The HDG and HDF supplements offer a great balance of low monthly premium and moderate out of pocket costs.  As you know from some of my other articles sticking with traditional Medicare and a supplement can give you better control of your healthcare as you won’t be subjected to as many utilization reviews.  The problem is that the cost of F, G, or even N supplements can be too high for some people.

The HDF and HDG supplements offer a moderate premium with moderate out of pocket costs.  For someone turning 65 you should be able to find a HDG for $40+/- a month here in East Tennessee.

I do think there is a sweet spot when it comes to coverage.  Keep this principle in mind, “You either spend more on the insurance and less out of pocket, or less on the insurance and more out of pocket.”  So on one end of the spectrum you have Medicare Advantage plans.  In general, (disclosure, disclosure, disclosure about how it depends on the plan and all that stuff, blah, blah, blah) the Advantage plans will have lower premiums, but the nationwide average on the out of pocket maximums is over $5000.

The other end of the spectrum is the “F” supplement.  It was quite the most popular Medicare supplement for decades.  This is largely due to the fact that the out of pocket maximum is effectively $0.  That’s right, you hand over your Medicare card and your F supplement to the doctor or hospital of your choice (disclosure, disclosure, disclosure about how it depends on the doctor or facility accepting medicare and all that stuff, blah, blah, blah) and you walk away.  All you spend on healthcare is your premium.

For those of you who are aging into Medicare after January 1, 2020 you cannot get a “F” Supplement.  Every so often CMS updates what supplements are available and in this last update the “F” got the ax for new enrollees.  If you already have an “F” there’s no need to panic you can keep yours…you can even get one after Jan 1, 2020.

The new “Cadillac” plan is the “G” supplement.  The “G” is very similar to the “F” with one exception.  The “G” supplement requires you to pay the Part B Deductible ($198 in 2020).  So effectively your out of pocket maximum IS $198!  For someone aging into Medicare at the age of 65 the “G” might run $100-$115 a month depending on the insurance company.

Think about this.  If you have a “G” supplement it is the easiest to use.  You pay the first $198 (at the Medicare negotiated rate, not what the insurance company charges) and then you  are done with health expense for the year.  Except…the monthly premium.  Let’s just round the numbers off to make this easy.  If the “G” is $100 a month then it is $1200 a year.  When it comes to out of pocket costs you only have to pay the $198.

With the HDG let’s say the premium is $35 a month.  That is $420 a year.  That’s a savings of $780 a year on premium.  With the HDG, just like the regular G you are going to pay the Part B deductible of $198.  That $198 is the same regardless of whether you used the G or the HDG.

What about after the $198?  How much out of pocket costs does the HDG leave you with after that?  What it leaves you with most of the time is 20%.  Remember that all Part B charges (and MOST charges are Part B charges) are paid 80% by Medicare after the Part B deductible.  So that leaves you with 20% of the bill at the negotiated rate.

So let’s say in your first month of eligibility you have to have some procedure done where the negotiated rate is $1000.  With either the “Cadillac” G plan or the “HDG” you are going to pay the first $198 of that $1000.  If you have the “G” supplement you are done paying.  Not just for this procedure, but for the year.  Just remember in premium alone you are paying $780 a year more though.

With the HDG after that first $198 you pay 20% of the balance.  The balance is $802.  So you pay $160.40.  For most of us that doesn’t break the bank AND you still have saved $619.60 in total costs over the “G.”

So what is the sweet spot in Medicare?  What balances monthly premium and out of pocket costs?  What still gives you and your doctors control of your healthcare instead of an insurance company doing a utilization review?  The HDF or the HDG.

Keep in mind you are not responsible for the first $2180 in cost.  You are only responsible for the first $2180 of your share of the cost.  Remember Part B of traditional Medicare works like an 80/20 plan.  Then Part A works off a series of deductibles the first of which is $1288.  The other issue is that with traditional Medicare there is no out of pocket maximum.  That is effectively what the HDF gives you.

If you were still in the 64 and under non-Medicare market you would probably love to have a $2180 out of pocket maximum and I can tell ya…there’s no way you are getting one for $38.75 a month!  So I hereby declare that the HDF is the sweet spot of Medicare coverage!