Americans are turning 65 at a pace of 10,000 per day and they face a confusing array of insurance decisions regarding Medicare. To help this age group understand their insurance choices, HealthPocket evaluated the expenses associated with their three main coverage options:
- Original Medicare with a Medicare drug plan
- Medigap Plan F with Original Medicare and a Medicare drug plan
- Medicare Advantage
Using government data on healthcare and medication use among Medicare-aged individuals, HealthPocket compared the premium and out-of-pocket expenses for each of the three Medicare insurance options. Medicare Advantage proved to be the lowest cost option. Its annualized cost estimate was 19% less than Original Medicare Parts A & B combined with a Medicare drug plan and it was 45% less than Medigap Plan F combined with Medicare Parts A & B and a Medicare drug plan. While the Plan F option left the Medicare enrollee with no medical out-of-pocket costs, this option still had out-of-pocket costs associated with drug coverage. Additionally, the Plan F option’s lower out-of-pocket costs did not compensate for its higher overall premium expenses.
Due to its current government funding structure, many Medicare Advantage plans do not charge a monthly premium. These plans also include an annual limit on out-of-pocket costs. Original Medicare has no such limit on out-of-pocket costs.
Premiums and out-of-pocket costs for Medicare Advantage plans may be affected in the future by changes in government funding but these changes are difficult to predict. Medicare Advantage plans have been at the center of highly politicized debates over the program given that the government often spends more for medical services delivered by Medicare Advantage plans as compared to the same services received in Original Medicare.