Juan, a 68-year-old retired engineer had Original Medicare parts A and B, but no Medicare Advantage or Medicare Supplement plan, and no Part D coverage for drugs.

He had come to the conclusion that he probably needed Part D for his prescriptions. However, he was emphatic about not wanting any additional coverage except Medicare Parts A, B, and D. He definitely wasn’t willing to pay for additional coverage so I knew a Medicare supplement was out.

I entered his medications into my software and priced some Part D plans, all of which had a modest monthly premium. Then I asked him why he would consider paying a premium for only Part D when he could instead have a Medicare Advantage with Prescription Drug plan for a $0 premium that also included benefits for dental, vision, hearing, and more.

He was completely confused as to how he could get substantially more benefits for a $0 monthly premium, and asked question after question of me. I explained that if he has a Medicare Advantage plan, that means the Medicare department of the government pays his insurance company a fixed rate per month and his insurance company is responsible for providing all his care under Part A and Part B. The insurance company can do this more cost effectively than the government can, so they throw in additional benefits for no extra charge in order to encourage customers to sign up with them.

Medicare Advantage plan participants have more restrictions than those on Original Medicare or a Medicare Supplement. With those restrictions come extra benefits like drug coverage, dental, vision, and hearing. Some Medicare Advantage plans now offer chiropractic or acupuncture care, transportation to and from medical appointments, over-the-counter benefits, and more.

Because Juan delayed his Part D coverage for three years after he was eligible, the government imposed a late enrollment penalty that he will need to pay for the rest of his life or as long as he has Part D. This is why it’s important to sign up for Part D when you are eligible if you are not covered under any employer’s group health insurance. Those who have other coverage at least as good as Medicare (called “creditable coverage”) have the option of delaying Part D until their other coverage ends.

Juan now has drug coverage as part of a Medicare Advantage plan that subsidizes the cost of his insulin, and his financial risk in a calendar year is limited to the Maximum Out of Pocket amount stated by his plan. This is much less risky than what he had before because Original Medicare parts A and B only pay about 80% of costs, leaving consumers exposed to that 20% risk, which has no cap or maximum. That 20% can become exorbitant if there is a serious health event.