How to Financially Plan With Medicare

Image by Steve Buissinne from Pixabay

Underperforming investments, unexpected career changes and family tragedies are just some of the things that can derail your retirement plans or leave you wanting more from your golden years. 

But one potentially disastrous obstacle to happy retirement is unexpected health care costs. In fact, a recent survey found that health care costs are the biggest financial concern for retirement among seniors. 

The federal Medicare program provides (mostly) affordable care to millions of America’s seniors, but that’s not to say it’s guaranteed to position you on the beach sipping margaritas. A study conducted by AARP found that half of seniors enrolled in Original Medicare (federally administered Medicare Part A and Part B) spent at least 16 percent of their income on health care.

That’s a lot of margaritas.

To combat these costs, more and more retirees are turning to the private sector for their Medicare coverage. The popularity of private Medicare insurance has boomed in recent years. The percentage of Medicare beneficiaries enrolled in Medicare Advantage (Medicare Part C) plans has nearly doubled over the past decade, with nearly 4 in 10 Medicare beneficiaries today enrolled in Medicare Advantage coverage. And that’s in addition to the millions of other Medicare beneficiaries enrolled in Medicare Part D prescription drug plans and Medicare Supplement (also called Medigap) plans. 

Here five big reasons for the surge of enrollment in private Medicare plans that can help seniors afford a more comfortable retirement. 

1. Coverage of the three pillars

Dental, vision and hearing. They are all types of care many seniors increasingly need, and all three aren’t typically covered by Original Medicare. 

As a result, Original Medicare beneficiaries must figure out a way to pay for potentially expensive care such as dentures, glasses and hearing aids. This could be done through buying a standalone dental, hearing or vision insurance plan, or just some seniors simply pay out of pocket. 

Most Medicare Advantage plans provide coverage for these three pillars of senior care.

2. Coverage of the big one

In addition to the three pillars of coverage mentioned above, there’s another big one that can be acutely important for seniors: prescription drug coverage. 

Original Medicare does not provide coverage for prescription medications. And when seniors are forced to pay for drugs out of pocket, the costs can be crippling. 

Medicare Part D plans (and most Medicare Advantage plans) provide coverage for prescription drugs. With most Part D and Medicare Advantage prescription drug plans, seniors are responsible for typically small copayments for most generic (non-brand name) prescription drugs.

3. Coverage for out-of-pocket expenses

Original Medicare premiums are typically quite affordable, overall. Most beneficiaries don’t pay anything for their Part A coverage, and the standard monthly premium for Part B coverage is $148.50 per month in 2021.

Out-of-pocket Medicare costs such as deductibles, copayments and coinsurance can pose as potentially high financial burdens for retirees on a fixed income, however. The standard coinsurance rate for Part B services and items is 20% of the Medicare-approved amount, which can add up to big bills in many cases. 

More than 1 out of every 3 Medicare beneficiaries are enrolled in Medicare Supplement Insurance, or Medigap, which can help cover some of these out-of-pocket costs and deliver more predictable health care spending.  

4. Out-of-pocket spending limits

Something that can keep Original Medicare beneficiaries on edge is the fact that there is no annual out-of-pocket spending limit in place to protect beneficiaries from potentially high health care costs. Original Medicare beneficiaries are theoretically responsible for an infinite amount of copayments and coinsurance until their deductibles reset. 

Medicare Advantage plans are required by law to contain an out-of-pocket spending maximum of no more than $7,550 in 2021, and some plans may offer spending limits below that amount. 

5.  Coverage for miscellaneous care

Beneficiaries of private Medicare plans may be able to find even more ways to save, particularly if they’re enrolled in a Medicare Advantage plan. Many Medicare Advantage plans may cover more services than Original Medicare, and some plans may cover things like acupuncture, non-emergency medical transportation and home modifications like the installation of grab bars in the bathroom, all of which aren’t covered by Original Medicare.

If you’re worried about health care spending getting in the way of living your best life in retirement, a private Medicare insurance plan might be able to help you save enough to top off that margarita.


  • Christian Worstell

    Christian Worstell is a Medicare and senior health writer. He is passionate about helping people navigate the complexities of Medicare and understand their coverage options. His work has been featured in outlets such as Vox, MSN, and The Washington Post, and he is a frequent contributor to health care and finance blogs. Christian is a graduate of Shippensburg University with a bachelor’s degree in journalism. He currently lives in Raleigh, NC.