Medicare Maze

The Statler Brothers had a hit song in the 70s (The Class of 57) that had this line, “things get complicated when you get past 18.” Well, if you think things get complicated at 18 just wait until you turn 65. That’s when Medicare begins. Medicare is the government health insurance program for people 65 or older. And since it is a government program, that means it is complicated. I am going to give a simplified description of Medicare and the decisions you need to make when signing up for the program. I’ll then tell you what Tammie and I have done and what we pay. Remember, this is a simplification and there are many exceptions you need to be aware of. If you want to get an in-depth understanding of Medicare, watch these two YouTube videos: Medicare Explained and Medicare Supplement vs. Medicare Advantage Cost Comparison.

Medicare Description

Medicare has four parts: Part A, Part B, Part C, and Part D. The first choice you have to make is to select either Original Medicare or Medicare Advantage. Original Medicare consists of Parts A, B, and D. Medicare Advantage is called Part C but actually takes the place of Parts A, B, and D. Please note that as a couple you each have your own separate Medicare plans. One could have Original Medicare and the other could have Medicare Advantage. The costs discussed below are for 2025.

Original Medicare

Part A is hospital insurance and pays when you are admitted to the hospital. It is “free” in that you paid for it when your were working as part of your FICA taxes. However, there is a $1,676 deductible for hospital stays. If you are hospitalized multiple times during a year, you may have to pay that deductible multiple times. Like I said it is complicated. Part A covers all of your hospital bills after the deductible is met.

Part B primarily covers outpatient medical care, including doctor visits, some home health services, durable medical equipment, and preventive services. Most people pay $185 per month (high earners pay more) for Part B coverage. There is also a yearly deductible of $252. Part B covers 80% of your doctor bills. You are responsible for the other 20%.

Medicare Part D pays for prescription drugs. This coverage is offered by private insurance companies. Each company sets their own monthly premiums, drugs covered, co-payments, and out of pocket expenses. You can change Part D coverage every year because plans change their coverage each year. Each company is required to tell you at the end of the year what changes will be made in the plan for the coming year giving you the opportunity to change Part D plans if you wish. The costs of Part D plans vary wildly, but the average is $50 a month

Supplemental/Medigap Plans

Because of the out of pocket expenses for both Part A and Part B, most retirees enrolled in Original Medicare decide to get a Supplemental Plan (sometimes called Medigap Plans). These Supplemental Plans, offered by private insurance companies and designated by letters A through N, offer standardized coverage to help pay for out-of-pocket costs associated with Original Medicare. These plans cover things like deductibles, copayments, and coinsurance, but they do not cover prescription drugs, which require a separate Part D plan. Each plan offers a different combination of coverage, with some being more comprehensive and others offering cost-sharing options. Right now, Plan G (the most comprehensive and most costly) and Plan N (requires more co-pays) are the most popular. Plan G covers all the out-of-pocket expenses for Part A and B except for the annual $252 Part B deductible. That is likely why 40% of retirees who use Original Medicare select it. Again, costs for Supplemental Plans vary and increase as you age. Typically, the range would be from $100-500 per month.

Please note that Original Medicare does not include coverage for vision, hearing, or dental. If you want that coverage you would have to get a plan on the open market or self-insure.

Disadvantages/Advantages of Original Medicare

The main disadvantage of Original Medicare is the cost associated with Supplemental Plans. A retiree with Original Medicare would have to pay the Part B monthly premium, a Supplemental Plan monthly premium, and a Part D prescription monthly premium.

The main advantage of Original Medicare is that you can go to any hospital (96%) and see any doctor (98%) who accepts Original Medicare. This is especially helpful to retirees who travel often or live in more than one location during the year. It also means that only you and your doctor are making decisions about your treatment not an insurance company.

Another advantage is that if Medicare pays for a procedure, then your Supplemental Plan also automatically pays as well. There are no disallowed claims as long as Medicare covers it (Medicare does not cover cosmetic surgery or experimental surgery). You can buy Supplemental Plans that will cover all deductibles and give you no out-of-pocket expenses (except the Part B annual $252 deductible).

Medicare Advantage

Medicare allows you to turn your care over to an insurance company. The company takes the monthly premium you pay to Medicare and then manages your health care like a PPO or HMO which is likely what your company that you worked for used. A Medicare Advantage plan contains Part A, Part B, and Part D. You no longer have any contact with Medicare, except to pay your Part B monthly premium. Medicare Advantage is managed care. You are limited to using certain doctors and certain hospitals. You will usually need to get permission to see a specialist and the specialist must be approved by the insurance company. Most Medicare Advantage plans either charge you $0 additional or a very low additional fee. Most Medicare Advantage plans also include prescription coverage. Some may also include limited vision, hearing, or dental coverage.

Advantages/Disadvantages of Medicare Advantage

There are several advantages of Medicare Advantage plans. You have just one plan. You don’t need a supplemental plan, you don’t need a separate prescription plan, and you will have at least some vision, hearing, or dental coverage. Most of the Medicare Advantage plans have no additional cost (remember you still have to pay the monthly $185 Part B costs) or are very low cost.

Medicare Advantage plans also have some important disadvantages. Although there may be no monthly premiums there will be co-pays and deductibles. There will be co-pays for every doctor visit, test, and hospitalization. However, there is an out-of-pocket limitation. These limitations depend on where you live and the company you select. For 2025, the average out of pocket limitation was $6,000. So if you have a bad medical year, things could get expensive.

The other major disadvantage of Medicare Advantage plans is that you will be limited in what doctors and hospitals you can use. Only doctors and hospitals that are part of your Medicare Advantage plan can be used. Also, you will likely have to get approval before you are allowed to see a specialist. Finally, your Medicare Advantage plan may change the approved providers each year. The doctor you like may be in the plan this year but not in the plan the next year.

How Do You Decide?

So how do you decide between Original Medicare and Medicare Advantage? Here are the questions you need to answer when making the decision:

Do I want to pay up front or as I use medical care?

With Original Medicare and a Supplemental Plan, you pay up front but other than the Plan B deductible there are no co-pays or out-of-pockets expenses. With Medicare Advantage there is no additional upfront costs, but you have co-pays as you use medical care through the year. In most years, you will likely save money with a Medicare Advantage plan. However, your out-of-pocket expenses could be very high if you get sick or require costly treatment.

Do I want to pick my own doctors?

Original Medicare allows you to select your primary care doctor, hospitals, and specialists. As long as they take Medicare, you can see any doctor you wish. Medicare Advantage gives you a list of doctors, hospitals, and specialists. If you pick someone outside of that list, you will have to pay more.

Am I ok with getting approval from an insurance company for my health care?

Original Medicare does not require preapproval for most health care decisions. Medicare Advantage will require you to get approval. Last year about 17% of Medicare Advantage claims were initially disapproved.

Am I likely to stay local or do I move around a lot?

Original Medicare is not tied to one location. You can see any doctor anywhere. If you move from Greenville, SC to Longmont, CO you don’t have to change your Supplemental Plan. You can get treatment anywhere in the country. Medicare Advantage plans are specific to a location, if you move you will have to change plans. If you live in two parts of the country, you will have to change plans each time you move. While you are allowed to get emergency care while you are travelling, you must return to your home area to get regular treatment.

How hard is it to switch from Medicare Advantage to Original Medicare?

You are allowed to switch at certain times of the year. Switching from one Medicare Advantage Plan to another is easy. Switching from Medicare Advantage to Original Medicare can be more difficult because after your initial enrollment you must meet medical underwriting when applying for a Medicare Supplement Plan. That means that you could switch to Original Medicare but be denied supplemental coverage. Because of this it is best to think about the decision to select Medicare Advantage or Original Medicare as a permanent decision.

Our Decision and Costs

We decided to use Original Medicare with a Supplemental Plan and a Part D prescription coverage. We both pay $185 per month for Part B coverage for a total $4,400 a year. In addition, we selected a supplemental Plan G from Mutual of Omaha. I pay $120 per month and Tammie pays $102 per month for a total of $2,664 a year. Our current Part D prescription coverage is $0 a month for both of us. Since we are on only a few very generic medicines we went for a low-cost option for Part D. I pay a total of $60 a year for prescriptions using my Part D plan. In the future, if we are on more expensive medications, we will switch to a more expensive plan. If we both end up meeting our Part B deductible of $252 per year, we would then be paying an additional $504. Our total health care costs for 2025 will be $7,568. Remember this does not include vision, hearing, and dental. We have a vision, hearing, and dental policy with Cigna which is completely separate from Medicare for both of us that costs an additional $62 for each of us per month or $1,488 a year. Remember that costs for Part B, Part D, and Supplemental Plans likely increase each year.

Final Thoughts

Yes, it is complicated and it isn’t cheap. However, once we got everything decided we have been pleased with the actual insurance. We are probably paying about $2,500 more a year with the Original Medicare and Supplemental Plan than we would if we had used a Medicare Advantage Plan. But we like that we can choose our own doctors and later in life we will probably be spending less money than if we had a Medicare Advantage Plan.

When you are ready to sign-up for Medicare, you can do so at Medicare.gov. If this sounds like more than you want to handle alone, google “Medicare broker” for a list of agents who will work with you to decide on what plan works best for you.