“Monthly premiums are the easiest information to compare, and cash-strapped retirees too often base their decisions largely on the premium they’ll have to pay every month. But potential out-of-pocket costs, such as copays and deductibles, might ultimately prove more important, especially as retirees age and are more likely to incur high medical bills. Considering both the premiums and out-of-pocket costs complicates the choice between lower-premium Advantage plans and higher-premium Medigap plus a prescription drug option.
“Part A hospital coverage is free for most people, but everyone enrolled in Medicare pays the Part B premium – the base amount is $104.90 per month in 2015, but higher-income people pay more – which covers doctor visits, outpatient care, lab work, scans, medical equipment and other services.
“In traditional Medicare, beneficiaries pay deductibles and co-pays, typically 20 percent for office visits and other Part B services, and the program does not limit out-of-pocket spending by beneficiaries. Medigap plans – also known as Medicare Supplemental Insurance – cover some or all co-payments and deductibles, and about one-third of traditional Medicare enrollees have Medigap, according to Kaiser. Premiums average about $200 per month and can go as high as $500 and do not include prescription drug coverage. Most people who choose traditional Medicare get a Part D drug plan, which averages $38 a month.
“Growing numbers of Medicare beneficiaries are flocking to Advantage plans (also known as Part C), because the additional premium for these plans, on average about $41 a month for plans with prescription drug coverage, is much lower than premiums for a supplemental Medicare Part D prescription drug plus a private Medigap plan. Advantage plans, typically offered by HMOs, limit out-of-pocket costs to $6,700 or less annually and often provide prescription drug coverage. A 2013 study by Kaiser found that the vast majority of Medicare beneficiaries have access to at least one Advantage plan in their area that includes prescription drug coverage but only half choose them.
“The bottom line on premiums: the average Advantage Plan premium plus the Part B premium equals $146 per month, when prescription drug coverage is included. This is half of the $343 in total premiums a beneficiary would pay for the Part B premium, plus a Medigap and a Part D drug plan, according to Kaiser’s estimates...”
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