, you pay all of your Part A and Part B deductibles, coinsurance, and copay costs until you’ve spent $2,800 in the current calendar year. That makes an HDG policy a bigger risk.
Find Plans in your area with your ZIP Code
How Do You Save Money?
Both Plan K and HDG can save you money if you can handle the initial out-of-pocket costs. Here’s how smart people handle it. They self-insure the out-of-pocket limit (Plan K) or high deductible (HDG).
Let’s say a Plan G policy at age 65 would cost you $125 per month, but you could get a Plan K or HDG Plan for $50. That’s a savings of $75 per month.
What if you put the $75 savings into a savings account each month and used it for your share of future costs? Each year you would put away $900. How likely are you to spend that amount on regular doctor visits? How likely are you to dip into savings for a hospital stay?
Answer those questions and you’ll know if Plan K or HDG will save you money over the long run.
Alternatives
If you believe the commercials on TV, it’s easy to think that private Medicare plans cost less and save money.
For some people, they do. For most people, they don’t.
Healthy people who join a Medicare Advantage plan that offers additional benefits may save money. They save money because they rarely use healthcare services and they can take advantage of the additional benefits, such as routine dental, vision, and hearing care.
However, people with chronic health conditions rarely save money with a Medicare Advantage plan. Private health insurance companies charge copays, coinsurance, and deductibles, just like Original Medicare.
In 2016, the average cost of visiting a doctor in the U.S. was $265. Medicare’s rates are a bit lower, so take this with a grain of salt. Under Medicare Part B, the beneficiary pays 20%. On average, that’s $53. However, with Plan K coverage, you only pay 50% of that, or $26.50.
Looking at it this way, what you pay out-of-pocket for doctor visits isn’t so bad. A typical Medicare Advantage plan has a $25 to $40 copay to see a specialist. Some plans charge a 20% coinsurance to see a specialist. Which means you’d be paying $53 or more out of pocket.
In our research, Medigap Plan K out-of-pocket costs are generally more affordable than Medicare Advantage plans. This includes coinsurance and hospital costs.
Oftentimes, what you pay for hospitalization with a Medicare Advantage plan is more than standard Medicare benefits. There is a growing trend in Medicare Advantage plans to charge a 20% to 40% coinsurance on inpatient hospital costs.
In that case, it isn’t difficult to see how a single 5-day hospitalization could easily cost you more out-of-pocket that the High Deductible Plan G annual deductible. And, with many Medicare Advantage plans having an out-of-pocket maximum in excess of $5,000 per year, it could end up costing you a lot more.
Next Steps
If you have not already done so, the next step is to get a list of all of the companies that sell Medicare Plan K and High Deductible Plan G in your area. We make it easy to get companies and rates. Click the link below and complete our request form.
If you’re not sure which Medigap plan is right for you, check out our 9 Medicare Plan G Pros and Cons before you decide.
If you’d like to speak with a licensed insurance agent about your best options, give HealthCompare a call at 1-855-728-0510 (TTY 711). They’re happy to answer all of your questions without obligation.