Joanne: When it comes to Medicare supplement plans, most people are familiar with the most common plans like Plan F, Plan G, and Plan N. However, there are high deductible versions of some Medicare supplements that can be appealing to consumers with fewer healthcare needs, and they might be looking to save some money. These plans are a high deductible. Plan F and high deductible Plan G

Cameron:  But before we start, my name is Cameron Giardini, and together with my co-host Joanne Giardini Russell, we operate Giardini Medicare, which is an independent insurance agency based out of Southeast Michigan. And although we are based in Michigan, we do work virtually over the phone to directly help consumers in about 13 states to find the right Medicare coverage for them if we do not work in your state.

We will still connect you with another trusted independent agent that will be able to help you find the right coverage. And, of course, even if you choose not to work with us, we know that the information in this podcast will help you have a successful and stress-free transition to Medicare. So a brief overview of today's episode.

We will talk about Medigap plans or Medicare supplement plans, the same thing. We will talk about what are specifically high deductible Medigap plans. We will discuss how these high-deductible Medigap plans actually work. We will compare potential rate increases for premiums over time. And lastly, we will talk about whether or not a high-deductible Medigap plan might be right for you.

So first, a brief overview of what are Medigap plans, just in case you're not familiar, Medigap plans are also called Medicare supplements. They are sold by private insurance companies and they help fill the gaps. Left by original Medicare, and they cover most of the 20% cost sharing not covered by Medicare.

Now these plans, allow policyholders to see any provider that accepts original Medicare, and they rarely ever require prior authorization. Medigap plans. They typically have higher monthly premiums, but lower potential out-of-pocket medical costs when you compare them to a Medicare Advantage plan.

And they do not usually provide extra benefits that are not. Covered by original Medicare Medigap plans are standardized by their plan letters and plan letters range from A to N. Take a look at page 76 in the Medicare and You Handbook and you will see a good chart with all of the standardized benefits by Medigap plan letter like always, we will link to that chart in these show notes.

You may notice on the chart that there is an asterisk. Next to Plan F and Plan G, and that is there to indicate that both of those plan letters have a high deductible option, which is exactly what we will talk about in this episode. The current Medigap plans that are available on the market. They don't provide coverage for prescription drugs.

So whether you are considering a regular Medigap plan or a high deductible Medigap plan, you'll still want to purchase a standalone Part D plan for prescriptions, and those options for Part D will be the same regardless of the Medigap plan you choose. That was just regular Medigap plans and an overview.

Now Joanne will talk about what are high deductible Medigap plans. 

Joanne: Well, high deductible Medigap plans are essentially what they do exactly like they sound. They are Medigap plans that have a higher deductible than their regular Medigap counterparts. So we briefly mentioned there are two high-deductible Medigap plans and they are high-deductible Plan F and high-deductible Plan G. But before talking about coverage, it's important to mention those people that are going to be eligible to enroll in these plans. Just like with the regular plan F and a regular plan G, your plan choice is really gonna come down to when you were first eligible for Medicare.

If you are first eligible for Medicare due even to a disability or turning 65 before January 1st, 2020, you are eligible to enroll in either a high deductible Plan F or high deductible plan G. However, If you were first eligible for Medicare for the first time after January 1st, 2020, you are only eligible to enroll in a high deductible plan G as your high deductible Medigap option.

The high deductible G and the high deductible F plans are very similar. But the high deductible G does not cover the Medicare Part B deductible, which is $226 this year, which is 2023. However, both plans count the payment of the Part B deductible towards the high deductible limit in 2023. The deductible for both the high deductible Plan F and high deductible Plan G Medigap plans is set at $2,700 for the year.

So you compare this to a zero deductible for the regular plan F and a $226 deductible for a regular 

Cameron: Plan G. Yeah, so as Joanne said, it's a much higher deductible limit compared to the regular Medigap plans. Now, one of the biggest misconceptions about high deductible Medigap plans is how they actually work.

You may be familiar with what a deductible is. But just in case healthcare.gov, they do a pretty good job of defining what it is, and they define it as the amount you pay for covered healthcare services before your insurance plan starts to pay. This definition, makes most people think that if you enroll in a high deductible Medigap plan, you will have to pay 100%.

Of the full cost of your healthcare services until you actually meet that $2,700 deductible that Joanne talked about, and then you think your Medigap plan will kick in after that, and that is how most deductibles work with most coverages. However, that is not how it actually works with a high deductible.

Medigap plan, and we'll talk about exactly how it works right now. The way that it actually works is we'll go over an example with a high deductible Plan G. With a high deductible Plan G, it is like you have original Medicare, but you have a financial cap of $2,700 for Medicare-covered services. That means you have the actual same Medicare cost-sharing you would have if you didn't have a Medicare supplement, but now with the high deductible plan, you have that deductible limit as basically a cap on your spending. Here are some actual numbers and examples. Just bear with me. It's kind of complicated, but it's good to know how these plans work. So with Part A, your Part A coverage is hospital insurance.

Under Original Medicare, you have a $1,600 deductible per benefit period. And that is for 2023. This means if you have a high deductible Medigap plan and you are hospitalized as an inpatient, therefore it's part A, you would likely be charged the full $1,600 for those services. And then that $1,600 that you spend out of pocket goes towards your $2,700 high deductible plan G for the calendar year.

Now $1,600 for the hospitalization is probably a lot less than you think if you have that $2,700 deductible and you truly were responsible for a hundred percent of the cost. Now, on the other hand, part B coverage is another example we will go over, and this is more of the traditional Medicare coverage that people think of.

A lot of times when you hear Medicare, you think 80%, 20%, so Medicare pays 80%, you pay 20%, and people get that from Part B of Medicare, so Medicare Part B for 2023. It has an annual deductible of $226. Once that is met, like we just talked about, you are responsible for 20% of part B covered services. Here's an example.

If you have an outpatient surgery that is covered under Part B of Medicare, let's say it has a $3,000. Price tag or that is the full approved cost of that surgery. First, you have the $226 deductible, which you pay a hundred percent of that, and then you pay 20% of the remaining cost of the surgery.

 This means you would spend 226 for the deductible and then 20% of the remaining. Dollars. This essentially comes down to about $781 that you would pay out of pocket for that outpatient surgery, which, again, is much less than the full cost that you might think you would have to pay with a traditional plan with a deductible.

So, in that case, the $781 goes towards your yearly deductible of $2,700, and you have about $2,000 remaining. And keep in mind, just an added note, preventive care is covered by Medicare Part B for most services at 100%. This includes things like an annual wellness fee. Visit, and this is still true, even if you are enrolled in a high deductible Medigap plan.

So even with a high deductible plan, you aren't responsible for all of the preventive services out of pocket. And now Joanne can talk about what actually makes people want to apply for a high-deductible Medigap plan. Well, 

Joanne: We'll talk about, we're gonna compare the high deductible and then the other Medigap premiums.

So if high deductible Medigap plans do have such a higher deductible than the other Medigap plans, what makes them appealing to some consumers? And the answer really is it comes down to premiums. Because you can hear from Cameron's example. It's a little more complex, and some people don't wanna deal with any of that stuff.

Mm-hmm. So I'm gonna run through some examples of the different premiums in Michigan and a couple of other states for a 65-year-old male. In Michigan, a Plan G will cost in a specific zip code, $118 a month. A Plan N will cost that same consumer $90 a month. N a high deductible G for that consumer will only be $38 a month.

So a significant saving in Florida, you're gonna see even more significant savings because a Plan G for Florida is going to cost this consumer $188 a month. And a Plan N in Florida would cost that person $140 a month. The high deductible plan G, in this case, is only $58 a month. South Carolina one more state to compare.

You got a Plan G for $105. You've got a Plan N for $82 and a high deductible G for $32. You can see the differences in premiums. Obviously, the premium is always a focus or a, you know, an attractive thing for some people to look at. You can tell there's a big difference based on zip code. And the state.

Just like with all other types of Medicare coverage in Florida, there's about $130 a month premium between that Plan G and the high deductible G, and then you can see in South Carolina, the difference is only about $73 a month. So like always, please compare the plans in your area and your zip code. If someone in Florida is telling you that high deductible G is the best thing, and you have to get that for everyone in the country, please take that with a grain of salt, as with everything else that they might be saying

Cameron: 

Yep. We've always talked about it in our episodes, but whenever it comes to your Medicare coverage, it is very specific to where you live. The same thing goes for everything we talk about in this podcast. Now that we talked about the premiums, let's go over the out-of-pocket costs again with high deductible Medigap plans and how they compare to others.

Medigap plans. If you look at the premiums, of course, the high deductible plan G is going to win out. It's going to be lower. But of course, you have to take into account the potential out-of-pocket cost as to whether or not these plans might make sense. Many people act like if you enroll in a high deductible Medigap plan, you're always going to hit the deductible every year, and you're just.

Simply wasting money. But of course, that's not the case for most beneficiaries or else these plans really wouldn't exist. However, it is also not correct to assume that you'll never use any medical services. You'll have $0 out of pocket and you're just going to save a bunch of money on low premiums.

Again, the truth is somewhere in the middle between those two realities. Just using this as an example, according to an AARP study that we will link to in the show notes in 2018, the average Medicare beneficiary paid about $1,600 out of pocket on Medicare-covered medical services. So with a high deductible Medigap plan, we will use that number to assume that is basically what you would spend out of pocket because, again, you basically have original Medicare with a high deductible Medigap plan with that financial limit.

 We'll just use $38/month for the high deductible Plan G in Michigan, and we'll add about $1,600 out of pocket to that. So in a. Average yearly out-of-pocket cost, you're looking at about $2,050 for that situation. Again, that is with the high deductible plan G. Now, with a regular plan G in Michigan, the out-of-pocket would be the $226 for the Part B deductible, and then your premium would be $118/month as Joanne talked about in the example.

Again, that's only an example that could easily fluctuate. Even within Michigan, the actual pricing is. But when you add those numbers together, now with a regular Plan G, you would spend about $1,600 out of pocket. Now with a Plan N, there is the same $226 deductible, and there are some copays with it. So let's assume you go to three doctor visits in a year and an emergency room visit.

Those copays would be just over $100 out of pocket. Now if we add the Plan N Premium together, long story short, you're about $1,400 out of pocket for the Plan N. If you hit those average numbers like AARP talked about in the study, the high deductible G all of a sudden has the highest overall out-of-pocket cost.

So again, it all comes down to what your health is gonna look like throughout the year. And overall, the high deductible plan comes down to your health and your risk tolerance. You can certainly win, or you can lose in some years, and that is just the reality that you have to be okay with if you're choosing a high-deductible Medigap plan.

But of course, we've talked about this in other episodes for Medicare supplements. One consideration is the premium and the coverage you pay when you first enroll. But our even bigger consideration is what this coverage will look like in the future. So Joanne will talk about that. 

Joanne: Yeah, so like we always talk about with Medigap plans, the price that you pay when you first enroll in the coverage is only one part of the story.

You should consider future premium increases to see the really big picture of what's gonna happen over the long run. And generally speaking, a high deductible Medigap plan will have lesser rate increases than a regular Medigap plan, like a Plan G. The reason for this is that these plans attract much healthier applicants typically, which keep medical claims lower on average, and the premiums already start from a much lower price than the traditional Medigap 

Cameron: plans.

Just a quick point on that, if you are somebody who has cancer, if you're really sick, going into your Medicare or your Medigap open enrollment. There's very little chance you're going to choose a high-deductible Medigap plan. So that is what Joanne talks about, where it's attracting healthier applicants on average.

Joanne: definitely. Then you'd look at the breakeven point. This is a concept out there in social media that you've heard of, right? Which is the breakeven point with a high deductible Medigap plan. This means that given enough time, There is a point where the premiums for a regular plan G will be high enough.

Even with the higher deductible of the higher deductible G plan, you'll always come out ahead with the high deductible G. Let's run through an example. We're going to assume that Plan G has a yearly increase of 6% and the high deductible G has an increase of only 2%. We're gonna start with the starting premium, as we mentioned before, of $118 for that Plan G person in Michigan and that $38 if that same person bought a high deductible Plan G.

When you're comparing the increasing premiums and the deductibles of these two plans, you do reach a point after 14 years with a monthly premium for Plan G. It projects to be $266 a month, which is higher than the monthly premium for the high deductible plan G plus the $2,700 high deductible actual amount of that deductible.

So, in theory, this means that at this point, even if you hit that $2,700 deductible, Every year going forward. After that point, you still save money with the high deductible G versus the regular plan G. 

Cameron: Yeah. And again, that is that break-even concept. You might see it in some videos or some people might talk about it where they say, if you give it enough time, the high deductible G always makes more sense.

Now, of course, that is also assuming, like we said, an average of. Maybe 14, it could be 10 years, whatever it is. It's at least probably a decade before that happens. So a lot of things have to go right or have to happen in that 10 years for you to actually see those savings. 

Joanne: But it's not that easy.

Cameron: No, it's not.

So there is a flaw, if you wanna call it that, with this version of the breakeven point. And it's a problem that a lot of people really don't consider, and that is the fact that the high deductible limit that we've been talking about this whole episode, it actually increases over time. Here's the definition of how these plans increase their deductibles.

Basically, this was set by a provision in the Social Security Act. And the deductible for the high deductible Plan F and Plan G is set to increase every year by the percentage increase in the consumer price index for all urban consumers. You don't really need to remember that. You don't need to understand it fully, but you just have to know that these do increase.

It's similar to inflation. I'm not an economist, but obviously as inflation goes up, pricing goes up, and these deductibles kind of follow that same trend, which is why there was a. Pretty big increase in the recent years, but we looked at all the numbers for these deductible increases all the way since 2008, and we found that the actual deductible limit increased about 2.62% on average.

So now, if we use that and can consider all of these factors, and we say, okay, now the Plan G and the high deductible G are increasing, but so is the deductible. Now that break-even Joanne talks about, it's gonna go from 14 years all the way up to 22 years, which is crazy. Now you're saying, okay, as a 65-year-old, I'm just enrolling in a high deductible G I'm ready for that breakeven point.

Now you're talking about when you're 87 years old; we have no idea what the Medicare system will even look like in 22 years. So it is certainly not something I would consider. Banking on, basically. Again, don't really consider the breakeven point as a consideration when you're deciding between the two.

When it comes to considering a high deductible Medigap plan, it simply comes down to whether you are comfortable with the risk potential of higher out-of-pocket costs. So when it comes to insurance, Math equations go out the window as soon as your health changes, for better or for worse. And unfortunately, no one knows when your health might change, or this will be a lot easier to figure out.

Now, the last thing to think about for future considerations when considering a high deductible Medigap plan is the fact that if you do want to upgrade, you know if you wanna go from a high deductible G to, let's say, a regular plan G in the future, in most cases, in most states, you will have to qualify for the new plan based on your health.

And you will have to do medical underwriting, which is health questions, to actually get that upgraded plan. It's not as easy as just saying, okay, I'll choose a high deductible plan while I'm healthy, and then once something goes wrong or, you know, once I start needing more coverage, that is when I will make the switch.

It is simply not that easy, and you may be declined coverage at that point. So we've talked a lot about high-deductible Medigap plans. Let's have Joanne do a brief recap of 

Joanne: everything. All right, so remember the high deductible plan F and the high deductible plan G. The availability to you is all gonna depend on when you were first eligible for Medicare.

It all comes down to whether or not you were first eligible for Medicare due to age or disability before or after January 1st, 2020. Eligibility is one thing, not enrollment. So don't confuse those two things if you were eligible at that time. That's gonna determine your plan selection. It doesn't matter if you were enrolled or not enrolled at that point.

Premiums for these plans are typically about 30 to $50 a month and are likely to have a lower yearly premium increase compared to the more common plans. G Plan and Plan F in 2023, the deductible is $2,700, and this increase is each year based on this CPI-U. On average has been about 2.62% per year.

High deductible plans work like any other Medigap plan based on the fact that they can be used nationwide at any provider that accepts Medicare, and they provide secondary coverage to your original Medicare coverage. Remember, that's part A in part B. Some positives about these plans are low premiums with the benefit of having the flexibility to see any provider that accepts original Medicare.

They have little to no prior authorization features, potential for out-of-pocket and premium savings if you're healthy, and it provides a financial cap. That original Medicare alone does not have some downsides. The potential for high out-of-pocket costs if your health worsens. The ability to upgrade is not guaranteed, and it's based on your health at that time.

And you may feel like you're paying for coverage that you aren't using, and you'll have to keep track of more medical bills. And 

Cameron: that goes right in line with our thoughts on the high deductible Medigap plan. So I will end this by talking about our opinions. So take this for what it's worth, but we always want to tell you a little bit about how we view different plans in the Medicare space.

 You may hear people say that. Brokers like us or other brokers, don't offer high deductible Medigap plans just because they're greedy and they earn less money by selling them. And that is true. So not the greedy part, but the less money part. The commissions are lower for high deductible Medigap plans because our commissions if you've heard our other.

Episodes are pretty much based on your plan's premiums. If your premium is lower, then we get less money for selling these plans. However, we really don't think that these plans should always be avoided, but we generally, don't recommend high deductible Medigap plans for most people, and it's certainly not our go-to option.

High deductible Medigap plans. They may be better in certain states, but in many areas, they don't make as much sense when looking at the actual numbers, especially in Michigan, like the ones we talked about. Also, this is just anecdotal, or this is what we hear from our clients, but we find a lot of our clients, after enrolling in a high deductible Medigap plan, don't feel that they're getting much coverage from their plan.

 In reality, this is because they're not. Getting much covered for it. These plans they're only there to give you a cap and prevent you from spending thousands of dollars out of pocket. So that's not a bad thing, but you're going to pay a lot of medical bills along the way to get to that deductible, and it can be really hard to remember the actual benefits of the plan that you're paying for.

This is even more so when you go to lunch or if you hang out. At a campfire with your friends, they say, I've got Medicare Advantage. It's no money. It's really hard to remember why you have that high deductible Medigap plan in place. And overall, if you're looking to save premiums with a Medigap plan compared to the typical ones like a Plan F or a Plan G.

We actually really recommend getting a Plan N or considering a Plan N as a really good alternative that can provide premium savings while also providing more coverage than a high deductible Medigap plan. So go to our other episodes to learn more about Plan N and other plans to hear about that. If you think you want no coverage at all.

 If you really are one of those people that say, I'm really healthy; I want nothing but original Medicare, that is a great option to put a high deductible Medigap plan in place because it is better, in our opinion than having nothing and no cap with original Medicare. Now. Lastly, if you listen to everything we've had to say about the high deductible Medigap plans and you think the coverage could be right for you, of course, we will certainly help you find and enroll in a plan that might be available in your area.

Joanne: I just want to throw in my 2 cents there. So again, the point of if you are the person saying, I only want original Medicare, I want the complete freedom to go to anyone in the country that takes original Medicare. I don't want a Medicare Advantage plan, but "I'm so healthy I won't need anything else."

That's a great person for a high deductible, G or F, in my opinion, because you have something you're protecting yourself. Absolutely. You can still go to all those doctors, but that's the biggest place that I see the positive. Positive for that plan. I recall Cameron. Don't you remember we had somebody that got a high deductible G here in Michigan?

Our suggestion was to get a Plan N. She didn't want that, I think, two months into the plan, right? She got a cancer diagnosis. I think that was the case. Mm-hmm. And then boom, flipped right out of that because she was in her six-month window where she could do, so we were able to move her. And I think it was even to a Plan G, wasn't it at that time?

Cameron: Do you remember that one? Yeah. At that point, they wanted the most coverage then. But yeah, that would only be, and that was only because of Medigap open enrollment, so, correct. Again, that was a. Not lucky because of obviously the diagnosis, but the timing. The timing was. That is a lucky one where you could upgrade 

Joanne: basically.

But it's an example of sitting around the campfire where you're not thinking, you know, you just don't know where these diagnoses come from and all of a sudden you're in this plan that you didn't think through. So just always keep that in mind. It's just. Really hard to think of it when you're looking for these 

Cameron: things when you're healthy.

Yeah. Like any Medigap plan, you have to be comfortable with both the best part of it and the worst part of it, right? And the highest potential out-of-pocket cost. Overall, there are many Medigap plans available to consumers on the market, and we think that almost all of them should at least be considered when you're making your transition to Medicare, especially during that Medicare or Medicare supplement open enrollment window when you first become.

Enrolled in Part B, so a high deductible Medigap plan. It might not be right for everybody, but if you understand how they work and you're okay with the pros and the cons, as we talked about, they can be another good option when finding the right Medicare coverage. And as always, please leave us a review on our podcast app and subscribe so you can listen to future episodes.

You can also find more Medicare content from us by going to YouTube and searching giardini Medicare. Lastly, if you want to send us any feedback or questions, you can send us an email. To info g medicare team.com. Thanks for listening, and have a great day.