Medicare enrollees are about to face the annual enrollment period from October 15 to December 7 in which they can switch Medicare Advantage and Part D prescription drug plans. One of the important aspects of Medicare Advantage coverage they should consider in selecting a plan is a comparison of each plans’ out- of-pocket maximum costs, the most an enrollee who stays within a plan’s network can pay in a year out-of-pocket.1 There is no cap on out-of-pocket expenses for someone in original Medicare alone. However, Medicare rules limit medical and hospitalization out-of-pocket costs to $6,700 per year for Advantage plans, adding an important measure of security for people selecting this option. In a review of recently published 2014 Medicare landscape data2, HealthPocket found that many plans have substantially lower maximum out-of-pocket caps than the $6,700 maximum. Some of the plans with low maximums charged a zero premium to enrollees3.
HealthPocket’s review of the landscape data focused on those Medicare Advantage plans that bundled in a prescription drug benefit (“MAPD plans.”) This allows the research to compare a consumer choice situation that is typical in the market: whether to fill gaps in Medicare by purchasing an Advantage plan with prescription drugs from a private insurance company or in the alternative to stay in original Medicare and purchase a Medicare Supplement plan and a Part D prescription drug plan.
The Medicare landscape data is based on a county-by-county listing of Medicare Advantage plans in each market, so a plan can appear in multiple locations. The charts below show the percentage distribution of maximum out-of-pocket levels for all MAPD plans and for those MAPD plans that charge zero premiums.
The charts show a similar pattern regardless of whether the MAPD plan is charging a premium. The plans are clustered so most are either structured to charge a reasonably low maximum out-of-pocket amount ($3,400 or less) or an amount close or equal to the highest allowed by the Medicare program ($6,000 to $6700.)
The Medicare Advantage program is growing in popularity, and this prior HealthPocket InfoStat demonstrated that 2014 premiums are in line with those of last year. One concern about Medicare Advantage plans is that they can be inexpensive to get into but costly if the enrollee needs medical services. However, the combination of a zero premium plan and a $3,400 out-of-pocket maximum provides a compelling financial proposition.
Medicare Supplement policies average $183 per month,4 though they can vary significantly based on location and age. Most of the policies sold have comprehensive coverage, so the premium cost will amount to most of the person’s non-drug health expenses.5 That typical consumer would also purchase a Part D plan to cover prescription drug expenses. The average premium for these plans will be $31 per month in 2014.6 In total a person paying the average amounts for both policies would have $2,600 in insurance premium expenses. This is contrasted with the budget conscious Medicare Advantage enrollee who may find a plan with no monthly premium and the guarantee that a worst-case scenario of annual out-of- pocket costs will not exceed $3,400.
The MAPD data shows a calculation that can create compelling support for low premium, low maximum out-of-pocket cost Medicare Advantage plans. However, consumers should look at other factors before making a decision, including whether their preferred doctor and hospitals are in the plan’s network, whether the drug plan covers their medications, and how the plan charges for each medical service. An additional benefit of the Medicare Advantage marketplace is the existence of quality data regarding Advantage plans. Once someone reviewing plan options narrows his or her choices to plans that are affordable with acceptable doctor networks, the quality data can help solidify the final selection. 7
Medicare plan choice should be based on each person’s circumstances. The Medicare annual enrollment period, running from October 15 through December 7 is the time for enrollees to compare the features of plans, including premiums as well as other costs, benefits, out-of-pocket cap and quality rating. HealthPocket helps consumers in this process by providing a free Medicare comparison tool so they can price and compare options.
Data for 2014 Medicare Advantage premiums was taken from the CMS 2014 landscape file. It was organized by choices in each county in the United States, and Medicare Advantage plans that did not provide prescription drug coverage were eliminated from consideration. No adjustment was made for market share of each plan.
All analysis assumes the accuracy of the underlying government data. While every effort was made towards a comprehensive collection of plans, HealthPocket makes no representation that every plan within the individual insurance market or in an individual state was included in this study. Percentages are rounded according to standard industry practices.
Steve Zaleznick, Executive Director for Consumer Strategy and Development at HealthPocket.com, authored this survey analysis. Correspondence regarding this study can be directed to Mr. Zaleznick at firstname.lastname@example.org. Feedback and questions are welcome but, given the volume of email, personal responses may not be feasible.
Feedback and questions are welcome but, given the volume of email, personal responses may not be feasible.
1 For enrollees in MA plans that include prescription drugs, there could be additional out-of-pocket payments for drug coverage.
3 The enrollee is still responsible for the Medicare Part B premium.
5 Medicare and Medicare Advantage plans do not cover most forms of long-term care, so that expense remains for most people.
7 According to the release cited in footnote 6, over half of Medicare Advantage enrollees are in plans that received 4 rating stars or higher (5 is the maximum.)
HealthPocket is a free information source designed to help consumers find medical coverage. Whether you are looking for Medicare, Medicaid or an individual health insurance plan, we will help you find the right healthcare option and save on your out of pocket healthcare costs. We receive our data from government, non-profit and private sources, and you should confirm key provisions of your coverage with your selected health plan. If you select a plan presented on our site, you will be directed (via a click or a call) to one of our partners who can help you with your application. Our website is not a health insurance agency and not affiliated with and does not represent or endorse any health plan. HealthPocket, Inc. is a wholly owned subsidiary of Health Plan Intermediaries Holdings LLC (NASDAQ: HIIQ)