Even Medicare and Medicare supplement insurance can learn new tricks. It's doesn't happen often and the changes might not be earth shattering but when a marketplace as big as Medigap health plans changes, everyone listens. This is evident in the recent addition of new Medicare supplement plans that incorporate cost sharing into the design of their plans in an effort to offer more affordable and cost effective Medicare supplement plans to the market while still keeping the flexibility of traditional Medicare providers (as opposed to Medicare Advantage plans which are ostensibly the latest generation of HMO plans). Part of this new plan onslaught is the L Medicare supplement plan. Let's break down its core benefits and see how it stacks up against other popular Medigap options such as the F plan.
The L Medigap plan is very similar to the K plan. In fact, it's essentially a richer version of the K plan which we covered in a separate article. Both plans incorporate cost sharing on certain Medicare categories with an annual maximum out of pocket of co-insurance limit. The K plan offers both a reduced cost sharing percentage (75% versus 50% for the K plan and 0% for the F plan) and a reduced annual cap. The annual cap is important as it dictates at which point you will be done sharing costs for Medicare covered benefits with providers that accept Medicare (without excess). We'll get into these last two issues later but first, let's break out the detail for the L Medicare supplement plan.
Let's first talk about what the L plan covers fully (similar to the F Medigap plan). The big one, Part A or Hospital/facility based care co-insurance is covered at 100%. This 20% co-insurance of hospital related costs is the biggest gap in traditional Medicare so we're off to a good start if the L plan covers it. Co-insurance just means that you will share in paying a percentage of the associated cost. Copays are fixed amounts...co-insurance are percentages. Preventative services allowed by Medicare are also covered in full with the L plan. The Preventative benefits are mandated due to recent changes in Medicare so this is expected. Okay...so those are the two items that are covered in full. Let's look at how the L Medigap plan brings in cost-sharing to reduce your resulting premium.
The percentage you will pay of the remaining area's is 25% of what Medicare doesn't cover. This is important as it's generally not 25% of the total bill once the deductible is met. Let's take a look. You will pay 25% of the Part A deductible (hospital annual deductible), Part B co-insurance (20% that Medicare doesn't pick up for physician or out-patient services), 3 pints of blood, Hospice Care, and Skilled Nursing care. You will continue to pay the 25% of these expense until you reach $2310 (2010 amount). This out of pocket limit is indexed so you want to confirm the current year's amount. The L plan does not cover the Part B (physician/out-patient) deductible or excess charge (up to 15% higher amount doctors are allowed to charge above what Medicare allows).
Let's take our example. Say you have $1000 of physician charges in a year. You will first pay the Part B deductible of $162 (2011). Medicare will then pick up 80% of the resulting $838. The remainder is approximately $167. With the L plan, you will then pay 25% of the $167. Not too bad. If you have really big bills, you will pay these charges until you've paid the out of pocket limit in a calendar year (Jan-Dec). So how do we compare the L plan against the F Medigap plan?
No one has a crystal ball and it's tough to know how the bills might fall next year not to mention 5 years from now. To some extent, we can expect that our health care costs will increase with each passing year of our life based on averages so opting for premium savings as a result of increased risk is generally not a sound long-term approach to Medicare supplement shopping since we're entering the most expensive period of our lives in terms of health care cost. The other main issue is the lack of coverage for Part B excess which we've covered extensively. Having an uncapped liability just doesn't mesh with the whole purpose of buying insurance in the first place. That's our 2 cents. Hopefully it saves you much more than that!