Updated: Nov 8
When evaluating Medicare Advantage Plans, one key question to ask is: What out-of-pocket costs will I face? Medicare Advantage Plans provide all Original Medicare Part A and Part B benefits along with extra coverage in one plan. But these private insurance plans can structure costs differently than Original Medicare.
Understanding Medicare Advantage out-of-pocket costs can help you choose a plan that fits your needs and budget. This guide covers what costs may apply, strategies to minimize expenses, and how Medicare Advantage out-of-pocket spending compares to Original Medicare Plan.
Out-of-Pocket Costs in Original Medicare
First, it helps to understand the out-of-pocket costs of Original Medicare which include:
Part A premium: Most people don't pay a premium for Part A hospital coverage since they have enough work credits. Those without enough credits pay up to $506 per month in 2023.
Part B premium: Standard Medicare coverage premium is $164.90 per month for most beneficiaries in 2023, but higher incomes pay more.
Deductibles: Part A has a $1,600 deductible per benefit period. Part B has a $226 deductible each year.
Coinsurance: 20% of the Medicare-approved amount for most Part B services after the deductible. No limit on how much you might owe.
Services not covered: Things like dental, vision, hearing, and long-term care are not covered. You pay 100% out-of-pocket. Medicare Advantage Plans may include all Part A and B benefits, but often structure out-of-pocket costs differently. Here’s what to expect:
Premiums in Medicare Advantage
You’ll generally pay the monthly Part B premium. Many plans also charge an additional premium for the extra benefits they provide. This ranges widely from $0 up to over $200 per month. The plan premium is in addition to your Part B premium.
Some plans will help cover part of your Part B premium, which reduces your out-of-pocket costs by that amount.
Deductibles and Copays
Original Medicare has high deductibles you must pay before coverage kicks in. Most Medicare Advantage Plans don’t have a deductible or it’s much lower, like $100 to $200.
Plans typically use flat dollar copayments for services instead of 20% coinsurance. For example, you'll pay a $10 or $50 copay for an office visit or procedure. This makes costs more predictable.
One major benefit of Medicare Advantage is annual lower limits on your out-of-pocket spending for Part A and Part B services:
Plans have a yearly maximum out-of-pocket limit set by Medicare. For 2023, the limit is $8,300 for in-network care.
Many plans also set lower out-of-pocket maximums, like $5,000 or $6,000 when you enroll in a Medicare Advantage.
Once you hit the plan's limit, you pay nothing for additional covered care from in-network providers that year. Original Medicare does not have an out-of-pocket cap.
Medicare Advantage Plans often cover extra services that Original Medicare doesn’t cover at all. These can include dental, vision, hearing, transportation, meal delivery, and more.
Taking advantage of these benefits often comes with little to no cost. For example, plans may provide an allowance for eyeglasses or hearing aids with just a small copay. Using these perks can save you money compared to paying 100% out-of-pocket as you would in Original Medicare.
Prescription Drug Coverage
Medicare Advantage Plans include Medicare Part D prescription drug plan or coverage. They have a formulary listing covered medications and cost tiers, such as:
Preferred generic drugs
Non-preferred generic drugs
Preferred brand drugs
You’ll pay a copay or coinsurance amount based on the drug tier. Costs vary between plans. Your total annual drug costs are also capped once you reach the plan's out-of-pocket limit.
Strategies to Minimize Out-of-Pocket Costs
While Medicare Advantage Plans have many advantages, out-of-pocket costs can still vary greatly depending on the plan. Use these strategies to help reduce your expenses:
Compare plans’ cost sharing. Look for lower copays, deductibles, and maximum out-of-pocket limits when evaluating plans.
Use in-network providers. Staying in-network is key to avoiding higher costs. Check that your doctors accept the plan.
Choose preferred pharmacies. Copays are usually lower at preferred network pharmacies.
Take advantage of free preventive care. Medicare Advantage Plans must cover many preventive services with no copay, like cancer screenings and annual wellness visits.
Evaluate drug coverage. Make sure the plan covers your medications with reasonable copays. Ask about lower tiers or exceptions if drugs aren't covered.
Check if you qualify for Extra Help. People with limited income and resources may get help paying Medicare Advantage costs.
Consider a Medigap policy. If you join a Medicare Advantage Plan but later switch back to Original Medicare, you can purchase a Medigap policy at that point to help cover costs.
Medicare Advantage vs. Original Medicare Out-of-Pocket Costs
While plans have flexibility in how they structure out-of-pocket costs, Medicare Advantage offers strong financial protections overall:
You’ll never pay more than Original Medicare for certain services like chemotherapy and dialysis.
Total out-of-pocket spending is capped each year. Original Medicare has no limit.
Many plans offer extra benefits not covered by Original Medicare, often with low copays or no additional premium.
Some plans will help pay part of your monthly Part B premium.
With Original Medicare, you can purchase supplemental coverage like a Medigap policy or Part D prescription plan, but this involves added premium costs.
The right Medicare Advantage Plan with affordable copays and maximums can provide valuable coverage with financial security. Pay close attention to out-of-pocket costs when evaluating different plans to choose the best value for your needs.
We’re Here to Help
You do not have to spend hours reading articles on the internet to get answers to your Medicare questions. Give the licensed insurance agents at Next Steps Insurance a Call at (717)-271-2326. You will get the answers you seek in a matter of minutes, with no pressure and no sales pitch. We are truly here to help.
Do Medicare Advantage Plans have maximum out-of-pocket costs?
Yes, Medicare Advantage Plans have maximum out-of-pocket costs. These plans set a limit on the amount you have to pay for covered medical services each year. Once you reach this limit, the plan will generally cover all of the costs for covered services for the remainder of the year.
What is a Medicare Advantage Plan?
A Medicare Advantage Plan, also known as Medicare Part C, is a type of Medicare health plan offered by private insurance companies. These plans provide all of your Medicare Part A (hospital insurance) and Part B (medical insurance) coverage and may offer additional benefits, such as prescription drug coverage.
What is the out-of-pocket maximum for Medicare Advantage Plans?
The out-of-pocket maximum for Medicare Advantage Plans varies from plan to plan. The maximum amount you can be required to pay out of pocket for covered medical services in a Medicare Advantage Plan in 2023 is $7,050.
Does Medicare cover the out-of-pocket maximum for Medicare Advantage Plans?
No, Medicare does not cover the out-of-pocket maximum for Medicare Advantage Plans. However, once you reach the out-of-pocket maximum, the plan will generally cover all of the costs for covered services for the remainder of the year.
What is the difference between Medicare Advantage Plans and Original Medicare Part A and B?
The main difference between Medicare Advantage Plans and Original Medicare (Part A and Part B) is that Medicare Advantage Plans are offered by private insurance companies and provide all of your Part A and Part B coverage in one plan. Original Medicare allows you to choose separate Medicare Part D (prescription drug) and Medigap (supplemental insurance) plans.
Can I choose any Medicare Advantage Plan or part c?
You can choose any Medicare Advantage Plan that is available in your area and meets your needs. It's important to compare the costs, benefits, and network coverage of different plans to find the one that best fits your healthcare needs and budget.
What is the monthly premium for Medicare Advantage Plans?
The monthly premium for Medicare Advantage Plans can vary depending on the plan you choose. In addition to the premium, you may still need to pay your Medicare Part B premium. Some Medicare Advantage Plans have $0 premiums, while others may have higher monthly premiums.
Are prescription drugs covered by Medicare Advantage Plans?
Many Medicare Advantage Plans include prescription drug coverage, also known as Medicare Part D. However, not all plans offer this coverage, so it's important to check the specific plan details when choosing a Medicare Advantage Plan.
Can I in a Medicare Advantage Plan at any time?
No, you can only in a Medicare Advantage Plan during certain enrollment periods. The initial enrollment period is when you first become eligible for Medicare, and the annual enrollment period occurs each year from October 15 to December 7. There are also special enrollment periods for certain circumstances, such as moving or losing other healthcare coverage.
What happens if I reach the out-of-pocket maximum for a Medicare Advantage Plan?
Once you reach the out-of-pocket maximum for a Medicare Advantage Plan, the plan will generally cover all of the costs for covered services for the remainder of the year. However, it's important to note that this may not include out-of-network services, so it's best to stay within the plan's network for the most cost-effective coverage.