Medigap Plan G or Plan N at 65: Why the Plan Letter Choice Could Cost a Retiree $36,000 Over a 20-Year Retirement

Once you turn 65, you’re generally eligible to enroll in Medicare. But there’s more to the story than that.

While original Medicare provides valuable health coverage, it can leave you with very expensive out-of-pocket costs. The deductibles, copays, coinsurances, and other out-of-pocket expenses you incur as a Medicare enrollee can add up quickly, straining your retirement budget.

That’s where Medigap comes in.

Also known as supplemental insurance, Medigap policies are sold by private insurance companies and are designed to help pay many of the out-of-pocket costs Medicare enrollees incur.

The scary thing about enrolling in original Medicare is that there’s no annual limit on out-of-pocket spending. Having Medigap could significantly limit what you have to spend.

There are a number of Medigap plans you can choose from, and each has its own benefits and features. Plans G and N tend to be popular choices among new Medicare enrollees.

Plan G generally offers broader coverage Plan N, while Plan N offers lower monthly premiums. And making the right choice between the two could save you thousands of dollars throughout retirement.

Plan G vs. Plan N: Understanding the similarities and differences

Medigap Plan G and Plan N cover many of the same core benefits, including:

• Medicare Part A coinsurance
• The Part A hospital inpatient deductible
• Skilled nursing facility coinsurance
• Blood transfusions (the first three pints each year)
• Foreign travel emergency care, up to plan limits

Neither plan pays the Part B deductible, which is $283 this year. That deductible changes annually.

Despite their similarities, Plan G and Plan N differ in two important areas.

First, Plan G covers Part B excess charges, which are extra amounts some providers are allowed to bill above Medicare-approved rates for services. Plan N does not cover these charges, so you may owe a lot more if you see a doctor who does not accept Medicare assignment.

Secondly, Plan G covers your full Part B coinsurance. This means you don’t have to share in the cost when you receive Medicare-approved outpatient care.

Plan N pays 100% of the costs of some Part B services. But it doesn’t pay 100% of everything. You could face copays of up to $20 for certain office visits and up to $50 for ER visits if you’re not admitted to the hospital.

How Plan N could cost you $36,000 more in your lifetime

Because Plan N doesn’t offer the same coverage as Plan G, it comes with lower premiums. Medigap Plan G typically costs $30 to $50 more per month than Plan N. But the savings you reap by choosing Plan N could be lost if you end up with more out-of-pocket costs.

If you end up with frequent doctor visits and emergency room care, you could end up paying a lot more money each year for healthcare despite having lower Medigap premiums. Over 20 years, you could easily end up spending an additional $36,000 out of pocket.

So how do you choose? You’ll need to ask yourself how often you think you’ll use your Medicare coverage.

If you expect to use it a lot, Plan G could be the better choice. If you’re fairly healthy and rarely see the doctor, Plan N could make sense.

Of course, there are Medigap plans outside of Plan G and Plan N you can look at. Your best bet is to review all of your options and compare the costs and benefits before locking your coverage in.

You should also know that the once-popular Plan F has been discontinued for new enrollees who became eligible for Medicare. Plan G is now the closest equivalent to Plan F, which may help you narrow down your choices.