Comparing Medicare Costs and Tradeoffs
The most coverage or the lowest cost may not be better than alternatives
Written by: Andrew Hall.
Key Takeaways
Before you start comparison shopping, make a list of your healthcare needs to ensure your plan has what you need.
Make decisions for you. Don’t ask your neighbor or friend about their Medicare plan because your needs are probably different.
Understand how your health needs work with the cost mechanisms like deductiblesA deductible is the amount you pay out of pocket before your insurance company covers its portion of your medical bills. For example: If your deductible is $1,000, your insurance company will not cover any costs until you pay the first $1,000 yourself., copaysA copayment (copay) is the fixed amount you pay directly to your provider for medical services or prescription drugs covered in your plan. For example: If your plan includes a copayment of $20 for office visits, you'll pay $20 to your doctor whenever you have an appointment., and coinsuranceCoinsurance is the percentage of your medical costs that you pay after you meet your deductible. The remaining amount is paid by your insurance company. For example: If you have a $1,000 medical bill and your coinsurance is 20%, you'll pay $200. Your insurance company will cover the final $800..
The most coverage or the lowest cost may not always be the best option.
On This Page
If you are like most people, costs can seriously influence decisions when it comes to your health insurance. Besides premiums, there are deductibles, coinsurance, and copayments to consider.
Depending on your plan, still you may have to consider supplemental costs like prescription drugs or out-of-network costs.
There is not an easy way to comparison shop health insurance, but we’ve figured out how to give you a quick look at what you need to know about costs if you are ready to enroll in Medicare.
What You Should Be Thinking About
You have a lot of information at your fingertips, but is it helping? Let’s get started with Original Medicare and Medicare Advantage and consider some options that affect your wallet.
Original Medicare
- If you have a qualifying work history, your Part A benefits don’t come with a monthly premium.
- Your Medicare Part B premium is set each year by the federal government and income brackets determine if you pay a standard rate or more.
- There is no limit on what you pay out of pocket each year. You will always be responsible for 20% of expensive treatments or surgery. These services can be costly.
- Original Medicare usually costs more than Medicare Advantage but can make budgeting your healthcare costs easier by offering predictable pricing for services.
- Original Medicare does not have out-of-pocket limits.
Medicare Advantage
- Your Part A and Part B coverage are always the same but networks, copays, and Rx options can change from plan to plan.
- Do you know the difference between an HMO and a PPO network? Both can affect your costs, but the good news is both usually offer Part D without an additional premium.
- Insurance companies are paid by the federal government to administer Medicare Advantage plans and each company determines their plans costs.
- Roughly half of all Medicare Advantage plans offer a Part D plan without an additional deductible.
- Medicare Advantage offers maximum out-of-pocket limits, so any covered services after reaching MOOP cost nothing for the remainder of the calendar year.
Many Different Kinds of Costs: Make the Comparison
We have and will mention throughout, don’t accept face value. Just because a plan is expensive, doesn’t not make it right for you. Every Medicare plan provides different options for services, including prescription drug prices, provider networks, vision and dental, and more.
Getting coverage that matches your health needs is paramount. Next, you can look at additional coverage and plan flexibility — both vary and come with different costs.
We’ve taken common scenarios for all four parts of Medicare and identified how they compare.
Original Medicare
Most people who choose Original Medicare plus a Medigap plan value access to Medicare’s entire Network. Medicare’s network offers flexibility.
- Higher Cost
- Coverage & Flexibility
Original Medicare and Medigap have predictable costs. They want the peace of mind that comes from knowing exactly how much they will spend on a hospital stay or chronic illness. They buy for convenience and don’t mind spending a bit more to gain peace of mind.
- Higher Cost
- Coverage & Flexibility
Sometimes people also choose Original Medicare if their doctors do not participate in any Medicare Advantage plans.
- Higher Cost
- Coverage & Flexibility
Medicare Advantage
Medicare pays the insurance company to administer your Part A and B benefits through the Medicare Advantage plan
- Affordable Cost
- Good Coverage
Most Medicare Advantage Plans have a Part D option included
- Affordable Cost
- Coverage & Flexibility
Medicare Advantage offers a lower monthly premium, and you get great coverage if your doctors and hospital are in network.
- Affordable Cost
- Good Coverage
Medicare Advantage plans may offer additional services, like dental and vision, wellness programs, transportation, and more
- Affordable Cost
- Coverage & Flexibility
Original Medicare & Part D
Enrollees can see any provider that accepts Medicare
- Higher Cost
- Coverage & Flexibility
Costs for Parts A, B, and D can be significant
- Affordable Cost
- Coverage & Flexibility
Without Medigap, there’s no Part A and B out-of-pocket limit
- Affordable Cost
- Good Coverage
Original Medicare, Part D & Medigap
Depending on the Medigap plan, Parts A and B deductibles, coinsurance, and copays may be covered in full.
- Affordable Cost
- Coverage & Flexibility
The total cost for Parts A, B, D, and Medigap could be more expensive than Medicare Advantage
- Higher Cost
- Coverage & Flexibility
Medigap does not help pay Part D drug costs, so they can be higher than a Medicare Advantage plan
- Higher Cost
- Coverage & Flexibility
Premium payments will be lower without Medigap, but out-of-pocket costs may be higher without additional coverage
- Affordable Cost
- Coverage & Flexibility
Make the Right Choice by Comparison
Making an important choice like what health insurance plan to purchase is huge! There are so many details, and there are licensed insurance agents, like GoHealth, that can help you wade through those waters. But if you choose to comparison-shop on your own, consider these four topics over anything else.
Total Cost for Care
It’s important to think about your total out-of-pocket costs, including deductibles, copayments, coinsurance, maximums, and drug costs, that you’ll pay with a Medicare health or drug plan.
Provider
Some plan types have a network of providers you’ll have to use if you want to pay less. If you have a particular doctor or pharmacy that you prefer to go to, see if that plan has a network.
What Benefits do You Need?
Many Medicare Advantage Plans include prescription drug, vision, hearing, and dental coverage.
Overall “Star Rating”
The “Overall Star Rating” gives a rating of the plan’s quality and performance for the types of services each plan offers. A plan can get a rating between 1 and 5 stars.
FAQs
If Medicare doesn’t cover all my health costs, what’s my option?
Most people supplement Medicare with some other form of coverage, such as a Medigap plan, retiree plan, Medi-Cal (if they have low income and assets), or Veterans Affairs (VA) benefits (if they qualify).
Others receive Medicare through private health plans called Medicare Advantage (MA) plans. MA plans have lower premiums with provider networks, but usually cover Part D and some include vision, dental and hearing. If your providers are in a Medicare Advantage network, it’s a great option.
If I have insurance with my job, should I even bother with Medicare?
If you are covered by an employer group health plan through active employment (i.e., not a retiree plan), you may delay enrolling in Part B. Still, it might be worth a comparison to find out if Medicare offers better coverage or costs less than your employer group plan. If you do delay enrolling in Part B, you can enroll anytime without penalty as long as you have credible health insurance with an employer. When your employer insurance stops, you will get a Special Enrollment Period that allows you to enroll in Part B without late penalties.
If I find a better plan, how do I switch coverage or enroll in the new plan?
Each year, there’s an open enrollment period for Original Medicare, Medicare Advantage and Medicare Part D, which runs from October 15 to December 7, with coverage changes effective on January 1.
There’s also a separate open enrollment window for Medicare Advantage and Part D that allows you to switch plans. This window runs from January 1 to March 31. If you’re new to medicare and miss your Initial Enrollment Period, you can enroll in Medicare during this window, with coverage changes effective on July 1. [1]