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Five Ways Financial Experts Recommend Covering Out-of-Pocket Medicare Advantage Costs

Updated: Jun 26, 2022

If you have a Medicare Advantage plan, you know it’s not going to be free. The least amount you will spend each month is $170.10 for the Part B (Medical Insurance) premium unless your plan is one of those that pay it for you, too.

Then you’ll have the monthly premium for your Medicare Advantage plan itself, although nearly two-thirds of such plans also have $0 premiums.[1]

Whatever you do have in regular monthly payments, you’ll have to budget out of the funds you have available each month. But what else will you have to pay?

Once you actually use your insurance, you will have to pay:

  • Annual deductible – the amount you pay out-of-pocket before your plan starts covering part of the costs (although some plans have $0 deductibles).

  • Coinsurance – a percentage you pay of the costs for covered goods and services.

  • Copayments – a set dollar amount you pay before receiving treatment, such as a $25 copay to see a doctor.

  • Prescription drugs – a separate deductible, plus a copay or coinsurance whenever you have a prescription filled.

What you pay each year out of your pocket will be limited by the out-of-pocket maximum listed on your policy. This may not seem important if you’re healthy and rarely use your insurance. But it can make a significant difference if you suddenly have an accident or a chronic illness, as the maximum can be as high as $7,550 per year.

Takeaway action step – Don’t assume that a plan with a $0 premium and $0 deductible is always the best plan. You may find that your plan’s out-of-pocket maximum is much higher than it would be if you paid a small premium and a manageable deductible.

Five Ways You Can Pay for Your Out-of-Pocket Expenses

HSA Balances – If you had a High Deductible Health Plan (HDHP) before moving to Medicare, it was likely linked to a Health Savings Account (HSA). You can roll unspent HSA funds over year after year, building a tax-free fund for medical care later. Once you turn 65, you can spend the funds on anything you want, but you will be taxed at your rate at that time if you don’t spend it on qualified medical expenses. Deductibles, copayments and coinsurance are qualified medical expenses.

Tax-Advantaged Retirement Accounts – If you have a traditional or Roth IRA among your savings for retirement, you can withdraw amounts to cover the out-of-pocket expenses that go beyond what your budget can afford. If you withdraw from a traditional IRA (where you had a tax benefit when you contributed the funds), you will have to pay tax at your present rate at the end of that year. But if your funds are in a Roth IRA, you already paid the tax on the funds you contributed, so you can withdraw what you need with no tax implication.

Emergency Funds – Financial experts recommend having an emergency fund to cover unexpected events without creating financial distress. Even if you already have one, you should consider adding a small contribution each month out of your regular budget. That will keep the fund growing – and will replenish it if you’ve had to withdraw funds.

Medicaid – Medicaid helps people with limited incomes pay for some medical costs. Although it is a joint federal/state program, eligibility rules vary from state to state. Visit for a quick screening quiz that will help determine if you are eligible for Medicaid or some other option.

Medicare Savings Programs – These programs help with the cost of Medicare premiums and, if needed, deductibles, coinsurance and copayments. Income requirements vary among the different programs (QMB, SLMB, QI and QDWI), so you might qualify for one. If you do, you also may automatically be eligible for a program called Extra Help to help pay for prescription drugs. Your state’s Medicaid office can help you with eligibility.

Takeaway action step – As you select your Medicare Advantage plan each year, think about how you would cover the out-of-pocket costs. Being able to change plans yearly lets you adjust your choice to both your finances and your health today – and for the next 12 months.

Sources [1] Kaiser Family Foundation. Medicare Advantage in 2021: Premiums, Cost Sharing, Out-of-Pocket Limits and Supplemental Benefits. (accessed January 18, 2022).


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