Medicare Advantage plans can be very attractive at first glance. Most of them offer very low monthly premiums. There are even many MA plans available with a zero premium.
So, they can be very tempting for people who are in overall good health, and who don’t expect to consume a lot of health care. But if you do need care, the situation can change, fast.
That’s because of high MA plan maximum out-of-pocket, or MOOP, costs.
What Is MOOP?
Your MOOP is the greatest amount of money you may need to pay out of your own resources in any given plan year. It includes deductibles, copays and coinsurance, but not premiums.
Once you reach your MOOP limit for the year, your insurance plan will typically cover 100% of your covered medical expenses for the rest of the year. It’s like having a safety net for your medical expenses.
The problem, though, is that some MA plans may have a MOOP as high as $8,850 per year.
If you receive services from out-of-network providers, you could be required to pay even more out of pocket: Medicare Advantage PPO plans that allow for out-of-network care typically will have an additional MOOP limit for such care, or a combined limit for in-network and out-of-network care.
In contrast, Medicare supplement insurance (Medigap) Plan G — the most popular and comprehensive of the standardized Medigap plans available to new Medicare enrollees — limits your annual out-of-pocket expenses for services under Medicare Parts A and B to the Medicare Part B deductible. As of 2024, that deductible is $240.
The Part B deductible changes from year to year, but it pales in comparison to $8,850.
Medigap disadvantages
On the flipside, Medigap plans typically have much higher monthly premiums compared to MA plans.
And unlike most MA plans, Medigap plans don’t cover prescription drug costs, except for those administered in your doctor’s office or in a hospital. If you need a prescription drug from a pharmacy, your Medigap plan won’t cover it.
That’s why nearly everyone who chooses Medicare supplement insurance also purchases a Medicare Part D plan, which covers prescription drugs, to go along with Medigap.
Which strategy is best for you?
There’s no single correct answer and your decision depends on your life circumstances.
MA plans work best for those in very good health who rarely need care. They can also work for people who can easily afford the higher MOOP costs, and who would rather keep monthly outlays as low as possible.
MA also has special-needs plans available for people with specific medical conditions. These plans can be very valuable.
Medigap plans are better for those who expect to need more care, who can’t afford a high MOOP, and who can afford a monthly premium for their Medigap plan as well as their Part D plan — though there are “extra help” programs available for lower-income Medicare beneficiaries.
