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One of the big mistakes retirees make with healthcare coverage is focusing on premiums. The real risk is out of pocket costs, especially if catastrophic medical events happen.
For example, Medicare Advantage may look great with low, even no premiums and perhaps extra benefits like dental. But MA typically has out of pocket costs, up to $9,250 (sometimes less) per year. That expense can occur year after year.
MA plans generally use deductibles and copays of some type while the lower OOP costs may also mean limited choice of health care providers. There is always some way to manage spending.
I chose to avoid that risk. We have regular Medicare Parts A, B and D. The standard Part B premium is $202.90 (I pay IRRMA, but that is not relevant to the comparison because it would apply to MA as well.) I also have Medigap G which in my case is $311 a month (higher than normal because I was forced to obtain an age based plan when my employer dropped our coverage). Connie has the same coverage.
The thing is, our coverage protects me (and Connie) from out of pocket costs above the Part B deductible. We could have taken Plan F but the premium difference wasn’t worth it.
Now along comes a major illness. We had the ability to receive care wherever we wanted, from whom we want or where our doctors refer us.
The first incident was Connie’s eye injury which required multiple surgeries included seeking care at a well known eye hospital in Philadelphia. That incident was hundreds of thousands of dollars for which we paid the Part B deductible.
Now we are dealing with cancer. I haven’t taken the time to add up the costs so far, but the care is expensive. One treatment on December 31 was billed at $14,000 and there are weekly treatments, now spanning two different years. Again our out of pocket costs are the $283 deductible.
My point is not to argue for standard Medicare or Medicare Advantage, but to suggest the real decision is to focus on where the maximum financial risk most likely resides – and that is in out of pocket costs, especially for serious health care needs which generally increase with age.
Making coverage decisions based on premiums alone carries higher long-term risks.
Thanks, Dick, for another helpful post on navigating the Medicare landscape. It’s way too complex, imho, for the average person to figure out without research and assistance from unbiased sources. Yours is greatly appreciated.
It is too complex, too many variables and IMO unnecessary to be that way. I find Part D particularly unfair as it requires people to anticipate what new medication they make take after enrolling to determine the best coverage. What a system.
True part D is unfair in that like you said it requires people to anticipate what new medication(s) they may be prescribed later in the year (which let’s admit is nearly impossible), but the insurer has the ability to change its formulary to change at any point during that same period. Just goes to show you that the insurance lobby has congress with a noose around its neck with the insurance companies’ lobbyist with their hand on the mechanism to drop the trap door.
There should be one formulary covering every FDA approved drug used for its approved purpose.
I wholeheartedly agree with your analysis, RDQ. The analysis should also extend, I would argue, to the selection of supplemental Medicare coverage, specifically, the choice between regular and high-deductible plans.
For Plan G, with my state and insurer, the cost savings of a high deductible plan is currently $2,329 a year and the maximum annual difference in out-of-pocket costs, between the regular and high deductible plans, is $2,667. In the three years I’ve had a high deductible Plan G, I’ve been in good health and have saved around $7,000 in premiums. The cost savings seems not unlike a form of health savings account. Of course, consideration of one’s overall health and ability to pay future deductibles should factor in decisions to choose a high deductible plan.
The best example of why you need a broad view of possible health care financial risks has to include Long Term Care which is totally outside Medicare…….I am currently paying more than $10k per month for Memory Care for my spouse…..
Sorry to hear that. LTC is indeed an outlier. We purchased LTC insurance nearly forty years ago. I added it as an employer group benefit.
Premiums escalated considerably a few years back, but have been stable in recent years. Our coverage would pay about half of what you are spending. Still a major expense.
RDQ as always you present clear arguments as to how we should be thinking of finances. Even those who may find you to be a pot stirrer ( I don’t), these are things that the uninitiated do not always thing about. Wishing the best for you and Connie. I look forward to reading more of your posts. Mike.
Thank you. I guess the pot stirrer thing has been with me always. I just have an urge to question things before i can accept them. During my career doing so got me out of the mail room and into a corner office, albeit over forty years. 😳
Bravo! Well said!!
The crux has always been longer term serious medical issues incurring large OOP costs or you get caught in some company’s BS approval hell and die from what could have been treated more promptly. Your money. Your risks. Your life!
Richard: I agree with your analysis regarding maximum financial risk, but perhaps I am not understanding something. In 2026, my Part B monthly premium is $202.90 and the deductible is $283. Do you really mean your deductible is $202.90? It appears to me that you began noting the premium cost and then indicated that was the deductible cost.
you’re right, it was a typo, thanks for catching it
I agree. For most of us the question is not if we will have large medical expenses in retirement at age 65+ but when. Much like a quality pillow choosing to go the traditional medicare route helps me to sleep better.
Thanks for your post Richard.