How to Calculate Your True Medicare Healthcare Cost

Medicare is changing constantly. What was once true about Medicare yesteryear, may no longer apply today. Which is why everyone needs to have his or her own Medicare agent. There are too many friends and family making recommendations about Medicare based on outdated information and people are making decisions based on it with costly consequences. But I digress.

Costs have changed as well. At one time, Medicare Advantage did not exist, and MediGap Supplements were the only option to not get stuck with the deductibles and coinsurances. But in 1997, with the passing of the Balanced Budget Act, we got Medicare Advantage.

Therefore, today you have options. But which is best for you depends on several factors:

The cost
lifestyle
Benefits
Providers
And convenience

Calculating the Cost

In this article, I cover how to calculate your cost. The information that follows may be meticulous, but make no bones about it, you NEED to know this information, as it can decide not only your financial situation, but the benefits you receive. So, take a deep breath and let’s go through it!

The first thing is knowing the difference between FIXED costs and VARIABLE costs.

Fixed Costs

Fixed costs are those you will pay regardless of whether you use your plan. This will include premiums, deductibles and copays for ongoing fixed consumption, like prescription drugs.

Variable Costs

Variable costs are those you pay ONLY IF YOU NEED the benefits. Like an emergency room visit, specialist visits, urgent care, outpatient care and surgeries, etc.

MOOP (Maximum-Out-Of-Pocket) Limit

Another thing to consider is whether your plan has a MOOP. A MOOP limits how much you will spend before the insurance pays 100% for the remainder of the benefit year.

Your Options: Original Medicare, MediGap or Medicare Advantage

You have three options to choose from:

Original Medicare
Original Medicare with a MediGap plan
Medicare Advantage

Original Medicare

Original Medicare is an 80/20 plan. Part A, your emergency hospital insurance, has a deductible of $1,484 per benefit period, for 2021 (it changes yearly). A benefit period is a 60-day window that starts on the first day you are hospitalized. If you are hospitalized again for the same reason within that 60-day period (the benefit period, read When it Comes to Medicare and Medicare Advantage, What is a Benefit Period?) you do not have to pay the deductible again. If you are hospitalized on day 61, you do.

Once the deductible has been met, the 80/20 portion kicks in. There is no MOOP.

Part B, your medical insurance, has an annual deductible of $203 for 2021, with no MOOP. Part D has an annual deductible of $445 for your prescription drugs, plus any copays depending on your plan.

Your Fixed Expenses with this option are $148.50 monthly for Part B, $203 Part-B annual deductible, and $445 Part-D deductible plus copays. TOTAL: $2,430 for the year + Part-D copays.

Your Variable expenses are the $1,484 deductible per benefit period and the 20% coinsurance. Also, Original Medicare has no:

Maximum-Out-Of-Pocket (MOOP) limit
Dental
Vision
Hearing

For dental, vision and hearing, you would need to purchase additional coverage from a private carrier, adding to your annual fixed costs.

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Original Medicare with a MediGap Plan

Another option is Original Medicare with a MediGap plan. A MediGap plan fills the GAP between what Medicare pays and what you pay; it eliminates or greatly reduces the deductibles, copays and coinsurances, depending on your plan.

The most popular plan is Plan G, because it pays 100% of hospital and medical deductibles, coinsurances, hospice and skilled nursing facilities. The only thing not included is the Part-B annual deductible of $203. Plus it pays any excess charges a doctor is allowed to charge. However, it does not include Part D, dental, vision or hearing.

While MediGap plans vary in price, on average, you will pay approximately $200 per month. Fixed costs are a guestimate, as there are certain variables (what state you live in and your plans). But you can expect approximately:

$148.50 monthly for Part B
$200 monthly for Plan G MediGap
Approximately $8 to $50 Part D, monthly
$445 annual prescription deductible
Dental, approximately $50 monthly
Vision, approximately $30 monthly

Grand Total of $5,727 annually + Part-D copays, which vary depending on what tier the drug falls into.

Medicare Advantage

Finally, there’s Medicare Advantage. This one is difficult to give exact costs, as there are many variables. There are:

PPOs, HMOs, PFFS and POS plans
$0 premium to moderate premiums
$0 deductibles to moderate deductibles
$0 copays to moderate copays
$0 coinsurance to 20% coinsurance for certain services, not all

But one thing most Medicare Advantage plans have in common is they include:

Dental, vision and hearing
Over-the-counter (OTC) allowances which range from $20 to $100 per month for items you would normally buy at Walgreens, CVS or Walmart (that’s money in your pocket)
Free gym memberships
Acupuncture and chiropractic
Some have Part-B premium credits, reimbursing a portion of the Part-B premium back into your social security check

For example, I had a lady I did a comparison for on MediGap and Medicare Advantage. She’s diabetic. Without dental and vision or hearing, her fixed costs would have been $3,540 with a MediGap plan and Original Medicare.

With the particular Medicare Advantage plan we chose, her fixed costs were $20 ($5 per quarter for insulin) and her $148.50 Part-B Premium = TOTAL: $1,802. The rest of her costs would be variable. In other words, as needed only.

Now, there are exceptionally good reasons one may choose Original Medicare with MediGap versus a Medicare Advantage plan. For example, if one had cancer and wanted the flexibility to go to any facility nationwide that accepted Medicare, or they traveled constantly and did not live in one area for more than six months out of the year.

However, if you do not have extenuating circumstances that require a MediGap plan with all its moving parts, a Medicare Advantage plan offers the best value and it’s managed under one plan.

If you’re not sure which is the best solution for you, contact us. We would be happy to do a needs analysis, answer your questions and make solid recommendations particular to your unique needs. This is a FREE service.

So, it’s important you do the math! The longer you live, the more important the savings. More importantly, making sure you get the best care to add quality and quantity to your life, to go along with the savings to enjoy it.

Eddie Velez | Licensed Florida Medicare Advantage Specialist

Eddie Velez is a former combat infantry Marine, and a Florida licensed insurance agent, specializing in Medicare Advantage and life insurance. With over 15 years serving seniors in a ministerial position, and with healthcare through Care Entrée. And now offering 5-star rated plans with Cigna, CarePlus, Aetna, Humana and UnitedHealthcare (coming soon, Florida Blue), plus Mutual of Omaha for life, and GTL and Prosperity for Hospital Indemnity and final expense insurance. Eddie is patient, caring and will get you the most benefits at the highest savings possible.