Others Claim Plan N Is Good Value: Oh Boy
Plan G: $115
Plan N: $95
This is about right, for a 65 yr old female, in an average state.
Difference in Out of Pocket Costs
Equation 1: Out of Pocket Costs for Plan G = Part B Deductible
Equation 2: Out of Pocket Costs For Plan N = Part B Deductible + Office Visits (up to but not exceeding $20) + ER Visits (up to $50) + Part B Excess Charges
Plan N is Cheaper, Then The Difference Erodes
Example: 3 office visits = $45 (let’s call it not $20) / 12 = $3.75 monthly average
Example: 0.5 ER visit = $25 / 12 = $2.50
Sum = $3.75 + $2.50 = $6.25 a month
So the premium difference = $25, less $8.75 a month = $16.75 a month.
That leaves the Part B Excess, I have compared Equation 1 to Equation 2. That value = $115-95-6.25 = $13.75 a month x 12 = $165 total cost difference a year.
YGTBKM (You Gotta Be Kidding Me)
If $165 a year means that much to you (a bottle of very bad wine a month), why are you not closely examining Medicare Advantage at $1800 a year lower in premium? I could increase this amount to $300 easily and ask the same question.
This isn’t intended to offend, it is there so you step back and think….
Can this be wrong? Yes, there are situations.
a. Part B Excess is disallowed. There are states that disallow the Part B Excess Charge. EVEN THEN, no one said the laws cannot change, it is governed by the state.
b. You live in a place where networks are too difficult to manage, so Medicare Advantage is too problematic. AH. Now this is a possible reason. In Alaska, there are no Medicare Advantage plans in 2021.
What is the “Correct Price?” It’s VERY Complicated
When you own Plan G, you are LONG the option, i.e. if you face the Part B Excess, no matter the amount, it is covered.
Yeah, back to this diagram, you are paying the $165 (the area below the horizontal line, in cash flows out of your wallet), per year, for the hockey stick in Plan G.
When you own Plan N, you are SHORT that same option, because YOU are responsible for the Part B Excess. In return you have kept $165 extra.
The diagrams are just flipped images of each other.
The graph has one formula (so the broken record player sings).
C = price of a call
d1 = Cumulative probability of something occurring.
NOTICE 2 curves, the red line is flatter, meaning that things that you don’t normally expect, occur at a higher rate (frequency). This means that all else equal, the C is more costly if the situation is more volatile. Volatility, then, is an important input into the value Plan G which includes the value of the Part B Excess Charge.
Possible Sources of Volatility? First the Obvious.
1. You require many, many office visits due to your condition. See the $165, it presume 3 office visits, that can be 3 office visits a month. Ask someone you know.
2. You have other serious maintenance matters. Again, your common sense tells you that the greater number of times you face a bill, the greater the likelihood that you face an Excess Charge. You don’t need to know a thing about any of the pictures here.
Now, The Not-Obvious
a. Doctor changes his/her mind, because he looks at his educational loan balance of multiple $100,000s, and realizes he/she holds a knife for a living.
b. Doctor realizes the malpractice insurance bill isn’t going lower.
c. CMS calls up every doctor and says “you’re taking a pay cut, effective tomorrow, have a nice day.” I promise the AMA doesn’t want me to be appointed CMS czar, because that is the very first that I would make. Sorry, fiscal and demographic weight of Medicare, anyone?
The issue is that many people will see the obvious, but the Not-Obvious points aren’t considered, much less being pointed out loud by YouTube gurus, “Acme boomer agencies.” There can be reasons.
A. They don’t understand the graphs and formulas here. The reality is that you do not need to be a mathematician; the logic here is common sense and critical.
B. They do understand and are not saying it out loud because of its complexity. Maybe. I have said this on the closed locations (here an example) because the public is likely to not understand or mishandle it, or both. See what I mean? This comment on YT to my Plan G vs Plan N video.
Is This The Punchline?
Ask yourself the following.
If the Part B Excess coverage is useless, then would the SELLERS (insurance companies), who are:
motivated to gain as much profitable market share as possible
to receive the maximum premium dollars
Charge you for it? They wouldn’t because of the two bullet points, they would drive down the difference. Given their calculations, where they have almost perfect data (63MM Medicare beneficiaries), are they likely to be wrong? Nah.
Instead, they have gone through what I have presented here, and then set their price as low as they could their estimates allow. That is what options sellers do, and an insurance company sells options.
Plan G y’all, not Plan N. Unless one of the exceptions mentioned above, applies to your specific situation.