This is the third in an ongoing series of informative Medicare posts courtesy of MedicareFAQ. Did you know that Plan F will go away for new enrollees in 2020 - and premiums skyrocket for those can stay on it? I didn't. I'd suggest reading this article closely before deciding which type of Medicare is right for your parents, your spouse, or you. You will then be able to make an educated decision. - Carol
What Are First Dollar Coverage Plans?
First dollar coverage plans are defined as plans that cover without any cost to the beneficiary other than the premium. There are 2 basic parts to Original Medicare, Part A (Hospitals) and Part B (Medical Services). Original Medicare covers 20% of costs for medical services after an annual deductible ($185 for 2019), and all costs for the first 60 days in the hospital once the reoccurring Part A deductible is met. ($1,364 for 2019)
How Does Original Medicare Work?
Below is an example of how Medicare Part A works:
You get admitted into the hospital. After you pay the Part A deductible, you would have no cost for hospital-related services for the first 60 days. Once you have reached your 61st day there will be additional costs. This does not mean that there will be absolutely no additional costs, as it is possible to have Part B services administered while you are in the Hospital. If moved to a skilled nursing facility for rehab, Original Medicare will cover the first 20 days at 100%, after that there would be additional costs.
Medical services are covered under Part B or Original Medicare. Before Medicare will pick up any costs you must first pay your annual Part B deductible. Once you have met that for the year you are then responsible for the remaining 20% and any Excess charges if your state allows.
Below is an example of how Medicare Part B works:
You have a surgery that the Medicare allowed amount is $100,000. Let’s assume you have paid your annual Part B deductible already during your pre-op visits.
Of that $100,000 Medicare will pay 80% ($80,000) and you will be responsible for the remaining 20% ($20,000). If your surgeon does accept Medicare but not Medicare assignment, which is rare. You could also be responsible for an additional excess charge of up to 15% ($15,000).
Medicare Supplement Plans (Medigap)
When someone sees these holes in Original Medicare it can be a bit overwhelming since there is no cap on how much you could be billed. The most comprehensive solution is to enroll in a Medicare Supplement (Medigap) plan to cover the gaps in Original Medicare. There are 10 standardized Medigap plans that use letter designations. Depending on which plan you choose depends on how many of the gaps of Original Medicare are covered.
Changes in 2020
In January 2020, two Medigap plans will be removed from the market for new enrollees. These two plans are the Plan F and Plan C. These plans are considered first dollar plans because other than the premium there is nothing out of pocket required by the beneficiary before coverage begins.
Plan F is the most comprehensive plan as it picks up all the costs that are left over to the beneficiary after Original Medicare pays its portion.
Like the Plan F all the beneficiary's cost will be picked up except excess charges.
Can Plans F and C be Kept After January 2020?
Yes! If you are enrolled in the Plan C or Plan F prior to January 2020 you can keep your plan. You can even change to another company’s Plan F or Plan C if you are currently enrolled in a Plan F or C. This is of course if you can pass the underwriting to get into a new plan.
Will the First Dollar Plans Going Away Affect my Premium?
Absolutely! Unfortunately, no one can read the future. Based on past situations of plans being discontinued, such as the Plan J and Plan I, you can expect the premiums of Plan F and Plan G to start soaring. The reason for this is the people that are healthy are likely to abandon ship and move to Plan G or N. Most enrollees currently are opting for these two plans, because their rate increases have been more stable, and they generally save the beneficiaries considerable amounts of money for similar and in the case of the Plan G coverage that is just as good.
Why are Plan F and Plan C Being Discontinued?
Due to the passing of The Medicare Access and CHIP Reauthorization Act of 2015. (MACRA) This act was passed by Congress and signed into law on April 16, 2015.
This law is intended to keep health care costs lower by deterring abuse on the plan F and Plan C. Unfortunately, there are many beneficiaries who will run to the ER for any cough or sniffle instead of going to their primary or an urgent care. This increases the costs for insurance companies and Medicare, since it is more expensive to be treated in the ER than it is at other locations.
Which Plan Will be the Most Comprehensive After January 2020?
Once January 2020 arrives and Plans F and Plan C are discontinued, Plan G and Plan D will become the top plans. The difference between Plan F and G is simply that you are required to pay the annual Part B deductible.
This is the route most beneficiaries are already taking because on average it saves them $200+ dollars over Plan F after they pay their Part B deductible. Likewise, the difference between the Plan C and Plan D is the same. They are required to pay the Part B deductible on Plan D and not on Plan C.
For many beneficiaries, this will not be a problem since you can change from Medigap to Medigap at any time if you can medically qualify. It is recommended that you look at the cost saving and longevity of your plan sooner rather than later. We do not generally get healthier as we age. By making the decision to get off the F or C plans now could save you thousands in the future.