Medigap Plan G – Discover Its Hidden Value

Plan G gold value

By the time you’re new to Medicare, or thinking about buying a Medicare Supplement policy (also called Medigap for short), you will have seen many ads for Medigap Plan G. Medicare Supplement Plan G has long been one of the most popular plans sold, along with Plans F and N.

If You’re Looking for Value, Plan G Has Much to Offer

In the ten years I’ve sold Medigap policies, many people have asked me which of the three most common plans offers the greatest value. I have always recommended Plan G because of the various types of savings it offers.

Plan G Is Nearly Equal to the Most Comprehensive Plan, but Far Cheaper

Plan G is the second-most comprehensive Medicare Supplement plan. Plan G has only one difference from Plan F, the most comprehensive Medicare Supplement plan.

You would “save” $183 per year, in the form of one extra benefit, by buying a Medicare Supplement Plan F. Plan F pays the Medicare Part B annual deductible, which is currently $183 per year.

Most people pay that at their doctor’s office, spread out over the first two or three visits of each calendar year.

Medicare Supplement Plan G does not pay that $183 annual deductible for you. Medicare Supplement Plan F does. That is the only difference in benefits between those two Medigap plans.

However, a Plan G will cost you from $300 to $500 less per year than a Plan F will. The exact price varies by insurance company.

Most of my clients, once they see that single difference between F and G, choose Plan G because they like to save money.

In simple terms, why would you pay an extra $300 to $500 per year for Plan F to only receive an extra $183 in benefits? Click To Tweet

The Price Savings Between Medicare Supplement Plans G and F Are Big

To see the exact price differences in your ZIP code, look at the advertised amounts from several insurance companies that sell Medigap policies in your state.

Don’t know where to begin? It’s easy! Just use our search feature to compare prices.

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When you search, expect to see companies whose names you recognize, like Mutual of Omaha, AARP (UnitedHealthcare), Aetna, and WellCare.

Yearly Price Increases Can Be Less With Plan G

As with other types of insurance, Medigap plans usually have regular premium increases for their policyholders, typically every year or so. Since Plan G costs less initially, its increases are somewhat less, on average.

The exact numbers will depend on which insurance company you have, which year’s increases we are looking at, and to a lesser extent on the overall cost of healthcare in your state. But you get the idea. Less is less. Over the long run, the savings do add up.

Plan G’s Risk Pool Seems Better Than Plan F

Another factor that will drive your cost of insurance higher (over the years) is the claim experience that your insurance company has with the specific group that you place yourself in.

Claim experience means the size and number of healthcare bills for a finite group of policyholders. For instance, if you place yourself into a group of people with high medical expenses, you will end up helping to pay a part of their healthcare bills, no matter how healthy you are or how low your healthcare expenses are. That’s how groups work.

What specific group would you be in? Your group would be delineated by the plan type you choose (i.e., Plan F, G or N), your gender, and by your medical record’s history of tobacco use or non-tobacco use.

That means that when you buy a Medicare Supplement of any type, your insurance will place you into a group of other people that own the same supplement. That group, in turn, will be divided into sub-groups, like gender, tobacco user, etc.

Here’s what I’ve observed: When chronically sick people turn age 65 and enroll in Medicare for the first time, they tend to buy a Plan F. It’s hard to say why that is, but as a group, people with serious and expensive conditions like congestive heart failure or COPD tend to enroll in a Plan F. Does it matter if you place yourself in their group? Yes, it could.

In other words, why would you willingly place yourself into a group of policyholders who have high medical expenses?

It’s another reason why the yearly price increases for Plan F tend to be higher. If that group’s overall healthcare costs are higher, and it is easy to believe that they are, that would drive the cost of their insurance up.

Again, that is anecdotal evidence, based on what I’ve observed.

You Can’t Buy a Plan F Starting in 2020

If you are undecided between Plan G and Plan F, you should know that your last day to buy Plan F is coming up very soon. Thanks to an act of Congress, it will no longer be offered as of January 1, 2020.

If you already have a Plan F, you will be allowed to keep it if you continue to pay the premiums. But should the discontinuation of Plan F matter to you? Maybe it should. Here’s a bit of speculation on that point to ponder:

Every Plan F group will be permanently closed to new members in 2020. But the group members will continue to age, obviously, and we know that as we get older our healthcare costs tend to rise. With no new (healthier) people age 65 enrolling in any Plan F, each group’s average healthcare bills will very likely grow higher and higher as the group members age. Therefore, it is a safe guess that Plan F premiums will begin to rise at a faster rate to cover those increased costs. Time will tell.

Don’t Be Fooled – the Way to See Plan G’s Value Is to Compare Benefits

Plan F used to be the most popular Medigap plan. In fact, many of your friends might have recommended that you buy a Plan F, just like they did. But they did not buy a Plan F for its value, despite what they thought. They bought a Plan F because of its simplicity.

In fact, they might have told you things like this:

“Plan F covers all your copayments at the doctors’ offices, for medical tests, and at the hospital. It’s easy to use. You don’t have to write any checks – if Medicare will cover a service, then a Plan F will pay all the copayments and deductibles for you. It’s that easy.”

And that statement is still true. But since a Plan F will cost you a lot more than the “second best” plan (Medicare Supplement Plan G), what exactly would you get by paying all that extra money for Medicare Supplement Plan F?

Plan G makes you shoulder that Medicare deductible in exchange for paying about $300 to $500 less for insurance every year important to you. Your friends who chose Plan F may not have gained that much.

Another Good Plan G Alternative Is Medigap Plan N

So, all that sounds good, but you still don’t want to pay for a Plan G? Then consider Medigap Plan N. Plan N will give you the same great hospital coverage as Plans G and F, but will cost you a lot less. In exchange, though, you will have some copayments:

  • Up to a $20 copayment for each doctor visit
  • A $50 copayment for each emergency room visit, unless it turns into a hospital admittance
  • No coverage for Part B excess charges, which are another 15 percent on top of some doctor bills.

Do You Still Have Questions?

It’s nice to have friends who are on Medicare, and they will certainly give you advice on which plan to buy. But conflicting advice can leave you confused. That’s not good.

So, give us a call today. You will be pleased to see how clear things can be. And no sales pressure either! We promise.

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NOTE: The views expressed here are those of the author and do not necessarily represent or reflect the views of HealthCare.com.

Bud Scannavino

About Bud Scannavino

Bud earned his MBA at Yale. He works with seniors, helping them with the financial issues of retirement, and especially Medicare. His practice is in the Atlanta, Georgia area. He's a regular contributor to HealthCare.com.

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