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Lately, I've been doing a lot of research on what it takes to step into the role to manage the finances for a loved one when they're no longer capable of doing that for themselves. This has become very real and very personal for me as both of my parents are getting older and for the past 2 years, my dad has been battling vascular dementia. My family and I have really rallied around him to support him and that includes managing his finances and healthcare decisions. And I think a lot of us experience something like this in life. If you don't really care about something deeply until it impacts you on a personal level. So, this is really something I've dove into head first.
And recently, one of the books that I was reading, the author pointed out something that made me pause. They talked about how one of the most permanent or at least hardest to unwind financial and health care decisions you'll ever make in retirement is the choice between a Medicare Advantage plan and a Medigap plan. And when I read that, two things happened. First, I knew I needed to do more research because this is something I didn't fully understand. And second, I knew it was something we needed to talk about. Because if you're making one decision around the age of 65 that is going to affect your healthcare for the next 20, 30, or 40 years, that is a decision we want to get right.
Hey guys, what's up? I'm Aaron and welcome back to the channel. My goal with this video is to take all of the research I've done so far and distill it down into a clear, practical way for anyone who's approaching this decision or who wants to understand it better for themselves or for a loved one. Now, because I want this video to be comprehensive, I know it's going to be a longer video, but don't worry, I will break it up into smaller videos that I will release over time if you want to reference certain segments later on. So that might make it a bit easier.
When I go to make a video, I always ask myself two questions. One, is this topic interesting to me? And two, do I genuinely think it will add value? This video is an absolute affirmative on both. So I hope as you watch it, you gain a lot of information so you're well equipped to make this decision for yourself or a loved one when that time comes. Because when you turn 65 and choose your Medicare coverage, you're not just choosing a health plan for this year. You are often setting the framework for what your health care will look like for the rest of your life. And here's the part a lot of people don't realize. If you change your mind, that decision is very hard to unwind later. On paper, they often make it sound like you can switch plans, no problem. But when you talk to people, they often describe it as being difficult, expensive, or not even possible at all. And that is why I want to make this video because this is about what your retirement will look like when your health changes from ages 65 to 75 to 85 and beyond.
Today, I'm going to walk you through what Medicare actually is starting from zero. So, you don't need any baseline knowledge here. What Medicare Advantage is, what Medigap is, the crucial decision window at age 65, the real pros and cons of each, little known things that people wish they had known, real examples of how costs play out over time, and a simple framework to help you decide which is best for you. By the end of the video, you'll understand exactly why this is one of the biggest health care decisions in all of retirement and how to approach it with confidence.
When you first enroll in Medicare around age 65, you're enrolled in what's called Original Medicare. It has two main parts. Part A, which covers hospital care, and Part B, which covers doctor visits, outpatient care, tests, and procedures. Together, that's Original Medicare. For most people, Part A is generally premium free, assuming you've had a working career where you paid taxes. And Part B has a monthly premium you continue paying no matter which path you choose. And here's the thing, Original Medicare does not pay 100% of your medical costs. It typically pays about 80% of the approved costs. You then are on the hook for deductibles, co-pays, and that remaining 20%. When it comes to Original Medicare, there is no annual out-of-pocket maximum. So, if you end up having a major illness or need a lot of care within the year, your out-of-pocket costs can be very expensive. And this is why most people do not rely on Original Medicare alone. Most people go down one of two paths. They either choose a Medicare Advantage plan or a Medigap plan. Here is where you're at the fork in the road.
Let's start with Medigap. Medigap, also called Medicare Supplement Insurance, is designed to fill the gaps in Original Medicare. It does not replace Medicare. It is a private insurance that works alongside it. Here's how it works in practice. Medicare pays its portion first, then your Medigap policy comes along and pays most, if not all, of what remains. So, if you go see the doctor or you go to the hospital, very often you have very little out-of-pocket costs or no out-of-pocket costs. Here's what you need to know about Medigap. It does come with a higher monthly premium, but it has very predictable costs. Most plans cover hospital deductibles, doctor co-insurance, and most of that 20% that Medicare itself doesn't pay. You can typically see almost any doctor nationwide that accepts Medicare. There are no networks. There are no referrals necessary. So, generally speaking, as long as you see a doctor that accepts Medicare, your insurance will cover you. The main downside here is that the premiums are higher, and you would also need to buy a separate prescription drug plan. A typical Medigap premium might be $100 to $300 per month, sometimes lower, sometimes higher. And this is in addition to your Medicare Part B premium. So if your Medigap plan is $200 per month, that's $2,400 per year plus your Part B premiums on top of that. Here's a simple way to think about Medigap. You pay more each month, so you don't have to worry about large medical bills later. This is really built for predictability and flexibility.
Now, let's talk about Medicare Advantage because this works very differently. Medicare Advantage replaces Original Medicare with a private insurance plan. These plans are run by private insurance companies and have been approved by Medicare. When you enroll, the plan becomes your main insurance. Medicare pays the insurer to cover you. The plan sets its own co-pays, networks, and rules. Most Advantage plans include hospital and doctor coverage, prescription drug coverage bundled in, and they often have extras like dental, vision, hearing, and gym memberships. The key features of Medicare Advantage are that they have very low monthly premiums. Many plans are $0 beyond what you're paying for Part B as a premium. Some areas do have small additional premiums, often in the ballpark of $20 to $60 range, but overall monthly premiums are usually very low. But you will still usually have co-pays for doctor visits, co-pays for specialists, charges for hospital stays, networks for doctors and hospitals, and prior authorizations for many services. A $0 premium absolutely does not mean 0 costs. And the vast majority of these plans, if not all of them, tend to have an annual maximum that you would pay out of pocket if you run into a worst-case scenario and you need a lot of health care in a year. But keep in mind that those out-of-pocket maximums are generally several thousands of dollars. Depending on the plan, a more robust plan might cap at around $3,500 to $4,500 per year. A mid-tier plan might be closer to $4,500 to $6,500. And a higher out-of-pocket plan can exceed $9,000 per year. And this usually doesn't include prescription drugs, which would have their own separate limits. So, insurers tend to shift the cost to when you actually use health care. And those costs can be very real. So, a simple way to think about Medicare Advantage is you pay very little monthly and you pay more when you use more care. So in a way, you can think of these plans as being similar to an employer plan.
So now that we understand what Medicare Advantage is and what Medigap is, let's talk about what people actually do in the real world. This is usually a decision most retirees make at 65. Or if you're in the position where you help your parents with their financial and health care decisions, you might be asking these questions, too. As of 2025, about 54% of all people with Medicare Parts A and B, roughly 34 million people, are enrolled in Medicare Advantage plans. So more than half of all Medicare beneficiaries are choosing Advantage plans as their primary coverage. On the other side, among people who stay in traditional Medicare, a large portion buy a Medigap supplement. Depending on how studies count it, about 20 to 30% of all Medicare beneficiaries have a Medigap policy. Medigap only applies to those on traditional Medicare because you generally can't have a Medicare Advantage plan and a Medigap plan, and that's why those numbers look different depending on the source. Over the past decade, Medicare Advantage has grown dramatically. It used to be a smaller share of the Medicare system, but now it's the majority choice. Meanwhile, Medigap plans have remained a smaller but still meaningful share. And this rapid growth is why this conversation is so important because more and more people are choosing Medicare Advantage plans. But many are choosing them without fully understanding the long-term differences like differences in cost, access to care, flexibility, and how hard switching later can be.
Now, you might be wondering, is there really just these two options? The short answer is there are a few other coverage paths, but for the vast majority of retirees, the decision really does come down to Medicare Advantage or Medigap plan. But I will walk through the other choices just so you have a view of the full landscape. The other categories just don't apply to everyone, but they are still important to know about. Some people keep health care coverage from a former employer, a union, or the military. This coverage often works alongside Medicare. So in a way, it often behaves similar to a Medigap plan and it may even include prescription drugs. So for these retirees, they might not need a Medicare Advantage or a Medigap plan at all. But truth be told, this has become a shrinking share of retirees as most employers are not offering retiree benefits. Lower income retirees may qualify for both Medicare and Medicaid. This is called being dual eligible. Medicaid can help with your premiums, your deductibles, your co-pays, and even long-term care, which Medicare doesn't cover. These individuals may enroll in special Medicare Advantage plans designed for dual eligibles or have Original Medicare with Medicaid as secondary coverage. This is a very different situation than what most middle-income retirees would face. And a small percentage of people have Original Medicare but then have no Medigap plan, no Medicare Advantage plan, and no retiree coverage. This means they are fully responsible for the 20% co-insurance, no cap. And this is generally considered a very financially risky situation if there happens to be a major health event. Most financial planners would discourage against this choice unless someone is deliberately self-insuring and they have substantial financial assets. So again, this is not likely the choice for most middle-income retirees.
So across all Medicare beneficiaries, a little over half are in Medicare Advantage plans. About 20 to 30% have Medigap policies. About 10 to 15% have retiree or employer coverage and about 10 to 15% have Medicaid or other assistance. A small percentage have no supplemental coverage. So for most people watching this channel, for most planning for the long term, those higher income retirees and those middle income retirees, there really are two paths to choose from. You have Medigap coverage and Medicare Advantage plans. For most people, those are the choices that will have the biggest impact on their cost, their flexibility, and their peace of mind with their health care in retirement. The other choices are often not ones you deliberately get to choose.
The massive growth we've seen in Medicare Advantage plans didn't happen by accident. It's really the result of three main forces working together. First, Medicare Advantage is heavily supported by Medicare itself. One of the biggest drivers is how Medicare pays Medicare Advantage insurers. Instead of paying doctors and hospitals directly like Original Medicare does, Medicare pays private insurance companies a fixed amount per person to cover someone in a Medicare Advantage plan. In many cases, that payment is actually higher than what Medicare would have paid to cover this individual on Original Medicare. From Medicare's perspective, it shifts the financial risk to private insurers. It creates more predictable government spending and is designed to encourage managed care to control costs. From the insurers' perspective, if care is managed effectively, Medicare Advantage can be very profitable because of the cost sharing with the insured individual. Because of this structure, Medicare has continually supported the expansion of Medicare Advantage. So really, part of the expansion is because the system is designed to support it.
Second, insurance companies and brokers have strong financial incentives here. This part is incredibly important and often not talked about openly. Insurance companies, Medicare Advantage plans receive large payments from Medicare for each enrollee. They can control costs through networks and prior authorizations, and they often generate higher margins than Medigap policies. This is why insurers pour so much money into advertising and extra benefits and expanding plan options. All of those TV commercials, those mailers, and the dozens upon dozens of phone calls pushing Medicare Advantage plans, those are not random. In many cases, brokers are paid more to enroll someone in Medicare Advantage than in Medigap. They may also receive an ongoing annual commission as long as someone stays enrolled in the plan or bonuses based on volume or based on plan performance. In general, a broker might receive about $600 to $700 from an initial Medicare Advantage enrollment, and they might receive about $300 to $350 each year the person remains in the plan. On the other hand, commissions from a Medigap enrollment are often about half of that. Now, that doesn't mean that the broker is acting in bad faith, but it does mean that we have a system that is encouraged to push Medicare Advantage plans. So, naturally, more people are guided to that path.
Third, Medicare Advantage is easier to sell, especially at 65. From the consumer's perspective, Medicare Advantage plans look very appealing upfront. Maybe a $0 premium beyond Part B, prescription drug coverage that gets included, dental and vision that can be added on as extras, simple bundled coverage all in one place. When you compare that, Medigap might have a premium of $150 to $300 per month or more compared to a Medicare Advantage plan that's $0 a month. It can feel like the choice is obvious, especially when you're in early retirement and when you're healthy. In early retirement, a Medicare Advantage often is cheaper and it aligns with what many retirees are looking for, low cost today. But often the trade-off doesn't show up until later when you truly start to use a lot of health care later on in life. So partially this shift is about consumer preference. Many people really like lower premiums, the ability to easily bundle your coverage in one spot and those added plan benefits. But really, the explosive growth here has strongly been influenced by Medicare's payment structure, insurer profitability, broker compensation incentives, and heavy marketing.
Your critical decision window comes at age 65. This is one of the most important parts of the entire video. This is the part that many people don't fully understand until they're years down the road. When you first enroll in Medicare, typically around the age of 65, this is when you have the most freedom. This is when you have the most protections. And the reason this moment matters so much is simple. This is when Medigap is easiest to get. This is when Medicare Advantage is easiest to enroll in. But you don't retain this flexibility forever. Under federal rules, you get a one-time six-month Medigap open enrollment period. And timing is incredibly important here. That six-month window starts the first month you are both 65 or older and enrolled in Medicare Part B. So, it's not automatically tied to your birthday. It's tied to when Part B begins. And if you're an individual who's continued to work past the age of 65 and you're still covered by an employer plan and you haven't yet begun Part B, it's only once Part B begins that you get this six-month enrollment window. During these six months, Medigap insurance companies generally cannot deny you coverage, charge you more because of your health, or make you wait because of pre-existing conditions in most cases. So, in plain English, there are no health questions. There's no medical underwriting. And that's why this window is so valuable. This is your clean slate moment. But for many people, once you move past this window, it closes and it never fully comes back.
At the same time, this is also when Medicare Advantage is extremely easy to enroll in. And Medicare Advantage plans must generally accept you during this enrollment period. So at 65, Medigap is wide open with protections and Medicare Advantage is wide open and easy to enter. This is really the moment where you can freely choose either path.
Now let's talk about what happens later. This is the part that confuses a lot of people and honestly this is the part that I was unclear about and ultimately inspired all of this research that is leading to this video. People often hear, "Well, you can always change your mind later." And technically, you can switch between Medicare Advantage and Original Medicare during those enrollment periods, but switching your Medicare structure is one thing. Getting a Medigap policy later is another thing entirely. Outside of that initial enrollment window, Medigap companies tend to use medical underwriting, which means they can ask health questions, they can charge more, and yes, depending on your situation, they can absolutely deny you coverage. So often people are shocked to learn that yes, you can leave Medicare Advantage, but you may not be able to get a Medigap policy. So this often creates a reality where people are locked in. So, while technically you can change between these two paths, in practice, many people find that it's impossible.
Now, switching between these two paths depends on which direction you're going. If you're trying to go from a Medigap policy to a Medicare Advantage policy, this is usually the easier direction, and this is usually very possible. You can generally make this switch during the normal open enrollment periods that occur towards the end of the year. And typically speaking, Medicare Advantage plans don't do medical underwriting. So they're unlikely to reject you for any pre-existing conditions. So in the real world, going from a Medigap plan over to Medicare Advantage, that's very doable.
Now, going from Medicare Advantage to Medigap, this is the harder direction. This is where you're outside of that protected window. This is where underwriting is very real and you can absolutely be rejected for pre-existing conditions. And even if you are approved, Medigap plans can charge you a higher premium, sometimes 30 to 50% higher than what they otherwise would have charged you if you originally signed up in that original enrollment window. So in the real world, going from Medicare Advantage to Medigap is sometimes possible. Think of it as rarely possible, but it can be difficult. It can be expensive or not available depending on your health and your state.
One thing that's really important to understand is why people may want to switch plans over time because the reason they want to switch in either direction are generally very different. So, let's walk through them. Why people might switch from Medicare Advantage to Medigap. This switch usually happens when health care needs increase. And remember, this switch is very difficult, if not impossible. First, we may have rising out-of-pocket costs. As people age, if they enter into a state of poor health and are routinely hitting their annual out-of-pocket max on their Medicare Advantage plan, well, all of a sudden those higher premiums but predictable costs with Medigap plans can be more attractive. Keep in mind if you're routinely hitting your out-of-pocket maximum on your Medicare Advantage plan, it likely means that you have ongoing health conditions and Medigap would now have medical underwriting which would make it hard to qualify for those plans. So the very reason you're seeking the switch would also mean that's the reason it's difficult or impossible to make this switch. Second, frustrations with networks. Doctors and hospitals can leave networks. Specialists may not be covered. So, when care becomes more complex, if you run into a medical issue, some people just want the ability to see any doctor that accepts Medicare. Third, delays from prior authorization. Needing approval for tests or procedures or rehab can feel stressful when healthcare feels urgent and feels necessary. Fourth, simply wanting predictability. Later on in retirement, many people want a simple, predictable monthly costs rather than rolling the dice with medical care. In short, as medical care becomes expensive and complex, Medigap can often look like the better option.
Now, what about why people switch from Medigap to Medicare Advantage? This usually happens when people are still healthy and focusing on lowering their fixed costs. First, we have rising Medigap premiums over time. Medigap premiums tend to increase with age and health care. And remember, these premiums are already a couple hundred dollars a month, and that's on top of your Part B premium. Second, simply being in good health. If someone finds themselves in a position where they're not utilizing a lot of health care because they are very healthy, the lower cost of Medicare Advantage can seem very appealing. But remember, in either situation, you still have to pay your Part B premium. Third, there's the appeal of extra benefits. Most Medicare Advantage plans tend to come with wellness perks, and those can feel like added value compared to Medigap, and you do have the option of bundling in one place your dental, vision, and hearing, but these are an added cost. Fourth, trying to reduce monthly expenses in retirement. Switching can free up a few hundred dollars a month that would otherwise be going to premiums for Medigap. So when you're healthy and more cost-focused, switching to Medicare Advantage can be more appealing.
So to sum up, people tend to want to switch to Medicare Advantage when they're healthy and they want lower costs. People tend to want to switch to Medigap when health care seems expensive and unpredictable and complex. That is exactly why this decision at 65 is so important because if you want Medigap later, the very reason you may want it may be the reason it's hard to get.
Now, there are a few important exceptions when you can switch back with protections in place. I want to be very fair here because it's not never. There may be a few situations where you have what's called guaranteed issue rights, meaning you can buy a Medigap policy and the insurer can't deny you. One common timing rule you'll see is you generally must apply starting 60 days before your coverage ends and up to 63 days after it ends. This is a very specific window and missing this timing can mean that those protections disappear. There is also something called a Medicare Advantage trial period. If you joined Medicare Advantage when you first became eligible, generally around the age of 65, there's often a one-year window where you can switch back to Original Medicare plus a Medigap policy with some protections. This is basically Medicare's version of "you can try it, but you have limited time to undo it." But notice what that implies. If you stay in Medicare Advantage for years and then later decide you want a Medigap policy, that trial period is long gone.
It's also important to keep in mind that Medigap rules are not identical in every state. Some states simply provide stronger consumer protections than federal law requires. For example, KFF has reported that a small number of states like Connecticut, Massachusetts, Maine, and New York require continuous or annual guaranteed issue protections for Medigap, meaning access can be easier regardless of health history. Other states may have birthday rules that can allow switching between Medigap plans without underwriting in certain circumstances, but that's typically more about switching from a Medigap plan to another Medigap plan, not necessarily solving the Advantage to a Medigap problem. So this is why when you look online, you'll often hear very differing personal stories. Someone might say, "I switched, no problem." and someone else might say, "I tried and it was impossible." These can both be very true and it depends on the state and it depends on your health.
So when people say Medicare Advantage is easy to get into but hard to get out of, what they usually mean is Medicare Advantage is very accessible at 65, often low premium and very marketable. But if you later decide you want Medigap for predictability and flexibility, you may not be able to get into it on the terms you expected or at all because your health has changed and the underwriting door is closed. That's why this decision is such a big deal. You're not just choosing a health care plan for the today version of you. You are also trying to choose one that will fit the continually aging version of you. The version of you that is 10 years older, 20 years older, or 30 years older. So really, the question is, what kind of coverage will I want when I'm 75, 85, and healthcare is potentially more complex?
So, let's lay out the pros and cons of both. For a Medicare Advantage plan, here are the pros. You have very low or $0 monthly premiums beyond Part B. Prescription drug coverage is usually included. It often has extra perks like the ability to bundle dental, vision, and hearing, and usually wellness benefits are included. There is an annual out-of-pocket maximum which caps the worst-case medical spending for the year. And for the cons of Medicare Advantage, the co-pays and co-insurance can add up as care increases. You have to deal with provider networks, which can limit doctors and hospitals that you can use. It often requires prior authorizations. This can delay tests or procedures or rehab care. The cost can vary widely year-to-year depending on your health needs and switching to Medigap later can be difficult or sometimes impossible.
And what about the pros for a Medigap policy? Here you have very predictable health care costs month-to-month and year-to-year. You have very minimal out-of-pocket bills when you actually do use care. You have broad nationwide access to the vast majority of doctors who accept Medicare. You don't need referrals and there's very few administrative hurdles and there's less financial and logistical hassle as health care becomes more complex should health care issues arise. Now, what about the cons of a Medigap policy? Well, here you have higher monthly premiums upfront. Prescription drug coverage is usually entirely separate. Premiums tend to increase gradually over time. A simple summary might be this. Medicare Advantage tends to optimize for low cost today. Medigap tends to optimize for predictability and flexibility long-term. Neither is automatically better, but they are built for very different priorities and seemingly very different stages of retirement.
Let's talk about some of the things people don't fully understand when they first choose a Medicare Advantage or a Medigap plan, but often they really feel the effects of these decisions later. Let's look at Medicare Advantage first. Networks can and do change every year. Doctors, specialists, and hospitals that are in network this year might not be in network next year. Networks do update and change over time. People are often surprised when they have to change providers because networks changed or they have to pay out-of-network fees if they want to continue seeing a certain provider. And there's also added confusion with the complexity of these networks because maybe a hospital is in network but then a certain provider at that specific location may not be in network. So people might be surprised being hit with an out-of-network fee. And this is part of the reason the American health care system is so complex. And while doctors are legally required to notify you if they leave a network, it doesn't always happen and you have very limited recourse. The insurance industry is not designed to make this easy. They don't make it easy for the providers and they don't make it easy for the patients. So assume that every single year it is your responsibility to check that your providers and your hospital are still in network. Prior authorization is very common for these plan types. Many plans require approval before things like an MRI, surgery, hospital stays, or rehab care. If you are dealing with ongoing health issues, and health care feels urgent or frequent, these prior authorizations can seem like they're causing frustrating delays. The out-of-pocket maximum is often higher than people expect. While having a yearly cap sounds comforting, many plans set that cap in the $4 to $7,000 range, some even higher, close to $9,000 or more. As you age, and if you develop health issues, hitting this annual cap can become more and more common. And it can really feel like a one-way door later on. Medicare Advantage is usually very easy to enroll in. But switching back to Medigap later can involve health underwriting, higher premiums, or even being denied altogether depending on your situation and your state.
Now, what do people wish they knew about Medigap policies? Well, your best opportunity to buy is right when you first enroll in Medicare. You generally have an initial six-month window that is tied to when you enroll in Medicare Part B, which is essentially a use it or lose it window. If you go outside of that window, then medical underwriting can come into play and it can be easy for you to get denied for these plans. Medigap isn't flashy and that's intentional. There are no bundled perks. There are no heavy advertisements and all of that is intentional. It is simply there to cover your health care expenses. It's really built for the years when health care gets more complex. As people move into their 70s and their 80s, the value of broad access, fewer hassles, and predictable costs tend to grow significantly. Generally, you simply pay your monthly premium, and then you have very little in the way of extra costs or hassle beyond that. And many people don't fully appreciate predictability until they truly need it. In early retirement, low premiums can feel like the priority. In later retirement, if you develop health issues, more steady costs, and easy access feel like they're more important. So, to sum it all up, Medicare Advantage really shines when you're healthier and you're focused on lower upfront costs. Medigap tends to shine if you're experiencing health issues and you want more predictable, stable costs and really easy access to a wider network of providers. And truly, most people only realize these differences several years after having lived with one of these plans.
Now, let's make this really tangible with a few realistic examples. I will compare a few different people in a few different situations. I'm not going to factor in Part B expenses or prescription drugs because those would be present in both situations. I'm only going to focus on the cost differentials here. Let's say we have two individuals. Both are 66 years old. Both are healthy and only using routine care. Person A chooses Medicare Advantage. Their plan has a $0 monthly premium beyond Part B, a $20 co-pay for primary care visits, and a $40 co-pay for specialist. Over the course of the year, maybe they have two routine doctor visits and one specialist visit. So out of pocket, their total cost for the year might be $80. Add in their Part B premium, and that's essentially their health care cost for the year. Person B chooses Medigap. They choose a plan that costs about $180 per month. That's roughly $2,160 per year in Medigap premiums. And when they go to the doctor, their visits are covered with little or no out-of-pocket costs at all. When you look at these two examples, it's pretty easy to see why a healthy individual would choose a Medicare Advantage plan.
Now, let's take two different 66-year-olds who have a chronic condition. Maybe they both have diabetes and high blood pressure. They see a primary care several times a year, a specialist or two, and they get labs and tests regularly. Person A is on a Medicare Advantage plan. Remember, they have $20 co-pay for primary care, $40 when they see a specialist, and will also say that they have a $200 out-of-pocket per day for a hospital stay if admitted. Over a typical year, they might have six primary care visits, four specialist visits, lab testing, and imaging. And so already, they might be spending over $700 per year. If they have a short hospital stay in one year, that could easily add another $1,000 or more. So in total, they might be spending $1,500 to $2,000 in a heavier care year. Now, Person B on Medigap, they're still paying $2,160 per year in Medigap premiums, but most doctor visits, labs, and even hospital costs are largely covered. So, their yearly health care spending remains. It's fairly predictable and it's just mostly the premiums. At this stage, Medicare Advantage might be cheaper in some years, and it might be more expensive in others. But here, we see that the gap narrows. We might also notice that with our retiree and one who might be fixated on budgeting when it comes to Medicare Advantage, your health care costs are a little bit more unpredictable here. Meanwhile, Medigap stays completely steady.
Now, let's do another example. Let's fast forward to someone in their late 70s. They experience a major hospitalization, a surgery, followed by rehab or skilled nursing care on a Medicare Advantage plan. This is the kind of year where many people hit their plan's out-of-pocket maximum. Let's say their plan has a max of $6,500 for the year. Between hospital co-pays, surgery costs, specialists, and rehab. They could realistically reach that $6,500 cap. Some plans are even higher. On a Medigap plan, they're still paying their Medigap premiums, which may now be higher, maybe in the ballpark of $220 a month to $250 per month. So roughly that's $2,600 a year to $3,000 per year in premiums. But their hospital stay, surgeries, rehab, all likely covered. So their total cost for a bad health year is still largely predictable. So early on in your retirement when you're healthy, Medicare Advantage usually wins when it comes to cost. If you have years where you're utilizing more health care, you might notice that the gap between a Medicare Advantage and a Medigap plan tends to narrow. But then if you have years where you have major medical events, it's likely that Medicare Advantage is more expensive as you hit your out-of-pocket max and Medigap still remains predictable and steady. So this is the real trade-off. Medicare Advantage generally means lower costs upfront and higher variability later on. Medigap generally equates to higher fixed upfront costs and much lower surprises later.
How to choose between Medicare Advantage or Medigap. Instead of thinking about dozens of plan details, I want to walk you through this like a simple decision tree. Just answer the questions honestly. Step number one, what matters more to you right now? If you strongly prefer lower monthly costs, go towards Medicare Advantage. If you don't mind paying higher monthly costs for steady, predictable costs long-term, lean towards Medigap. Step number two, how important is provider flexibility? If you essentially want to see any doctor nationwide who accepts Medicare, lean towards Medigap. [music] If you're fine dealing with networks and getting referrals, lean towards Medicare Advantage. Step three, are you planning for today or for later retirement, too? If you're truly focused on staying healthy and focusing on how you're living right now at the age of 65 and keeping your cost low, lean towards Medicare Advantage. If you're looking down the road into your 70s or 80s and truly worried about expensive health care costs and conditions, it might be better to lean Medigap. Step four, how do you feel about financial surprises? If high medical bills in a bad health year would completely stress you out, maybe you want the predictability of Medigap. But if you really want to prioritize lower health care costs upfront and you're okay with maybe having higher costs down the road as health issues may come up, then lean towards Medicare Advantage. If your answer is mostly pointed towards keeping your monthly costs as low as possible right now and you're comfortable with networks and some variability in costs, Medicare Advantage often ends up being the better fit. If your answers leaned towards predictable expenses, broad access to care, and less hassle as health needs grow over time, Medigap is usually the better long-term match.
This is really your long-term strategy for health care in retirement. Yes, Medicare Advantage is going to look cheaper upfront at age 65. Yes, Medigap plans are going to look more expensive upfront, but as health care needs tend to increase with age, predictability and flexibility often become far more valuable than lower premiums. And at that point, switching can be difficult, if not impossible. So ask yourself, what kind of health care experience do I want for the rest of my retirement? Don't choose your health care solely based on the premium at 65. Also, make sure you're factoring the health care experience you want at age 75 and 85. There is no one right answer, just the right answer for you.
And now that you fully know what the options are, you can make a better choice. So, what are your thoughts? Medicare Advantage or Medigap? I'd love to hear in the comments down below. I post new videos every single week. If you got anything at all out of this one, please give it a like. If you're new here, please consider subscribing. Or if you know of someone who might get something out of this type of content, please consider sharing. I'll see you soon. Bye.