Two Popular Medigap Plans are Being Shuttered — What It Means for You!

Q. A couple of years ago, my aunt Linda applied for a Plan F Medigap plan and the insurance company approved her. The following year, she saw a specialist about some hip problems she was experiencing, went for an MRI, and ended up needing hip replacement surgery. Medicare paid 80% of the cost of her visit to the specialist, the MRI, and the surgery. Plan F covered the other 20% owed under Part B, so Linda owed nothing!

Following the surgery, Linda spent a couple of days in the hospital, and then she had a home health care nurse come out to her home several times.

The total cost for Linda’s surgery, hospital stay and follow-up care was $70,000. Medicare paid its share of the bills and sent the remainder of about $14,000 to Linda’s supplemental insurance carrier. The carrier paid the entire bill, and Linda owed absolutely nothing for any of these Part A and Part B services. Her only out of pocket expenses were for some medications. This was all because of her Medicare Plan F!

My question is: I am eligible for Medicare this year. I thought I knew what I needed to know based on my aunt’s experience, and was going to follow in her footsteps and opt for Plan F as a supplemental plan. But, I read that Plan F and another popular plan are being taken away. What is the timeline for this, why is it happening, and what actions can I take at this time?

Thanks so much for your help!

A. Just when you think you finally understand Medicare and what coverage is best for you, they change it!
For decades, people on Medicare have had the option to supplement their Medicare benefits with Medigap coverage, also known as Medicare supplement coverage. And, as you can imagine, the most popular supplement plan for many years has been Plan F, the plan your aunt was on when she had her hip surgery.

The reason Plan F is so popular is precisely because of situations similar to what happened to your aunt. It takes care of all the gaps in Medicare, while leaving you with $0 out of pocket. This kind of certainty helps make planning for your healthcare spending easy to predict.

Plan F Is Being Eliminated

Sadly, all good things must come to an end. As part of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), Congress is eliminating Medigap plans that cover the Part B deductible, including Plan F and Plan C, effective in 2020. Another change is that Medicare premiums for higher income individuals will also be increasing. On a positive note, if this affects you, you have time to plan ahead to minimize the financial impact.

Why is Congress eliminating Plan F?

Medigap Plan F is the most popular of all supplement plans. Plan C is similar but doesn’t cover Medicare excess charges, so it is less popular. So, why is Congress eliminating these plans?

Some legislators fear that Plan F and Plan C policyholders visit their healthcare providers more often than someone who pays their own deductible. In other words, they worry that anyone with Part B deductible coverage will run to the doctor for every sneeze or paper cut. Conversely, if you were responsible for paying your own Part B deductible, then you might think twice about visiting your doctor for minor things, such as a cold.

But, will it cost more in the long run? Critics say that eliminating Plan F might cause some people to forego care, resulting in more expensive care later on. There could be health conditions that don’t get diagnosed early enough and end up costing Medicare big bucks down the road. While that may be true, it didn’t stop Congress from eliminating these plans in the next couple of years.

Good news: This change will only affect NEW Plan F Enrollees

Fortunately, these changes only affect new enrollees after January 1, 2020, so people currently on Plan F will be able to keep that plan in 2020 and beyond!

· Grandfathering will occur for current plan holders: While Medigap plans with deductibles are going away, enrollees with this coverage will be grandfathered in.
· Premiums will rise: Over time, you can probably expect Plan F premiums to slowly rise, since the total number of people enrolled will be shrinking each year.
· Enroll now: If you want this coverage, enroll in Plan F or C prior to 2020 so that you can then keep your policy.
· Consider alternatives: If you can handle a small Part B deductible, options such as Plan G and Plan N offer significantly lower premiums today and will also still be around after 2020. It’s still great coverage and you won’t find yourself stuck in an obsolete Medigap plan that might have rising costs over time.

Remember, selecting the right coverage now can help you attain rate stability down the road.

Higher Medicare premiums are coming for higher incomes.

The elimination of Medigap plans covering the Part B deductible is just one way that MACRA might affect you. The legislation also adjusts the income thresholds for Medicare Part B premiums beginning this year.

· Higher-income beneficiaries: This will largely affect higher-income beneficiaries, who will pay more for their Part B and D than they do now. Many in this group already pay higher premiums, and the MACRA legislation will increase those premiums further for individuals earning over $133,500 ($267,000 for married couples).
· A big increase for some: While this change affects only a small percentage of the Medicare population, the Kaiser Family Foundation reports that premiums for this group will be as much as 80% higher than the Part B base premium.
· If you’re affected, plan now: If you fall into this category, your health insurance costs in retirement may be higher than expected. Working out your estimated costs now will help you better plan for when you can retire.
If you are retired or about to retire, and are part of the estimated 2.9 million individuals who will pay income-related premium adjustments, it’s a wise idea to sit down with an experienced financial planner, such as myself, to discuss how you will handle these changes.

Medicare Doesn’t Pay One Penny for Long-Term Care

Regardless of the changes described, the fact remains that Medicare does not pay one penny, ever, for long-term care (often called custodial care) —which involves help with activities of daily living such as bathing, dressing, and using the bathroom; nor does Medicare pay for supervision needed by those suffering from dementia. And this is not changing. You can read more about this in our Critter Corner article, “Does Medicare Not Care about Long-Term Care?”

This means that, regardless of what is happening with Medigap policies in the future, it is wise to plan ahead for the catastrophic cost of long-term care ($10,000 – $14,000 a month in the DC Metro area)!

If you have not done Long-Term Care Planning, Incapacity Planning, or Estate Planning, or if you have a loved one who is nearing the need for long-term care or already receiving long- term care, please contact us to make an appointment for a no-cost introductory consultation.

Fairfax Elder Law: 703-691-1888
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Rockville Elder Law: 301-519-8041
DC Elder Law: 202-587-2797

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