What should I go with? What do you recommend? Which one do you think is best? After I’ve explained the basics of Medicare to folks and we are looking at supplements those are probably the three questions I get asked most often. So what am I to say? If you have read my post, “What if Medicare didn’t exist?” you know that anything in Medicare is a good deal compared to what you might have to choose from if Medicare wasn’t there.
That being said 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 is quite probably the most popular Medicare supplement. 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.
Now that being said the “F” is the most expensive supplement. So what is the sweet spot? In my opinion it is the HDF supplement. The HDF cost about 25% of a regular F, but you effectively have a $2180 out of pocket maximum.
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!