Medicare is confusing. First, you have original Medicare which is Part A and B. Then you have to decide if you want a Medicare Advantage Plan (Part C) or a Medigap Policy. If you choose to go with a Medigap Policy, you need to choose between Medigap Plan A, B, C, D, F, G, K, L or N. Of course, if you choose a Medigap Policy you will also need a Medicare Part D policy for prescriptions. That’s a lot of letters. My three year old son has a better grasp of the alphabet than most of us have with the Medicare ABCs. I’ve written before about the best Medicare Plans in retirement for you. This article compares the most comprehensive Medigap policies, Plan F and G.
First, it is important to understand the main difference between a Medigap Policy and a Medicare Advantage Plan. Medigap and Medicare Advantage are both additional plans that you can purchase in addition to Original Medicare. Both plans require an additional fee each month on top of the Medicare premium of $134 in 2018. Medicare Advantage Plans are similar to the healthcare plans most of us have prior to Medicare. You choose either an HMO or PPO plan provided by an insurance company in your area, and your fees are much lower by going through in-plan doctors and hospitals. Medicare Advantage plans also may offer additional benefits such as dental, vision, and hearing benefits which aren’t covered by Medicare.
Medigap (a.k.a Supplemental) Policies are different from what you may have had before as there are no networks. Instead, you can work with basically any doctor but dental, vision, and hearing coverage is not included. Medigap helps pay for costs that Medicare doesn’t cover. It’s pretty easy, the higher the monthly payment for your Medigap policy, the lower the out of pocket costs that you will face. This brings us to Medigap Policy F and G which are the most robust options and covers the most costs.
Comparing Medigap F & G Policies
As I mentioned earlier, Medigap helps pay for coverage “Gaps” in Medicare. For example, Medicare Part A has a $1,340 deductible for inpatient hospital care. Instead you can purchase a Medigap policy, pay a higher premium each month, and you won’t have to pay for the Part A deductible out of pocket. There are 10 Medigap policies that you can choose from, ranging from A to N. All of the policies help cover expenses that Medicare doesn’t cover, but Policy F & G are the most comprehensive.
I like to refer to as the Medigap F policy as the Cadillac of Medicare policies. Pay the Medigap F policy monthly premium and you can see any doctor and basically get any medical procedure done and you will have no out-of-pocket expenses. The negative, like an actual Cadillac, is that the monthly payment can be expensive. Expect to pay over $130 per month (on top of the $134 in 2018 part B premium) for a Medigap F policy. Still, if you have major medical issues or like knowing the exact cost of your medical bills, the F policy can make sense.
Now, let’s compare Medigap Policy F to a G policy. A Medigap G policy covers the exact same thing as an F policy except for the annual Medicare Part B deductible, which is $183 in 2018. In other words, it makes sense to buy a Medigap G policy over an F policy as long as the yearly premiums are less than $183 of the Medigap F policy.
Let’s compare Medigap F vs. G Policy prices in different Michigan cities.
|City||Area Code||F Policy Premium||G Policy Premium||Annual Difference|
Source: AARP Medicare Supplement Plans 4.22.18
See a trend here? This pricing is all from the same company, an AARP sponsored United HealthCare plan, and you may find better or worse pricing from other insurance companies. This pricing also assumes that a person is just turning 65 now and eligible for Medicare. AARP has very competitive pricing though and unlike other insurance companies, finding Medigap pricing is easy. I mentioned before that the only difference between the F & G plan is that you have to pay the Medicare Part B deductible, $183 in 2018, out of pocket. If the price difference between the two plans is more than this $183, the G policy is the better value. The AARP plans in every city I looked at is the exact same price, and the price differential is $240. Therefore, it looks like the G is the better policy if deciding between the two here in Michigan, but every insurance company will have different pricing.
So, which one should I buy?
If you want the most comprehensive Medicare policy, you probably want to consider a Medigap policy with Medicare Part D for prescriptions. If you are deciding between buying a Medigap F policy vs. Medigap G policy, the decision should be pretty easy. If the G policy is less than the part B deductible ($183 in 2018) than the F policy, than it makes sense to purchase the G policy. Unfortunately, I still see many Medicare salespeople sell the F policy, even when not in the best interest of the client. Either the salesperson doesn’t know enough to recommend the G policy. Or, even worse,the salesperson is trying to maximize his commissions. Medigap policies pay a commission based on the price of the policy you buy. The higher the monthly premium, the higher the commission. Don’t make the mistake paying more than you need for an F policy, just because it is in the best interest of the Medicare salesperson.