What is first-dollar coverage?

First-dollar coverage is an insurance policy that pays healthcare costs beginning with the first service.

In the Medicare world, this term applies to some Medigap policies (Medicare supplement insurance) that cover the deductibles and copayments associated with Original Medicare.  Medigap Plan F offers first-dollar coverage. Beneficiaries do not pay anything out of pocket.

First-dollar coverage has been bantered around in Medicare reform discussions. Studies have shown a link between having this coverage and using more healthcare services. For example, a beneficiary with first-dollar coverage might choose to go the emergency room for a non-emergency issue rather than wait to see his physician. As of 2020, Medigap policies for new enrollees will no longer include the Part B deductible benefit so they will not have first-dollar coverage.

Word of caution for new beneficiaries: If you're interested in Plan F or Plan C, a second plan that offers coverage of the Part B deductible, find out how much the policy charges for that coverage. This year, the Part B deductible is $233. Yet, a recent study showed that the average premium for Plan F nationally is $400 per year more than for Plan G, a policy that doesn't offer coverage of the Part B deductible. 

PS Generally, this is not an issue for those who have elected Medicare Advantage. That's because the benefits usually care some type of copayment or coinsurance, such as $395 a day for hospitalization or $25 for a physician's visit.