Medicare Doesnt Pay for Everything: How to Bridge the Cost Gap

Medicare can cover most of your health care needs when you turn 65, but it doesn’t pay for everything.And one of the most significant financial challenges to watch out for are the out-of-pocket costs you can face aside from monthly premiums — including deductibles and other types of cost sharing.Just how much you’ll pay, and when, depends on the type of Medicare enrollment that you choose: traditional Medicare, which is operated by the government and provides care on a fee-for-service basis, or Medicare Advantage, which is run by private insurance companies and operates on a managed care model.There is no built-in annual out-of-pocket limit in traditional Medicare for outpatient and hospitalization services.

Protection is available from supplemental insurance coverage.Some retirees get this from former employers or unions, but most often it means purchasing Medigap — a policy offered by private insurance companies that covers part or all of Medicare’s cost-sharing requirements.

And 10 percent of people on traditional Medicare age 65 or older don’t have any supplemental protection, according to KFF, a nonprofit health policy research group — which is a risky move, experts say.Medicare Advantage plans come with out-of-pocket limits — but they can be high, ranging from roughly $5,000 to $9,000 annually depending on the services you use.What’s more, the out-of-pocket protection varies among plans.

When serious medical conditions arise, out-of-pocket costs can be a significant financial hit or make it difficult to afford care altogether.(Starting this year, the Inflation Reduction Act of 2022 imposes a $2,000 cap on total out-of-pocket spending for drugs covered by Part D plans.)Choosing between traditional Medicare and Advantage shouldn’t be based on cost alone.

Medicare Advantage plans offer one-stop shopping and extra benefits, but they restrict care to in-network providers and have been criticized for techniques such as “prior authorization,...