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How To Predict Out of Pocket Costs for Medicare Advantage

Medicare Advantage (Part C) is private health insurance available through Medicare. It is a popular option for Medicare insurance because it includes Part A and Part B from Original Medicare and typically covers coinsurance and additional services such as dental, hearing, and vision. In addition, Part C plans have an annual out-of-pocket maximum. While Medicare Advantage plans are significantly more affordable than traditional private health insurance plans, they are not free.

If you are thinking about enrolling in a Medicare Advantage plan, you may be wondering how to predict out of pocket costs for Medicare Advantage.

How To Predict Out of Pocket Costs for Medicare Advantage

When you enroll in a Medicare Advantage plan, you will typically pay monthly premiums as well as co-pays for services you receive. You will also have to pay for any medical services that are not covered by your plan. Your individual Medicare Advantage costs will depend on the terms of your plan and the specific types of care you seek over the course of the year. Because Medicare Advantage plans cap annual out-of-pocket expenses, it is possible to get a fairly accurate estimate of what your total costs would be before you enroll.

Comparing average out-of-pocket expenses

An analysis by Better Medicare Alliance released in 2021 showed that seniors enrolled in traditional Medicare spent an average of $4,994 per year compared to Medicare Advantage beneficiaries who spent an average of $3,354 per year on the same spending categories. Broken down by month, on average, those enrolled in Original Medicare spend $416 per month and Medicare Advantage plan members spend $279.50 per month.

For seniors on traditional Medicare, out-of-pocket costs include the Part B monthly premium (the standard cost is $164.90 per month in 2023), coinsurance (20% coinsurance for Part B services and hospital coinsurance for Part A services), and the cost of any services not covered by Medicare such as vision, dental, and hearing aids.

For seniors on Medicare Advantage, out-of-pocket costs include the plan’s monthly premium*, Part B monthly premium ($164.90 per month), copays for services (instead of 20% Part B coinsurance and hospital coinsurance for Part A services), and the cost of any services not covered by Medicare or the Medicare Advantage plan.

*According to NCOA, the average monthly MA plan premium for 2023 is $18, but premiums vary from $0 to over $200.

Out-of-pocket maximums on Medicare Advantage plans

One of the reasons that seniors choose Medicare Advantage plans over Original Medicare is that they come with an out-of-pocket maximum. In 2022, the average out-of-pocket limit for people enrolled in MA plans was $4,972 for in-network services, according to KFF.

Once a plan member hits the annual-out-of-pocket maximum set by their plan, the plan will fully fund any additional covered services. Plan members may still have some added expenses if:

  • They seek services not covered by their plan

  • They are enrolled in an HMO plan and seek services out of the plan's network

  • They need medication and the plan does not cover prescription drugs

  • They receive services from a provider who does not accept their plan

Calculating annual costs

If you choose a Medicare Advantage plan that covers all of the services you need and you receive care from in-network service providers, you will never pay more than your plan’s annual out-of-pocket maximum. To calculate the most that you could pay on a Medicare Advantage plan, add your out-of-pocket maximum to the total annual cost of your premiums. If you rarely use medical services, you can expect your annual costs to be significantly less.

Our independent insurance agents are dedicated to assisting people on Medicare and those who are ready to transition from employer coverage to personal retirement coverage. We help kupuna understand their benefits options and apply for additional coverage, as needed. We are the only insurance agency in Hawaii contracted with EVERY Medicare Advantage plan, which means we are able to offer unbiased advice; all at no cost to our clients.

At PBC, our clients are our number one priority and we look forward to getting to know you and your needs. Call us today at (808) 738-4500 to see how we may be of assistance.


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