Page 2 - Cover Letter & Evaluation for Michael Novotny

After that six-month period guaranteed-issue period is past, you will likely have to answer
questions about your health before you can get a Medigap policy or, if you already have one,
before you can upgrade to a more comprehensive Medigap plan.

Perhaps the most desirable attribute of Medigap policies is the flexibility they offer. You do not
need referrals to see specialists and will be covered when you see any provider who accepts
Medicare (as more than 98% of doctors and public hospitals do). Because Medigap policies are
nationally standardized, your benefits and coverage are the same in every state.

Medigap policies do not include prescription drug coverage, and so if you get a Medigap policy,
even though you do not currently take any prescription drugs, you will also need to enroll in a
Part D stand-alone drug plan. And Medigap policies do not cover routine dental and vision care
or hearing aids. The benefit designs for all 10 Medigap plans are shown on pages 6-7. Here are
summaries of the two Medigap plans in your evaluation.

1) Medigap Plan G. This is among the most comprehensive Medigap plans, and it covers all
of Medicare’s gaps after you have paid the Part B deductible ($183 this year). So, once
the deductible is paid you will not have any cost-sharing for Medicare-covered services.
The only two Medigap plans that are more comprehensive than Plan G are Plans F and
C, both of which will no longer be sold beginning in 2020, although people who already
own either of these two plans at that time may keep them.

Plan G is often a better deal than either of the two more comprehensive plans because
the premium savings are larger than the Part B deductible. As an example, if you save
$200 in annual premiums by buying Plan G instead of Plan F or Plan C, then you’ll come
out ahead even if you do wind up paying the $183 deductible. In Orange County you can
likely purchase a Plan F policy for $2,400 a year or less.

2) Medigap Plan K. This plan is much less comprehensive than Plan G, and it has a steep
$5,240 annual out-of-pocket limit. But since its introduction in 2010, it has become a
popular plan for healthy individuals who want the flexibility of a Medigap policy but do
not want to pay the high premiums associated with the more comprehensive plans
(including C, D, F, and G). It is one of only two Medigap plans that has an out-of-pocket
limit (the other is Plan L).

In evaluating the less comprehensive Medigap plans like Plan K, it helps to remember
that Medicare pays most of the medical costs, with the Medigap plans paying some or
all the balance. As an example, Medicare pays 80% of most Part B costs, and the
remaining 20% is paid for by the Medigap policy and/or the policyholder.

Plan K pays 50% of this 20% balance (which is only 10% of the total cost). And thus for
an expensive series of diagnostic tests that cost $2,000, Medicare will pay $1,600 (80%),
Plan K will pay $200 (10%), and the policyholder will pay the other $200 (10%). So the

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