Javascript is not enabled.

Javascript must be enabled to use this site. Please enable Javascript in your browser and try again.

Skip to content
Content starts here
Leaving AARP.org Website

You are now leaving AARP.org and going to a website that is not operated by AARP. A different privacy policy and terms of service will apply.

Section 3: Costs and Coverage 
 

Making Medicare Work for You

How coverage can be customized to meet your needs


ESTIMATED READ TIME: 5 MINUTES

  

IN THIS ARTICLE

 

•  Alicia, a grandma who travels
•  Frank, a frugal retiree
•  Edgar, still on the job
•  Max, who has some health problems
•  Marie, a retired teacher
•  Andrew, who wants specific doctors

When it comes to Medicare, everyone has different needs.

 

Fortunately, it’s possible to customize coverage based on your personal circumstances. You’ll need to consider your health care and prescription medication needs, the doctors you would like to see and the plans available in your area.

 

The following are hypothetical examples of people who are about to turn 65 and are facing a decision about Medicare. Your costs will differ, but their cases can help you pinpoint the best choices for you.

 

illustration of a woman with black hair

ALICIA, A GRANDMA WHO TRAVELS

 

Alicia is retired and has five grandchildren who live in different states. She travels frequently to visit them, often staying for a few weeks at a time. She also travels internationally every few years. She takes three prescription medications and sometimes sees specialists when she’s traveling.

 

Alicia’s decision: original Medicare

 

She’ll have coverage for doctor visits and hospital stays when she visits her grandchildren and won’t be limited to a regional provider network with a Medicare Advantage plan.

 

Alicia won't need to pay the Part A premium. She worked only 32 quarters because she took time off to raise her children, but her husband had more than the 40 quarters needed to qualify for free Part A before he died. So she is able to receive this benefit based on her husband's work history.  

 

Alicia buys a supplemental Medigap policy to help cover the costs of deductibles and copayments for Part A hospitalization and the 20 percent coinsurance for Part B doctor visits and outpatient services. The policy she picks provides some coverage for foreign travel. She purchases a Part D prescription drug plan that will cover her medications. Her costs:

 

  • $170.10 monthly premium for Part B, plus a $233 deductible
  • $108 a month for a Plan G Medigap policy 
  • $22 a month for a Part D plan, plus cost sharing for medications

 

illustration of a man with white hair

FRANK, A FRUGAL RETIREE

 

Frank is retired and receiving Social Security benefits. He’s healthy, and other than his annual medical checkups, he doesn’t see a doctor very often or take any medications.

 

He doesn’t travel much, and he’s looking for the least expensive way to get coverage in case he develops any medical conditions. He wouldn’t mind switching doctors if he can save money by doing so.

 

Frank’s decision: Medicare Advantage

 

Since Frank is already receiving Social Security benefits, he’ll be enrolled automatically in parts A and B of Medicare and his Medicare coverage will start the first day of the month he turns 65. He won't need to pay the Part A premium. He chooses a Medicare Advantage plan that doesn’t charge a monthly premium, has no annual deductible and has prescription drug coverage. The plan doesn’t cover out-of-network providers and hospitals, but he finds a new doctor nearby. He won't have to pay a copay for preventive care or visits to his primary care doctor. His costs:

 

  • $148.50 monthly premium for Part B 
  • $40 copay for specialist visits, plus copays for other medical services and procedures, such as lab visits, physical therapy, urgent care and X-rays
  • $325 annual deductible before the plan starts paying for any occasional prescription
  • $325 daily copayment for days 1 through 5 as an inpatient in the hospital. No charge for days 6 through 90. 
  • $5,900 annual out-of-pocket maximum for in-network health services in 2021 for the plan he chose, not including premiums or prescription drug costs. So he won’t be responsible for any charges beyond that amount for services in his plan’s network.

 

If Frank develops any health problems and needs regular prescription medications — or if he wants to start seeing a doctor who isn’t covered under his current plan — he can reevaluate his Medicare Advantage options or switch to traditional Medicare during the annual open enrollment period, which runs from Oct. 15 to Dec. 7. A switch to another plan would start Jan. 1. Or he could swap Medicare Advantage plans during the other open enrollment period, which runs from Jan. 1 to March 31. 

 

Switching to traditional Medicare after being in a Medicare Advantage plan could be more difficult for him if he also wants to buy a private Medigap policy. If more than six months have passed since Frank enrolled in Part B, Medigap companies could charge him more or reject him for any medical conditions he developed before he decided to switch.

 

illustration of a man with brown hair and a beard

EDGAR, STILL ON THE JOB

 

Edgar is working for a large employer and doesn’t plan to retire for several years. He’s happy with his employer’s health plan, which covers dental, medical, prescription and vision costs and has low premiums and deductibles.

 

Edgar’s decision: Part A of Medicare and his employer’s health plan

 

Edgar signs up for Part A during his initial enrollment period because it’s free but decides not to sign up for Part B yet because he’s happy with his employer’s plan. Since he works for a company with 20 or more employees, his job-based insurance will be his primary coverage even after he turns 65, and he won’t be required to start paying the Part B premiums. His costs:

 

  • Existing costs for his company’s medical insurance, including deductibles

 

To avoid a late-enrollment penalty, he will need to sign up for Part B before or within eight months of leaving his job and losing coverage as an active employee unless he is able to switch to the plan of his spouse who is still working. At that point, he’ll also be able to sign up for a Medigap plan and Part D coverage. Or he can choose to enroll in a Medicare Advantage plan.

 

illustration of a man with black hair

MAX, WHO HAS SOME HEALTH PROBLEMS

 

Max takes two medications and tends to have a lot of dental expenses. He doesn’t travel much and is looking for a plan that covers his medications and dental care. He sees a cardiologist regularly.

 

Max’s decision: Medicare Advantage

 

Max signs up for parts A and B of Medicare during his initial enrollment period (he won't need to pay the Part A premium). He chooses a Medicare Advantage plan that covers visits to his dentist and cardiologist. It doesn’t charge a monthly premium, and there's no annual deductible. When comparing plans, he looks at the total cost — premiums plus copays — for his medications and other medical expenses. His costs:

 

  • $170.10 monthly premium for Part B
  • $45 copay per visit to his cardiologist and other in-network specialists
  • $1,000 annual dental coverage limit
  • $5 copay per visit to an in-network primary care doctor or a $30 copay per visit to an out-of-network primary care doctor 
  • Other copays or coinsurance for medical services and procedures, such as lab visits, physical therapy, urgent care and X-rays
  • $5 copay for his generic medication and a $47 copay for the brand-name drug he takes, which is on the plan’s preferred list. Drugs that aren’t in the preferred pricing tier have a $100 copay.
  • $335 a day for days 1 through 6 of a hospital stay. He’ll have no charge for days 7 through 90 at an in-network hospital. However, if Max chooses to go to an out-of-network hospital, he will pay 45 percent of the total cost of the hospital stay.
  • $6,700 annual out-of-pocket maximum for in-network health-care costs, not including premiums or drug costs. So Max won’t be responsible for any charges beyond that amount for services in the plan’s network.

 

illustration of a woman with white hair wearing glasses

MARIE, A RETIRED TEACHER

 

Marie retired five years ago after a long career as a teacher, and she’s happy with her retiree health insurance, which includes medical and prescription drug coverage. She can keep her retiree coverage if she continues to pay the monthly premiums.

 

Marie’s decision: Parts A and B of Medicare, plus retiree health insurance

 

Since Marie isn’t working, she signs up for parts A and B of Medicare during her initial enrollment period. Medicare will become her primary coverage when she turns 65, and her retiree coverage will become secondary. She won't need to pay the Part A premium because state and local government employees hired after March 31, 1986, have mandatory Medicare coverage. (Many hired before then also started paying Medicare insurance at some point in their careers under a Section 218 agreement between a state and the Social Security Administration.) Her costs:

 

  • $170.10 monthly premium for Part B
  • Existing costs, including premiums, deductibles and copayments, for her retiree coverage

 

Marie won’t need to sign up for Part D as long as her retiree benefits provide drug coverage that is considered at least as good as Medicare’s, known as creditable coverage. She should receive a letter from her retiree plan each September letting her know whether the retiree plan’s drug coverage is considered creditable. She should keep those letters in case she has to buy a Part D plan later and needs to prove that she had coverage to avoid paying a penalty.

 

illustration of a man with a beard wearing a turban

ANDREW, WHO WANTS SPECIFIC DOCTORS

 

Andrew is receiving Social Security benefits and doesn’t have any health problems. He wants coverage from original Medicare because some of the doctors and hospitals he would like to use aren’t included in the Medicare Advantage plans in his area. But he’s not sure he wants to pay extra for a Medigap policy.

 

Andrew’s decision: original Medicare, including a Medigap policy

 

Since Andrew already is receiving Social Security benefits, he’ll be enrolled automatically in parts A and B of Medicare, and his Medicare coverage will start the first day of the month he turns 65. He won't need to pay the Part A premium. He decides to buy a Medigap policy to avoid potentially large out-of-pocket costs for hospitalization and outpatient services. 

 

The policy will cover the Part A deductible, which is $1,556 for each hospital stay per benefit period in 2022, plus copays of $389 a day for days 61 to 90, $778 a day for up to 60 more days and the full cost of up to 365 additional days after Medicare benefits are used up. It also will cover the 20 percent coinsurance for Part B services and other out-of-pocket costs.

 

In addition, Andrew chooses an inexpensive Part D policy, which covers his medications. His costs:

 

  • $170.10 monthly premium for Part B
  • $233 annual deductible for Part B
  • $111 a month for a Plan G Medigap policy
  • $13 a month for a Part D policy
  • Copayments or coinsurance for any medications

TIPS FOR GETTING STARTED

 

  • About Medigap coverage. If you choose original Medicare and are considering supplemental insurance to help pay for deductibles, copayments and coinsurance, be sure to sign up during the six-month Medigap open enrollment period. If you decide not to get Medigap during that time, you may be charged more or denied coverage if you try to sign up later and have an existing health problem.
 
  • About Part D drug coverage. If you sign up for original Medicare and purchase a stand-alone prescription drug plan, you can switch plans every year during open enrollment. This is helpful if your medications change or the plan’s costs and coverage change. 

 

  • About Medicare Advantage. If you choose Medicare Advantage, you’ll be able to switch to another plan during open enrollment each year. You also can switch to original Medicare if your health changes and you want a greater choice of doctors. However, in many states, you may not be able to purchase a Medigap policy, or you may have to pay more if you have a preexisting health condition and if more than six months have passed since you signed up for Part B.
How to Estimate Your Costs