Medicare Advantage or Medigap Policy? - Step 3

Option 1- Stick with Part A and Part B with or without adding prescription drugs (Part D): 
 
If you choose to add prescription drug coverage to your Part A and Part B you will need to purchase a Part D plan.  
Part D (prescription drug plans) are offered through private health insurers and typically cost anywhere from $30-$175 a month.  You can generally find a suitable plan in the $30-$50 range.  This premium will be on top of your Part B premium.  For example...if you choose a $40 a month Part D plan you will pay the $174.70 Part B premium and the $40 Part D premium for a total of $214.70 a month.  You can always View Medicare Plans here if you would like to see what is available in your area.

If you choose to stick with Part A and Part B without adding a prescription drug plan you will only pay the Part B premium of $174.70 a month. 

If you choose to go without prescription drug coverage you will start to accrue a Part D penalty.  The longer you go without prescription drug coverage, the higher the Part D penalty will get.  If you decide to get a prescription drug plan at a later date, you will then start paying the Part D penalty on top of the monthly premium.  

If you have a prescription drug plan through your employer or the VA you will not accrue the Part D penalty.  As long as your prescription coverage is equal to or better than what Medicare offers it will be considered "creditable" and you will not accrue a Part D penalty.

OUR OPINION:  Out of the three options presented on this page, this one is the worst.  Whether you add a prescription drug plan or not, sticking with only Part A & Part B is not the best decision.  The only time we would suggest doing this is if you don't have any other options available in your zip code.  Sticking with Part A and Part B leaves you vulnerable to the 20% coinsurance (you pay 20% of the bill) on Part B.  As you will see in the next two options, either a Medicare Advantage Plan or a Supplement Plan will offer far superior coverage.


Options 2 - Get A Medicare Advantage Plan (Medicare Part C):

Some Medicare Advantage Plans can have a small premium, but generally you will be able to find a variety of suitable plans at a $0 premium.  This means you will only have to pay the $174.70 Part B premium and nothing for your Medicare Advantage Plan.  You can get a Medicare Advantage Plan with or without prescription drug coverage.  The prescription drug coverage will not add an additional premium like it did in the previous example.

The greatest benefit of a Medicare Advantage Plan is that it eliminates the 20% coinsurance on Part B in favor of some small co-pays and cost sharing.  This means that instead of having to pay 20% of the bill yourself, which can get very expensive, you will only be subject to co-pays and cost sharing.  For example, it may cost you $20 to see a specialist or $180 for an ambulance ride.  To see a full list of copays and cost sharing you will want to look at the plan's Summary of Benefits.

The plans also have a maximum-out-of-pocket dollar amount that ranges from around $3,500 - $8,000 depending on the plan.  This means that if you have a really bad year and all of your copays and cost sharing adds up to the maximum-out-of-pocket limit, you are done paying and the plan will cover everything in full for the rest of the year.

Medicare Advantage Plans also have extra benefits that are not offered by just Part A and Part B.  They come with benefits like dental, vision, hearing, gym memberships, over-the-counter reimbursement, meals, etc.  For a full list of extra benefits you will want to see the plan's Summary of Benefits.

Depending on your zip code and whether or not you elect to take prescription drug coverage, some Medicare Advantage Plans even give you money back.  This money is typically added to your Social Security check to offset the Part B premium.  For example, if a plan gives you $50 back you will only be paying $124.70 a month for your Part B premium instead of the full $174.70.  During the Annual Enrollment Period for 2024 we saw plans in some areas giving back $160, leaving the beneficiary to only pay $14.70 a month for their Part B premium.  If you would like to View Medicare Plans in your zip code, you can always do so here.

OUR OPINION:  Getting a Medicare Advantage (Medicare Part C) plan is far superior than just having Part A and Part B and it is probably the right option for most people.  If you are fairly healthy and you don't use a lot of health care services, a Medicare Advantage Plan is the best fit for you.  If your health gets to a spot where your copays and cost sharing starts adding up to be north of $3,000 a year it may be time to look at Option 3: Medicare Supplement Policies also known as Medigap Insurance.


Option 3 - Get A Medicare Supplement Policy (Medigap) with or without adding prescription drugs (Part D):

A Medicare Supplement Plan is a policy issued by a health insurance company separate from Medicare.  The intention is to cover the gaps that Medicare does not pay for.  If you have heard of Plan A, Plan K, Plan G, Plan N, etc., this is where they fall.  These all refer to Medigap Plans.

These plans have premiums that are determined by your health or age; sometimes both.  The premiums can range wildly from around $1,200 to $10,000 a year on top of your $174.70 per month Part B premium.  The premium will be determined by your age, your health, and the type of plan you are applying for.

Some plans have smaller premiums with higher cost sharing while others have larger premiums but cover nearly everything.  For example, although the premiums are higher, the Plan G has a $226 annual deductible.  After that is paid, the plan covers everything for the rest of the year.

NOTE:  Medigap Plans DO NOT come with prescription drug coverage.  If you want coverage for prescription drugs you will have to purchase a Medicare Part D plan separately.  You can View Medicare Plans along with their prices right here.

OUR OPINION:  Getting a Medicare Supplement Plan (Medigap Plan) is a good idea for the individual that uses a fair amount of health care services.  If you know that you are going back and forth to the hospital a lot, costs are going to add up.  It may be better to get a Medigap Plan with a $3,000 annual premium than to pay an $8,000 out-of-pocket-maximum on a Medicare Advantage Plan.

OUR OPINION
1) Only stick with just Part A and Part B if it is the only option in your zip code.  You are better off with a Medicare Advantage Plan or, potentially, a Medigap Plan.

2) Medicare Advantage is probably best for most people.  If you are not using a lot of healthcare services this is where you can get the most bang for your buck.

3) If you are starting to accrue over $3,000 of copays and cost sharing in a year it may be best to take a look at what kind of Medigap Plans are available to you.


**If you ever have questions, we are here to help!  You can always request a callback or we can send a free Plan Recommendation Report directly to your email.  We hope we have simplified the process of obtaining Medicare for you, but if you ever have any questions please reach out to us and we will be happy to help.**