Unless you\’ve just retired for Goldman Sacks, financing health care costs through retirement has become a major issue for many if not most Americans. The ever-increasing cost of health care coupled with the longer age expectancy turns what used to be a fairly calculable financial risk into a complete unknown. There\’s a real question of being able to afford retirement whether it\’s chosen or \”coaxed\”. In light of this focus towards \”affordability\” for Medicare supplement insurance plan options, new Medigap plans have come to market at a much lower price point. The M Medicare supplement plan is one of them so let\’s take a look at how they are able to reduce the monthly premium and what exactly we are given up in order to get these reduced premiums.

The general trend with Medicare Medigap plans is to increase in benefits (and generally cost) as you go up in the letters with A being the simplest (least expensive plan) on up. The M Medigap plan bucks this trend. The M plan combines some of the core Medigap benefits with cost-sharing (like the L plan). The M plan only applies this cost-sharing to the Part A (Hospital) deductible which is a fixed annual amount. The M plan is actually richer than the K, L plans but less rich than the F plan (which is also the most popular on the market). Let\’s take a closer look at the core benefits.

With the M plan, the Part A and Part B coinsurance is covered. This is the 20% you will pay after annual deductibles for both hospital or facility based care (Part A) and physician based care (Part B). These are really the two big risks of just having Medicare by itself (without a supplement plan) since the 20% can continue indefinitely. 20% of a $100K bill is $20,000. You don\’t want to end up with that bill on your dresser and $100K is not that extravagant these days when dealing with hospital care. The M Medicare supplement plan also covers the peripheral benefit such as 3 pints of blood, skilled nursing, hospice care, foreign emergency travel, and preventative co-insurance which all have varying degrees of importance. Now, let\’s take a look at what the M plan doesn\’t cover or covers with cost-sharing.

As we mentioned above, both Part A and Part B have a deductible that needs to be met first before Medicare starts picking up 80% of the remaining charges. The cost sharing comes in for the Part A (Hospital) deductible which is $1156 for 2012. This means you will pay 50% of this deductible amount. The Part B deductible ($140 for 2012) is not covered at all for physician benefits with the M Medigap plan. An associated benefit to the Part B deductible is excess charge. Excess is the amount that physicians can charge above what Medicare allows and still be contracted. If your Medigap plan does not cover excess, you pay this charge indefinitely. Providers can charge up to 15% more than what Medicare allows in this category.

So, what\’s our take away on the M Medigap plan? First, make sure it\’s available by strong carriers in your State. It\’s definitely not as prevalent on the market as some of the Medicare supplement staples like the F plan. Next, look at the premium difference versus the F plan. There needs to be enough annual savings to offset 1/2 of the Part A deductible (approx $578), 100% of the Part B deductible ($140) and potential for Excess. It\’s this last piece that worries us since there\’s no real upper boundary we can use to calculate. If you have extensive physician services in a given year, this amount can be quite high. This may be part of the reason that the M plan is not widely offered and the F Medicare supplement plan is offered by almost every carrier.

Dennis Jarvis is a licensed insurance agent concentrating on medicare supplement insurance.