Medicare Changes Are Coming. Are You Prepared?
President/CEO at Healthcare Solutions Direct, LLC, a nationwide insurance agency focused primarily on the retiree health market.
Changes are coming to Medicare because of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). First-dollar coverage for Medicare Supplement plans (also known as Medigap plans) will no longer be available to anyone new to Medicare. This will affect choices for Medicare Supplement plan availability, but that might end up being a good thing.
MACRA established three major changes to Medicare. First, providers will now be paid based on the quality of the care they provide and not just the volume. Second, it established security features that mandated Centers for Medicare and Medicaid Services (CMS) omit Social Security numbers from Medicare cards by this past April and replace those numbers with randomly generated combinations of letters and numbers to identify the beneficiaries. And third, Medigap Supplement Plans F and C will no longer be available to anyone new to Medicare as of Jan. 1, 2020.
Traditional Medicare uses letters to identify coverage: Part A for hospital expenses and Part B for medical expenses. Medicare offers great benefits; however, the downside is it only covers 80% of medical expenses after a small deductible each calendar year. The Part B annual medical deductible for this year is $185. Once the deductible is met, the retiree would be responsible for the remaining 20% without an out-of-pocket spending limit that would act as protection. Because of that, supplemental coverage can be a necessity for a retiree who has Medicare as their primary insurance.
The Medigap plan is a direct extension of Medicare and helps pay some of the deductibles and coinsurance that Medicare does not cover. Private insurance companies (including my own) offer Medigap plans, which are standardized to provide the same coverage and benefits. Each company that offers a Medigap plan charges a monthly premium that varies by company. Although there are 10 standardized plans, the most popular are Plans F, G and N.
After Jan. 1, 2020, anyone new to Medicare will not be able to purchase Plans F or C, which are the only plans that cover the Part B deductible. Congress reasoned that requiring everyone to pay at least the Part B deductible would reduce medical overuse. People currently on Medicare will be “grandfathered” in and will not be affected by these changes.
Plan F has been so popular because it pays everything Medicare-approved that Parts A and B do not cover, including the Part B deductible. Recently, Plan G, which is almost the same as Plan F, has also become popular for costs reasons. The only difference between the plans is that under Plan G the individual must pay the Part B deductible. The savings in monthly premium with Plan G make up for the difference of the deductible, causing more retirees to choose the plan. New Medicare beneficiaries might also want to look a little closer at Plan N for the same cost-saving reasons.
My healthcare insurance company sampled the last 933 individuals who purchased Plan G instead of Plan N. The average savings an individual would have seen with Plan N over Plan G was $22.49 per month (or $269.88 per year) in premiums. This might be enough for some retirees to strongly consider Plan N.
Neither Plan G nor Plan N covers the Part B deductible. Plan N has up to a $20 office copay after the Part B deductible and a copay of as much as $50 for an emergency room visit if the person is not admitted. It also does not cover Part B excess charges, which occur when a doctor, provider or supplier does not accept the Medicare-approved amount as full payment for covered services. According to CMS, a provider can only charge a maximum of 15% over the Medicare-approved amount. The downside for the provider if they do this is that Medicare will only pay them 95% of the Medicare-approved amount. However, a Kaiser Family Foundation report found that as of 2011 (the last year for which the CMS Data Compendium is available) 96% of physicians and practitioners accepted Medicare-approved amounts. So finding one who doesn’t accept the Medicare-approved amount as full payment could be rare.
For beneficiaries who want a lower Medigap supplement monthly premium and are willing to agree to some cost sharing, Plan N could be a good choice. But for those who don’t want to worry about possible copays or additional charges outside the Part B deductible, Plan G will continue to be a nice option. Before making any decision, though, I recommend retirees talk to an expert who can look at their specific situation, so they are better prepared for the transition into Medicare. Each person’s needs are different, but the changes starting in 2020 could be positives for both retirees and the Medicare program.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.