Medicare supplement Plan F fills all the gaps in Medicare, leaving a person with no co-pays for services covered by Medicare. Medicare pays its part of the bill and Plan F pays the deductibles and co-insurance.  There has been talk for some time about modifying Plan F because having 100% coverage is too good and encourages people to overuse the medical system.

My response to this kind of talk has been, “I guess somebody thinks going to the doctor is recreational activity for seniors”.

The National Association of Insurance Commissioners (NAIC) was asked by CMS (Centers for Medicare and Medicaid Services) to review Plan F and Plan C Medicare supplements to determine how they could be changed to reduce Medicare spending.

NAIC came back with its recommendations: Don’t change Plan F or Plan C Medicare supplements!

“We were unable to find evidence in peer-reviewed studies or managed care practices that would be the basis of nominal cost sharing designed to encourage the use of appropriate physicians’ services. Therefore, our recommendation is that no nominal cost sharing be introduced to Plans C and F. We hope that you will agree with this determination,” the NAIC wrote in the Dec. 19 letter.

Kathleen Sebelius, Secretary of Health and Human Services, agreed with NAIC.

According to a LifeHealthPro article: 

The NAIC did its work and “discovered that there is a limited amount of relevant peer-reviewed material on this topic. “

Moreover, none of the studies provided a basis for the design of nominal cost sharing that would encourage the use of appropriate physicians’ services.

Importantly, the NAIC pointed to caution in implementing added cost-sharing because it could result in delayed treatments that could increase Medicare program costs later, for example, increased expenditures for emergency room visits and hospitalizations, and result in adverse health outcomes for vulnerable populations like the elderly, chronically ill and low-income, the NAIC warned.

In the last few months, my clients who are turning 65 have overwhelmingly chosen the Plan F Medicare supplement.

About 20% of my clients have chosen to enroll in a Medicare Advantage plan, while the vast majority chose to stay with Original Medicare and get a supplement. A few people chose the Plan N supplement, which has some co-pays and the Part B deductible. But most have opted for the simplicity of Plan F – no co co-pays, no bills.

I have been telling my clients that Plan F is excellent coverage, but I’ve also told them Plan F might be too good – and that’s why Medicare has considered making changes to it.

It is kind of common sense that cost sharing makes people think twice about the medical services they receive.

If people have no co-pays, they are very likely to get that expensive knee replacement surgery. And they will get as much physical therapy as they can –  if they have no out-of-pocket costs. Medicare pays first and the supplement pays the rest of the bill.

But then again….. Do seniors overuse the medical system? Are they getting too much physical therapy?  Are they getting too many knee replacements?  And is shifting cost to the patient the best way to cut down on what some might consider elective surgery, or services like physical therapy?  These are the billion dollar questions facing Medicare.

I can tell you that people enrolled in Medicare Advantage plans do not overuse physical therapy, and this is because they have $25 to $45 co-pays for each visit. So my 80 year old clients might go once to physical therapy and pay $40 – but they won’t go again. So they suffer with their pain, and their sore shoulder doesn’t get better.  Is that the way to save Medicare money?

Back to Plan F:  It looks like this 100% coverage option (for medical bills) will be sticking around – although nobody knows what the future will bring.

For an explanation of Medicare supplements compared to Medicare Advantage, take a look at this 6-minute video presentation titled Intro to Your Medicare Choices.

I had an appointment yesterday with my tax accountant who is over 65 and on Medicare.  She is my accountant but not my client, but she asked me about a bill she got from her dermatologist.  The bill showed the charges for her treatments in the office, and it showed what Medicare paid and what her Medicare supplement paid.  It looked like the doctor’s office was “balance billing her” – though I didn’t look that closely at the bill.  I told her to call the doctor’s office and ask for an explanation of the bill.

One clue I did not pick up on:  The amount due was $162.

Second clue: This lady has a Plan N Medicare supplement.

As I drove away from the appointment, my cell phone rang.  It was my accountant calling to tell me she had spoken with the doctor’s office about the bill. They told her she has a deductible in her coverage, and that’s what the $162 is.

Duuuuuuh! How could I forget that?  Medicare Part B has a $162 deductible, and Plan N does not cover it.  Plan N has a lower premium than a Plan F or C because a person must pay a $20 co-pay when they go to a doctor’s office. They also pay a $50 co-pay if they go to the emergency room.  And they pay the Part B deductible each year ($162 in 2011).

I am an insurance agent and I forgot about the Part B deductible not being covered by Plan N.  (Of course, I was not in my working-and-explaining-Medicare-mode when I was meeting with my tax accountant.) I can see lots of folks getting Plan N for a lower monthly premium and then having greater confusion when they get their medical bills.

I usually suggest people get a Plan F Medicare supplement. “Think F as in full coverage”, I say.  With Plan F they don’t have to worry about co-pays and deductibles because Plan F fills all the gaps in Medicare.  I have had several clients who were diagnosed with cancer, and they called me specifically to tell me how grateful they were to have a Plan F Medicare supplement because they never had to think about their medical bills.

I just thought I’d pass on this tidbit of wisdom I gained this week.