By Christian Worstell, licensed insurance agent and Senior Writer for MedicareAdvantage.com.
As the Medicare Annual Enrollment Period approaches (AEP, also called the fall Medicare Open Enrollment Period), some Medicare beneficiaries may think the enrollment period for private Medicare plans is not relevant to them because they can’t afford a private Medicare plan. I’m here to tell you otherwise. It may actually be Original Medicare that you can’t afford.
There are at least four reasons why Original Medicare — Part A and Part B — may actually be harsher on your wallet than private Medicare plans like a Medicare Advantage (Part C) plan or a Medicare Part D prescription drug plan.
1. Original Medicare doesn’t have an annual out-of-pocket spending limit
Original Medicare offers a lot of benefits. But one thing you won’t find is an out-of-pocket spending limit for all those benefits.
Neither Medicare Part A nor Part B contain an annual out-of-pocket spending limit. That means there is no limit to the amount of money you can spend on Medicare deductibles, copayments and coinsurance over the course of the year. Depending on what types of health care services you need, these costs can add up quickly. Meanwhile, privately sold Medicare Advantage plans are required by law to include an annual out-of-pocket spending limit. For 2021, this limit is $7,550 for the year. And due to market competition, some plans may feature limits that are less than that amount.
Once you spend $7,500 on deductibles, copayments and coinsurance for qualified care, your plan pays for 100% of your out-of-pocket costs for covered care for the remainder of the year.
2. Many Medicare Advantage plans feature $0 premiums
90% of Medicare Advantage plans in 2020 include prescription drug coverage. These plans are called Medicare Advantage Prescription Drug (MA-PD) plans. In 2020, nearly half (49%) of all MA-PD plans came with no monthly premium. If you have a $0 premium Medicare Advantage Prescription Drug plan, the only monthly premium you likely have to pay is your Medicare Part B premium, which you would still have to pay anyway if you stick with Original Medicare. (Most beneficiaries aren’t required to pay a Part A premium. If you are, you’d still have to pay those premiums if you have a $0 premium Medicare Advantage plan).
So with a $0 premium MA-PD plan, there’s no extra monthly premium for you to pay. Your premiums are the same as they would be in Original Medicare.
3. Many Medicare Advantage plans offer extra benefits
For as much as Original Medicare covers, it has several glaring holes: it doesn’t typically cover routine dental or vision coverage, and it doesn’t typically offer prescription drug coverage.
But dental, vision and prescription drug coverage are three extra benefits that some Medicare Advantage plans may offer. As mentioned above, 9 in 10 Medicare Advantage plans covered prescription drugs in 2020. If you are enrolled only in Original Medicare, how — and how much — are you paying for things like routine dental care, vision care and prescriptions?
A Medicare Advantage plan that bundles these benefits into one plan may be more cost effective for you.
4. Medicare drug coverage can help you save money
I mentioned drug coverage above, but given the skyrocketing cost of medications, it’s worth repeating. Paying for your prescription drugs entirely out of pocket can put you at a substantial financial risk. Medicare beneficiaries have two choices for Medicare drug coverage: enroll in a Medicare Advantage plan that includes prescription drug coverage, or enroll in a standalone Medicare Part D plan. Both offer prescription drug coverage with typically low copayments for generic drugs.
Depending on the plans available where you live, you may be able to find a plan that offers more benefits at the same monthly premium cost with annual spending protection. If you think the Annual Enrollment Period doesn’t apply to you because Original Medicare is all you can afford, you may want to think again.