(The “out-of-pocket” maximum is, in my opinion, the most important part of any health insurance policy. 

Traditional Medicare has no Out-Of-Pocket Maximum

Many of you may have heard me say before that the largest drawback to traditional Medicare is that it has no out of pocket maximum.  The out of pocket maximum (OOPM) is what stops the financial bleeding.  When something big happens it caps your financial obligation.  Inside the insurance world it’s called a financial “stop-loss.”

Medicare Advantage Plans Vs Medicare Supplements

Medicare Supplements and Medicare Advantage Plans can give you an out-of-pocket maximum.  If you are still in the “under 65” market the legal limit on out of pocket maximums is about $8700 for a single individual (That’s just insane isn’t it?)  By contrast Medicare Advantage Plans limit your out-of-pocket maximum to about $5500 on average.  This number can vary quite a bit based on where in the country you live, whether or not you have a monthly premium, and what the competition is like in your area.

The “F” Medicare Supplement

The “F” Supplement gives you a $0 out of pocket maximum.  That’s right. $0.  Zero.  Nada.  Zilch.  Medicare picks up what Medicare picks up and the regular “F” supplement picks up the rest.  That being said not everyone can get an “F” anymore.  The “F” is only available for those who became eligible for Medicare before January 1 of 2020.  

The “G” Medicare Supplement

For those that became eligible for Medicare after January 1, 2020 the “G” is the new Cadillac supplement.  With the “G” you pay your part B deductible of $233 (for 2022) and after that it covers all the deductibles, co-pays, and co-insurance that Medicare doesn’t cover.  That effectively gives you and out of pocket maximum of $233.

The “Baby G” Medicare Supplement

My favorite supplement is the HDG or “Baby G” supplement.  It’s the least expensive supplement available and all it does is give you an out of pocket maximum of $2490.  Compare to the maximum for those under 65 it’s incredible and compared to the average Medicare Advantage plan its well under half as much as the average!  Compared to an F or a G you’ll typically save well over $1000 a year in premium costs.  You will have some out of pocket costs, but in general it’s a great deal. (Read more here)

What do these plans cost?

Please note all these costs I mention are ballpark numbers here in my primary market of Tennessee.  These numbers can vary widely.  If you are looking in Florida, California, or New York (and many other states) it’s a competely different ballpark.

Medicare Advantage

For someone turning 65 and entering the Medicare System?  Some Medicare Advantage Plans are available for a $0 dollar a month and some cost over $100 a month.  Typically, the more expensive ones will have lower out-of-pocket maximums and better co-pays for hospitalization.

Medicare Supplements

A high-deductible G might run you $30 – $40 depending on the insurance company. The G might run from $95 to $115 and for an F you might expect to pay $120-$150. In general companies that start higher have lower rate increases and those that start lower have higher rate increases.  

What Should You Choose?

You should choose what fits your finances.  Look at your income and your savings.  Most people have little savings and moderate income.  For these people I’d look at Advantage Plans or the Baby G supplement.  For those with solid income and little savings I’d look at the G supplement.  If you are challenged from an income perspective I’d look at an $0 premium Advantage plan.  Those that are challenged with both the income and the savings are minimal I’d look at the $0 premium Advantage plans and find the one with the lowest out of pocket maximum.

Other Factors

Some other factors to consider are if you plan on traveling during retirement (I’d advise a Medicare supplement).  If you have complex health issues and you can afford it I’d also lean towards a medicare Supplement (read why here).  If you are on a lot of medications you might consider and Advantage plan.  I have seen a trend the last few years for the prescription benefits for Advantage plans to be better than the prescription benefits for Part D plans.