Retirement Savings: Best Medicare Plans for Every Budget
Written by
Stacy Sare Cohen
Edited by
Cory Dudak
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As of April 2024, 67.3 million people were enrolled in Medicare, according to CMS data sets. That’s an increase of 1,551.703 million since the agency’s September 2023 report. Among those beneficiaries, 89.5% are 65 and over, and 50.4% signed up for Medicare Advantage and Medigap supplemental plans that included or excluded Part D prescription drug coverage.
Retirees can choose traditional Medicare supplemented by a Medigap plan to pay the 20% Medicare doesn’t cover, pay it out of pocket or enroll in a Medicare Advantage (MA) plan.
With Medicare Advantage alone, retirees can choose from 43 plans, not to mention all the Medigap supplement plans offered by private insurance providers such as Humana, AARP and Blue Cross Blue Shield.
With so many healthcare options on the market, how does one know which plan is best for your health and budget?
GOBankingRates reached out to three Medicare experts for insight and advice on how to choose the best Medicare plans.
- Chris Orestis, President at The Retirement Genius
- Bob Rees, Senior Vice President for Medicare at eHealth Insurance
- Jessica Topolski, Licensed Medicare Agent at AZ Health Insurance Brokers
Best Plan for a Low Income Budget: HMO
Individuals who earn $15,060 a year or $20,440 for a family of two in 2024 fall below the federal poverty level, according to the Health Insurance Marketplace and are eligible for state Medicaid to pay Medicare premiums. This group pays the lowest premiums by enrolling in an HMO plan. However, the healthcare options for HMOs come with more restrictions than other plans.
“If selection of a [Medicare Advantage] plan is based on cost, then a low-income beneficiary will pay the least for an HMO. [However,] this plan will give them the least choice [and] require them to stay in-network [as well as] get pre-approval for most treatments beyond required health maintenance, such as annual physicals,” Orestis said.
Best Plan for the Middle Class: PPO
If you earn $49,715 to $149,160 annually, the median income for the middle class, a preferred provider organization (PPO) plan can provide more flexibility. Unlike an HMO, A PPO offers the freedom to choose in-network or out-of-network providers for your care.
With a PPO plan, beneficiaries can use their preferred doctors, specialists and hospitals without requiring a referral from your primary care physician (PCP).
Preferred provider organization plans are available through Medigap and Medicare Advantage plans, however, with Medicare Advantage PPO plans, while you can go out of the network, the provider has to accept the out-of-network charges,” said Topolski.
Most PPOs Medigap supplement plans will cover your medical treatment while traveling, as long as the doctor or hospital accepts your insurance, however, not all Medicare Advantage PPO plans will, so check with an insurance agent before you pick your plan, especially if you travel often.
Best Plan for High Net Worth Individuals: PFFS
For the needs of high-net-worth individuals (the upper class), standard insurance policies often fall short. The wealthy often require a plan that provides privacy and discretion and access to a vast network of top specialists.
Retirees in this income bracket who travel frequently should consider comprehensive international insurance not covered by conventional plans. For this reason, they need a tailored approach to healthcare. One option is a private-fee-for-service plan.
“A PFFS will allow access to any healthcare provider who accepts Medicare,” said Orestis.
“It’s the more expensive option for the highest level of choice.”
Is Medicare Advantage the Cheapest Retirement Option?
Medicare Advantage now accounts for 51% of enrollments and data has shown that many people benefit from lower costs of premiums and additional benefits that Traditional Medicare does not offer,” said Orestis.
“Medicare Advantage also limits out-of-pocket costs, and with Traditional Medicare it is necessary to purchase additional Supplemental (Medigap) coverage to limit those costs.”
On the surface, Medicare Advantage may appear to be a cheaper option because it might have low premiums and includes doctor visits, hospitals, prescriptions, dental and vision in one plan. But make sure to read the fine print.
Dorothy from New Jersey who works part-time said her Medicare Advantage plan has a $7,000 annual deductible and her prescription costs for her diabetes medicine go up every month, so she’ll be shopping for a new plan in October during open enrollment.
“Where costs can escalate for Medicare Advantage is when the beneficiary goes out of network for care, or if they don’t receive authorization for treatments,” said Orestis.
“For people who value the ability to access care wherever or whenever they want, Traditional Medicare is often the right choice.”
Orestis warns if cost savings, convenience, and additional benefits are the priority, then Medicare Advantage can be the right call but states it’s important to “making the right plan selection across the large variety of options is critical,” Orestis said.
How To Choose the Right Plan?
To choose the best plan, you need to be aware of all the possibilities. To achieve this, Rees recommends working with an agent who offers a broad range of options from multiple insurers.
“A licensed agent can help you identify your priorities and find a plan you can afford that covers the drugs you need and the doctors you prefer,” Rees said.
“It doesn’t cost anything extra to work with an agent,” said Rees.
“In a recent survey, we found that 66% of Medicare beneficiaries who worked with an agent said they were “very confident” in their plan selection, compared to 55% of those who didn’t work with an agent.
Read Your Annual Notice of Change Letter With a Fine-Toothed Comb
Not reading your Annual Notice of Change letter and understanding the changes to your benefits can be a costly mistake,” said Rees.
“Just because you may love your plan now, doesn’t mean you will love it next year.”
“Your Annual Notice of Change letter may inform you that your copays are going up for office visits, or your favorite doctor is no longer in your plan’s network, or a drug you take will no longer be covered — or covered at a lower level,” he said.
“It may even tell you that your plan is being discontinued in the new year.”
MA and Part D Changes in 2025 Can Impact Your Wallet
Rees tells us he expects the changes to MA and prescription plans in 2025 will be disruptive.
“Insurers offering Medicare Advantage and Part D plans in 2025 will be responding to regulatory changes from CMS which could result in higher monthly premiums, higher copays or deductibles, or reduced benefits and which may even result in some insurers backing out of specific regions,” Rees said.
That’s why it’s so important to review your Annual Notice of Change letter carefully.
“At this point, we’re all waiting to see exactly what those changes may look like, but they’re widely expected.”
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