My company has help thousands of consumers with their Medicare supplement high deductible plans. This includes both Medicare high deductible Plan G and the High Deductible Plan F.
There are events unfolding that will have a significant impact on the value of the high deductible Medicare supplements. If you have a Medicare supplement high deductible Plan G or a high deductible Plan F you will want to read further.
If you are considering a high deductible Medicare supplement, this article has information that will help you determine if it’s a good value for you.
High Deductible Medicare supplement Plans, A Good Value?
As I mentioned, my team and I have written a lot of high deductible Medicare supplement Plans for our clients. It can be a great value in certain areas of the country.
I am going to go over the criteria I use to determine if it’s a good value in a moment. But first, understand that the high deductible of these supplement plans does not apply to Medicare. It only applies to your supplement. This is part of what can make this Medicare supplement such a great value.
The easiest way to understand the High Deductible Medicare Supplement plans is to stop thinking of them as high deductible insurance. Instead think of them as putting a well defined maximum out-of-pocket limit on your Medicare Part A and Part B, inpatient and outpatient services.
When you have a Medicare supplement, any Medicare supplement, your original Medicare Parts A & B are your primary coverage. Medicare pays first.
Medicare Part A & Part B
I have linked below the benefits of Medicare Part A and Medicare Part B. The deductibles and copay change a little every year, but the concept doesn’t.
With Medicare Part B, outpatient services, you pay a small annual deductible of just over $200 when you first see a doctor during the year. Then Medicare Part B pays 80% of your Medicare Bills, you pay 20%.
Medicare Part A also has a deductible, it’s a per event deductible. That buys you 60-consecutive days of in-patient hospital care. From day 61 forward you pay an increasing per-day copay.
If you have a hard time following that, just print the Medicare benefits sheet I have linked above .
Without a Medicare supplemental plan, you have unlimited financial risk.
High Deductible Medicare Supplement Plans Maximum Out-Of-Pocket
With the high deductible Medicare supplement Plans your annual financial risk is limited to their annual deductible.
For 2021 that deductible was $2,370. For 2022 it will be $2,490. That is your annual maximum out-of-pocket limit. Your benefits are the benefits of Medicare Part A and Medicare Part B (per above) with an annual maximum out of pocket equal to the Medicare supplements deductible.
Once your out-of-pocket expenses for inpatient or outpatient Medicare services have reached that deductible, you have 100% coverage. All other Medicare inpatient and Outpatient services are paid for, for the rest of the year.
Maximum Out-Of-Pocket Plans
In my opinion, these Medicare supplement plans shouldn’t be called high deductible plans. They should be called high maximum out-of-pocket limit plans, because their function is to set an annual Maximum out-of-pocket on your Medicare.
Since I know there are some of you out there asking, hopefully just in your head, I am going to answer the question we so often get.
The benefits of the Medicare supplement Plan F-High Deductible and Plan G-High Deductible are exactly the same. They are exactly the same.
There is a difference in benefit between the regular Plan G and the regular Plan F. But no difference in benefits for their high deductible option. I go through the fancy footwork for how that was developed in my other video of the high deductible supplements.
Who Can get a Plan F-HD?
The Plan F High Deductible is for those who were eligible for Medicare prior to 2020.
The Plan G High deductible is for everyone else. They have the same benefits and should have the same premium.
With that aside, here is what you need to know going into 2022.
Medigap High Deductible and Inflation
First, the deductible amount of these plans is written into Social Security Law and linked to your CPI-U. That is the Consumer Price Index for all Urban Consumers.
The important point to make is that the deductible increases every year with inflation. Of all the Medicare supplement plans, the high deductible plan is the most vulnerable to periods of high inflation. Because the increase in the deductible is a direct decrease in your benefit, periods of high inflation directly reduce the value of the high deductible plan compared to other Medicare supplements.
If you are concerned about inflation in the years ahead, you should think twice about the high deductible Medicare supplement option.
Is the High Deductible Medigap Plan G a Good Value?
So next I am going to go over the criteria I use to determine if the high deductible Medicare supplement Plans are a good value relative to full coverage supplements.
Then I am going to touch on some of the extra benefits my favorite high deductible insurance company adds that make it an incredible value.
The first point to consider is that the Medicare supplement high deductible plans have two moving parts that impact its value. The first, as we covered, is the deductible itself. As it increases, your benefits decrease dollar for dollar. The second moving part is the price. The monthly premium.
If you have a high deductible plan with a price that increases every year and a deductible that increases every year you have two major components of your insurance that are compounding against you.
Every year you are paying more for less coverage. If you are just turning 65 you can have 20 to 30 years of negative compounding that you must consider.
Pricing Structure Choices
I prefer the high deductible plans in States that have a mandate requiring all Medicare supplement plans be priced as Issue Age or Community rated. In these states, there are often some insurance companies where price increases are few and far between.
That means that if you are with the right insurance company in those states, your price increases will be few and far between. Let me stress, if you are with the right insurance company price increases can be few and far between. Otherwise, with the wrong insurance company you can still experience regular annual price increases. Being with the right insurance company in essence neutralizes one of the two components that are compounding against you.
As an aside, many people researching Medicare for the first time falsely believe that an Issue Age or Community Rated policy equates to “no price increases over time”. That is not true. All and any Medicare supplement Plans can have price increases. There is no price structure that turns a for-profit insurance company into a philanthropic organization. All they have to do is apply to the state for a price increase.
Attained Age vs. Issue Age
In an Attained Age state, you will often see the Plan G high deductible and Plan F high deductible increase in price annually and at a faster rate than a Plan N. If you graph that out over a decade or more, you will find the relative value of the high deductible Medicare supplement decreasing each year compared to the Plan N.
The second thing I look at is the annual premiums savings of the High Deductible Medicare supplement relative to the next higher coverage that is full coverage. The Medicare supplement Plan N.
When I refer to full-coverage I think mostly of the 100% coverage for Medicare Part A in-patient services. But really it comes down to any hospital stay. Let me explain.
Medicare Part A and Your High Deductible
When it comes to inpatient coverage, which is coverage under Medicare Part A, the supplement Plan N and regular Plan G have 100% coverage. You can be in the hospital for a year and not pay a dime.
With the high deductible Medicare supplements, you are going to pay the hospital costs up to the Medicare Part A deductible if you are an inpatient in a hospital. If you are in a hospital under observation your coverage will be under Medicare Part B and it can easily cost you your entire supplement plan deductible, which is nearly two and a half thousand dollars.
Per Event Deductible
The Medicare Part A deductible is a per event deductible of approximately $1,500. Let’s just use round numbers to make the concept easier. If you are in the hospital as an inpatient, you will pay the hospital per night rate up to that Part A deductible of approximately $1,500. That is what an inpatient hospital can cost you if you have a high deductible supplement.
If you are in the hospital under observation, your bills will be covered under Medicare Part B. That can easily be more expensive. But your high deductible supplement caps your out-of-pocket cost at the deductible of $2,490 for 2022.
Comparing To Full Coverage
Now – when I evaluate the value of the high deductible plan to your other choices, I look at the annual premium savings versus what it can cost with one major medical event that lands you in the hospital.
What is the annual premium savings of a high deductible plan Medicare supplement versus a Plan N?
Is your high deductible plan still a good value if you end up in the hospital for any reason?
For example:
If you are in a state where the price difference between a Plan N and the high deductible plan is let’s say just $50 a month, for example. That’s an annual savings of $600 in premiums.
But it can cost you $1,500 with a single inpatient hospital stay. That means that one hospital stay can wipe out about 2 ½ years of premium savings.
Are you really saving with high deductible plan? Or are you speculating.
If you are in the hospital under observation, it can cost you your deductible of two and a half thousand dollars. With one hospital stay you can lose three to five years’ worth of premium savings.
Again, are you saving or speculating?
If a single stay in a hospital can wipe out three to five years of premium savings, is that a good value or a gamble?
And there are a lot of states like this, mostly Attained Age states where the price increases every year along automatically along with the deductible.
Let’s contrast this to areas like South Florida. Florida is an Issue Age state. Or we can look at Washington State, New York, Connecticut and others where there are two factors that make the high deductible attractive. They are states that mandate that all supplements are either Community rated or Issue Age.
Premium Savings vs Higher Medical Costs
Plus, the average premiums for full coverage like a Plan N are significantly higher than the rest of country. A Plan N at $150 or more a month for example is common in South Florida. While the high deductible Plan can be $50 +/-.
In that case your premium savings is over $1,200 a year PLUS you can have a plan with a history price stability that is unmatched in the industry.
Those are areas of the country where the high deductible Medicare supplement can be a good value if you use the right insurance company.
A Quick Review – The Important Stuff
The biggest weakness of a high deductible Medicare supplement is its vulnerability to inflation. Inflation directly reduces your benefit by increasing your deductible.
To find the value of a high deductible plan you need to compare the premium savings of your high deductible vs the premium of full coverage like a Plan N. Then compare that savings to the cost of a hospital stay. Can a single hospital stay ruin the value you see in the high deductible supplement plan?
To be fair, I will also recommend a high deductible Medicare supplement in attained age states like California where the prices for Medicare supplements are high and increase at a faster rate than most other states. There are always exceptions. Those exceptions start with a Plan N over $150 /month.
Another point, some people will consider the Medicare supplement Plan K or Plan L as a low cost alternative to full coverage. In my opinion, Plans K & L are not nearly the value of the high deductible plans. Often, they are promoted by insurance companies that do not offer the high deductible Medicare supplements.
The Insurance Company I Prefer
The company I prefer to use for high deductible Medicare supplement Plans has an incredible history of price stability. That is critical for finding value. In Florida for example, as of the making of this video this company has a has a net price DECREASE since 2010 for both their Plan N and their high deductible plans. That’s right, the current premium is lower than it was twelve years ago. Florida is an Issue Age state with higher than average Medicare supplement premiums.
Of course, with most companies if you change plans or change companies you lose or reset your Issue Age position.
There are also some insurance companies that regularly increase their premium rates. I see rate increases annually. Never think an Issue Age or Community rated policy means no price increases. It just means that with the right company, price increases are few and far between. There are plenty of wrong companies.
Anyway, that insurance company I like to use has a corporate policy that really sets it apart. First, if you have a high deductible Medicare supplement, on your two-year anniversary of having your supplement plan they will send you a letter that gives you a window of time to upgrade your coverage without medical underwriting. You can move to a Plan G or a Plan N etc. no health questions asked. Plus, you keep your issue age.
In addition, with this company you can always move down in coverage without medical underwriting and keep your Issue Age.
This Is Value!
That means, for example, if you get a high deductible plan at age 65. Two years later you can change to the Plan N or Plan G no questions asked and still pay the 65-year old rate. Then, if you change your mind, you can still go back down in coverage, back to the high deductible and reset that two-year window that gives you the free upgrade on the two year anniversary.
This is a great way to keep your options open and your costs down. It’s flexibility no other company provides.
If you would like to see price quotes for the Medicare supplement Plans and insurance companies I recommend in you area, please use the form below to provide us the information we need in order to help you.
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Matthew Claassen
Matthew Claassen, CMT and CEO of Medigap Seminars Insurance Agency. Medigap Seminars is an award winning premier national Medicare Insurance Brokerage, ranked among the top in the U.S.A. Matthew is considered a leading national expert on Medicare and Social Security. Mr. Claassen is a distinguished member of the Forbes Business council, an invitation only organization of business leaders and entrepreneurs. He and his team have received awards from many of the countries largest insurance companies including Mutual of Omaha, Aetna, Humana, Cigna, United American, United Healthcare and others. His videos have become the most popular Medicare educational videos on YouTube with millions of views. As a financial analyst Matthew lead a team of researchers to win the 2009 Best Equity Research & Strategy Award from The Technical analysis magazine.
