Costs to consider before dropping Medicare Advantage Plan altogether

For some Medicare beneficiaries, an Advantage Plan ends up not being a good fit.

If you’re in this situation and are thinking about dropping your plan to return to basic Medicare — Part A (hospital coverage) and Part B (outpatient services) — there are some things to consider before you make the move.

While you’d generally gain the freedom to go to any doctor or other provider you want instead of only those in a plan’s network, the switch likely would include new costs.

“It’s important to compare [coverage options] not only on a provider and medication basis but also on your total financial picture,” said Elizabeth Gavino, founder of Lewin & Gavino and an independent broker and general agent for Medicare plans.

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During Medicare’s annual open enrollment period, which started Oct. 15 and runs through Dec. 7, you can make changes to your coverage. Here’s what to consider if you want to ditch an Advantage Plan altogether.

Advantage Plans, which are offered by private insurance companies and deliver Parts A and B benefits — and usually include Part D (prescription drug coverage) — come with deductibles, copays or coinsurance and out-of-pocket maximums, but they differ from plan to plan.

Basic Medicare also has cost-sharing amounts that are adjusted annually.

Part A usually has no premium but comes with deductibles and coinsurance. For 2023, the deductible will be $1,600 per benefit period (which generally starts when you are admitted to the hospital). That applies to the first 60 days of inpatient care.

For the 61st through 90th day, the coinsurance will be $400 per day in 2023. For lifetime reserve days, the charge will be $800 per day.

As for Part B, the standard premium next year is $164.90 (although higher-income beneficiaries pay more). The deductible will be $226, and then you generally would pay 20% of the cost of services.

“That could include expensive things like outpatient surgery, diagnostic exams, ambulance rides, chemotherapy and dialysis,” said Danielle Roberts, co-founder of insurance firm Boomer Benefits.

There also is no out-of-pocket maximum with basic Medicare. However, you may be able to get a Medigap policy, which would cover some cost-sharing.

Medigap plans, which also are sold by private insurance companies, help cover cost-sharing aspects of Parts A and Part B including copays and coinsurance. Policies are standardized — same-named plans offer identical benefits no matter which insurer sells them — but the premiums vary among plans, insurers and locations.

These plans also come with their own set of rules for enrolling.

When you first sign up for Part B, you get six months to buy a Medigap policy without an insurance company nosing through your health history and deciding whether or not to insure you. After that, unless you meet a special exception or live in a state with no restrictions on enrolling, you typically must go through medical underwriting.

“There is not a guarantee that the underwriter will approve you for the Medigap policy,” Roberts said.

This means it may be wise to avoid dropping your Advantage Plan until you know you’d be able to get the Medigap policy.

There is an exception: If you had a Medigap policy but dropped it to try an Advantage Plan for the first time, you get a year to change your mind. That 12-month trial period lets you drop an Advantage Plan and return to the Medigap plan you were previously enrolled in.

Also be aware that while Medigap plans help with Parts A and B costs, they do not provide any coverage for Part D.

The average premium for Part D in 2023 will be about $31.50, with higher-income beneficiaries paying more. The maximum deductible that a Part D plan can have will be $505.