Interesting Stats on Medicare Costs and Coverage

Many times when meeting with clients, they want to know if they really need Supplemental coverages such as a Medigap Plan (Supplement) or a Medicare Advantage Plan instead of just going with Medicare Parts A and B alone.  So what many Medicare beneficiaries really want to know is, what kind of out of pocket costs will they have if they don’t enroll in Supplemental types of coverages.  I recently came across some interesting statistics that address this issue.

Using averages of all Medicare beneficiaries, they will have out of pocket medical costs a little over $3,000 per year (not including premiums).  If you exclude those costs not covered by Medicare, I estimate you arrive at about $1,200/year in 2016 dollars.  That is less than the average Medigap policy cost (looking at all ages, sexes and plans).  One might conclude that on average, they would likely spend more in Medigap premiums than they would receive in benefits.  However, with a Medigap policy, they cap their out of pocket exposure for medical costs.  Medicare Advantage Plans also cap exposure.  Remember that 2 of the largest out of pocket costs Medicare beneficiaries risk are the Part A Inpatient Hospital deductible(s) ($1316 per benefit stay in 2017) and the uncapped 20% Part B outpatient exposure.

To me, this data reinforces the need and value of insurance.  Having a Medigap policy or a Medicare Advantage Plan not only helps cover out of pocket medical costs, but it protects your financial assets.  It allows you to have the peace of mind we hear about so often.

If you would like to read more about this topic, I have linked to a website that covers this topic in more detail:  http://www.commonwealthfund.org/publications/issue-briefs/2017/may/medicare-out-of-pocket-cost-burdens

Based in the Richmond, Va area, David Higgs of Choices In Medicare, specializes in helping seniors transition to Medicare.  He can be reached at email:  David@ChoicesInMedicare.com or go to website:  www.ChoicesInMedicare.com