As you plan for retirement, if you're not factoring in some estimate of healthcare expenses, you're doing yourself a big disservice. According to an RBC Wealth Management report, "the projected lifetime cost of care for a healthy 65-year-old is $404,253 -- and that doesn't factor in long-term care costs, which could be as high as $100,000 a year."
Jeepers. The Bureau of Labor Statistics has its own scary numbers: A retired couple may spend, on average, between $13,000 and $40,000 annually on healthcare, depending on their ages. Given all that, it's smart to get savvy about how you might keep your healthcare costs under control, and that starts with Medicare.
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Medicare is a government-sponsored health coverage plan designed mainly for those aged 65 and older. (It serves a few other populations, too.) It comes in two key varieties: Original Medicare and Medicare Advantage plans. Here's a look at what Medicare Advantage plans are, and why you might want to consider them.
Medicare basics
When you enroll in Medicare -- which you can do as you approach age 65 -- you get to choose either "Original" Medicare, which features Part A (hospital coverage) and Part B (physician/medical insurance), or a Medicare Advantage plan, sometimes referred to as Part C. (Recently there were more people enrolled in Medicare Advantage plans than in Original Medicare.)
Those who sign up for Original Medicare typically add Part D prescription drug coverage and sometimes a "Medigap" supplemental coverage plan, too.
Medicare Advantage plans -- pros and cons
While the U.S. government administers Medicare coverage, insurance companies such as Kaiser Permanente and UnitedHealth Group are the ones offering Medicare Advantage plans. They're supported by the government and are required, by law, to provide at least as much coverage as Original Medicare. They generally offer more than that. Here are some pros and cons of the plans:
Pros
- Medicare Advantage plans typically offer more than Original Medicare, such as coverage for hearing, vision, dental, and/or prescription drugs.
- Many Medicare Advantage plans charge members $0. (They get their income per member from the Medicare program.) Members will still be on the hook for paying their Part B premiums, though, which is $174.70 per month for most people in 2024.
- Original Medicare often has enrollees paying 20% of various expenses, which can seem like a bargain until you encounter big expenses. If, for example, you rack up $400,000 in bills, you might be on the hook for around $80,000. Medicare Advantage plans, though, cap out-of-pocket expenses for members. The 2024 limit is $8,850 for in-network expenses (excluding drugs) or $13,300 if your plan allows you to see some out-of-network providers. Some plans may feature lower caps.
- Signing up for a Medicare Advantage plan can make your life simpler, as you don't have to keep track of Part A, Part B, Part D, and perhaps a Medigap supplement as well.
Cons
- Medicare Advantage plans typically require you to stay within a restricted network of providers and facilities, and you may need to be pre-authorized in order to see specialists. You may also need this kind of prior authorization for various procedures or drugs. (Members denied authorization can appeal.)
- Whereas most doctors across the U.S. accept Original Medicare patients, those with Medicare Advantage plans can be out of luck when traveling. (Of course, if you have an emergency, you should still be able to go to a nearby facility for care.)
Is Medicare Advantage a good fit for you?
The first thing to understand is that every Medicare Advantage plan is different, and satisfaction can vary with plans from different insurers. One insurer offering plans may deny authorizations more than another insurer and may have different overall satisfaction levels from enrollees. Before signing up, do some research, such as searching for something like "compare satisfaction with Medicare Advantage plans." All plans have ratings, up to five stars, so favor highly rated plans.
Medicare Advantage plans may be best suited to those who are flexible and willing to stay within a restricted network. Remember that the network may be restricted, but it may also be very good, with many great providers and facilities. If you have particular doctors you don't want to lose access to, you might stick with Original Medicare. If you aren't in great health and need many services, you might spend less with Original Medicare, though if you rack up really high bills, you might be better off protected by a Medicare Advantage plan's out-of-pocket caps. It's hard or impossible to know in advance exactly which kind of coverage will be best for you, but researching the costs of your various options can provide an idea.
Everyone's decision will depend on their circumstances and preferences. Read up more on Medicare in general and Medicare Advantage plans in particular to see which kind of coverage seems best for you.
