The more we write about the premiums, hopefully the smaller the range will be. But if you don’t shop for a plan, you are leaving money on the table in most cases. Fortunately, there's a tool on Medicare’s website that helps you shop for Medigap plans.
Insurance companies would argue that the quality of customer service is a differentiator in terms of plans. I think that is a nice-sounding phrase. I’d shop based on premium, and that should be almost all the due diligence people need to do. I would look for a community-rated plan with the lowest premium.
Affluent people who travel a lot outside the U.S. need to do careful Medigap shopping. It provides limited coverage for medical expenses incurred outside the U.S.—usually of an emergency nature. Traditional Medicare doesn’t cover you outside the U.S. Some Medicare Advantage plans offer emergency coverage outside the U.S.
Q. Affluent people can also get hit with big surcharges. What's the situation there? A. There's something called IRMAA, which stands for "income-related monthly adjustment amount." Wealthier individuals have to pay higher percentages of their Medicare expenses for Part B and D policies.
If you earned more than $124,000 this year—and that's modified adjusted gross income, or MAGI—the Part B surcharge can be really stiff. If "normal" people pay $105 a month for Part B, the highest-earning individuals in the U.S. pay nearly $390 a month, or quadruple.Another important thing is that IRMAA is based on your tax returns for two years ago , and IRMAA can be influenced by one-time events. If you sell a vacation home that has no lifetime gain exclusion, for example, you got a slug of one-time income—and it will play havoc with your IRMAA surcharge. If you have a financial adviser, they should be factoring in this time element, in terms of how they plan for your Medicare premium.
Q. What plan do you use?
A. The Medicare Advantage plan disadvantages are unacceptable, as long as I have the financial resources to get Medigap. Medigap is a lot more expensive—you easily could spend several thousand more a year in premiums than for comparable coverage, in terms of out-of-pocket costs for Medicare Advantage. And again, Medicare Advantage restricts you to their provider network, which to me, as a beneficiary, is a point of concern. But Medicare Advantage does have out-of-pocket payment protections, so are attractive for that reason.
Q. There was legislation passed last year that changed Letter F and C plans. How does that affect people?
These plans are the only two Medigap plans that provide first-dollar coverage of Part B deductibles. That deductible is now about $166 and may rise above $200 next year, because health-care expenses are going up. Congress decided that people needed more skin in the game and that those two plans discouraged people from taking proper responsibility for their health-care spending needs.
As of 2018, newly sold Part F and C plans will no longer provide first-dollar coverage for Part B deductibles. If you already have a Part C or F plan, or buy one in the next couple of years, you're grandfathered, and your plan will continue to cover this deductible.