As you get older and may need more medical help, you want to ensure you have affordable, comprehensive coverage that will ensure you stay healthy for as long as possible. At the same time, you don’t want to pay tons of out-of-pocket expenses.
The things that may concern you are surgeries, procedures, and prescription drug costs. There’s also the cost associated with going to the hospital, into a nursing home or receiving at-home care, and the concern of what will happen if you have an emergency.
You also know you’ll need extra help when it comes to dental and eye care. You’ve heard from others that, unfortunately, medical, dental and eye care bills can become higher as you grow older.
With all that in mind, you’re looking into Medicare Advantage or Original Medicare as your primary health insurance plan options. However, do you know which one is best for your situation now and in the future?
Let’s look at what the two are, along with the differences between them, as we examine Medicare Advantage vs. Original Medicare.
What is Original Medicare?
When looking at Medicare Advantage vs. Original Medicare, you first must know which one is which.
Original Medicare, also known as Medicare Part A and B, is a federal program run by The Centers for Medicare & Medicaid Services under the U.S. Department of Health and Human Services.
Medicare is funded by payroll taxes that workers and employers pay, and monthly premiums paid by the beneficiaries that could be deducted from their Social Security benefits. A little more than half of people 65 and older choose Original Medicare when it comes to health care coverage.i
It offers health care coverage to eligible recipients: those 65 or older or those who are under 65 and have End-Stage Renal Disease or have been eligible for Social Security disability benefits for a minimum of 24 months.
Recipients are automatically enrolled when they turn 65, but it is possible for them to opt-out to other types of coverage. Individuals can go to doctors, hospitals and other providers who accept Medicare coverage.
Typically, individuals will pay a fee, like with other health care coverage, and Medicare will take care of the rest.
What is Part A & B?
Original Medicare comes in Parts A and B. Part A will cover a certain amount of hospital expenses, care in skilled nursing facilities, hospice care and some types of home health care. Part B will pay for doctor bills and various medical expenses like preventive screenings, medical supplies and lab tests.
Usually, if individuals or their spouses paid Medicare taxes while they were employed, they will not have to pay a monthly premium for Medicare Part A coverage. However, when it comes to Medicare Part B, most people are going to be paying a standard monthly premium. Some individuals pay a higher Medicare Part B premium that is based on their income.
How Covered Medicare Costs Are Paid
Health care services are paid through something called an assignment. This is a process where a health care provider, medical product supplier or doctor will take the Medicare-approved amount as full payment for their services provided.
If individuals go to doctors, suppliers or providers that accept assignment, they will only be charged the Medicare deductible or coinsurance amount, and the doctor will wait to receive the rest of the payment from Medicare.
Now that you know the ins and outs of Medicare let’s look at what Medicare Advantage is, and how it plays into Medicare Advantage vs. Medicare.
What Is Medicare Advantage?
Medicare Advantage, or Medicare Part C is a coverage under a private health plan that covers the same services as Medicare Part A & B plus more. This type of Medicare insurance is provided by insurance companies rather than the federal government.
The common Medicare Advantage Plan types include Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), and Private Fee-For-Service (PFFS). There are less-common ones, including Special Needs Plans (SNPs), Provider Sponsored Organizations (PSOs), and Medical Savings Accounts (MSAs).
Medicare Advantage Plans might have coverage rules, premiums, provider networks and cost-sharing for covered services different than Original Medicare. Most Medicare Advantages Plans will provide prescription drug coverage.
Individuals are allowed to enroll in Medicare Advantage Plans if they have Medicare Parts A and B already and if they live in a plan’s service area.
Medicare Advantage Costs
When individuals enroll in a Medicare Advantage Plan, they assign their Original Medicare benefits to their private insurance carrier and will usually pay the Medicare Advantage and Part B premium (along with the Part A premium if they have one, which is unusual).
Medicare Advantage Plans are required to include limits on individuals’ out-of-pocket expenses for their Part A and Part B costs. The limits are typically high; for 2021 they may not exceed $7,500.ii
Medicare Advantage Plans cannot make the individuals pay higher coinsurances or copayments than they would with Original Medicare for specific services like dialysis and chemotherapy.
Medicare Advantage Under Unions or Employers
Unions or employers will sometimes enroll workers in Medicare Advantage Plans that they choose to sponsor. Individuals can stay with the plans, switch to other ones, or simply use Original Medicare instead.
However, individuals should be aware that if they choose to switch coverage, the employer or union might reduce or eliminate their health care benefits and those of dependents. Individuals need to talk to their employers or unions before making the change.
The 4 Biggest Differences Between Medicare Advantage and Medicare
When determining whether to enroll in only Original Medicare or a Medicare Advantage Plan, you should consider the biggest differences between the two. Here are the four biggest differences you’ll find examining Medicare Advantage vs. Medicare:
1. Original Medicare Does Not Cover Prescription Drugs:
If you take prescription drugs for any reason, you may decide, when looking at Medicare Advantage vs. Original Medicare, that the former may be preferred.
About 82% of Medicare Advantage plans, like HMOs and PPOs, will come with prescription drug coverageiii.
Each plan has its own benefits and limitations, so if you rely heavily on prescription drugs, make sure you find one that will cover most, if not all, of your medications. Be sure to discuss with your licensed insurance agent the co-pay costs for the medications you are currently taking.
Be aware that you can also enroll in Original Medicare and a standalone Prescription Drug Plan as an alternative to enrolling in a Medicare Advantage Plan.
2. Original Medicare Does Not Cover All Dental, Hearing or Vision Services:
When it comes to Medicare Advantage vs. Medicare for vision, hearing or dental services, Medicare Advantage might be a better choice.
If you need extra dental care outside of your six-month cleanings, require any hearing aids or go to the eye doctor more than a few times a year, consider getting a Medicare Advantage plan. Many of them will cover these services.
3. Medicare Advantage Plans Require Seeing In-Network Doctors:
One important question to ask yourself when comparing Medicare Advantage vs. Medicare is if you’re comfortable being restricted to a network or not.
With a Medicare Advantage Plan, could be required to see primary care physicians and specialists in your plan’s network and service area.
Medicare, on the other hand, allows you to see any doctor, hospital or specialist that accepts Medicare in the United States.iv
4. Medicare Has No Out-of-Pocket Cost Protection:
One aspect that helps Medicare Advantage take an edge in the Medicare Advantage vs. Original Medicare argument is the fact that Original Medicare has no out-of-pocket maximum, while Medicare Advantage does.
By law, Medicare Advantage plans have a yearly limit on what you pay out of pocket for services covered under Medicare Part A and Part B. As mentioned above, for 2021, that maximum is $7,500.
Once you reach your plan’s limit, you’ll pay nothing for services covered under Part A or B for the rest of the year.
Some people who choose to stay in Original Medicare vs enrolling into a Medicare Advantage Plan will purchase a Medicare Supplement Insurance Plan to help cover the out-of-pocket costs. You can learn more about the differences between Medicare Supplement Plans and Medicare here.
Finding a Medicare Plan That’s Right for You
Hopefully, you now know what’s involved when it comes to comparing Medicare Advantage vs. Original Medicare.
If you feel Medicare Advantage Insurance is right for you, you can get started comparing plans right away without leaving this site. Just click here to visit our Medicare Advantage quoting tool. Find a plan you like, and you can even enroll on your own – without having to leave the tool or speak to an agent.
If you’re still struggling to determine if Medicare Advantage or Original Medicare is best for you, you’re not alone. Many people find comparing their Medicare options to be challenging.v In these cases, we recommend speaking with an expert.
Ensurem offers free, no-obligation consultations with licensed insurance agents. Our agents specialize in insurance for adults 65+ including all things Medicare. They’ll complete a needs analysis and shop plans in your area to find you coverage that works for you. Reach a licensed agent when you’re ready at 844-847-3800.0195BGMAGN2021M_V1
Want more advice on preparing for Medicare Open Enrollment? Give us a call at 844.847.3800 to speak with a licensed insurance agent.
i“Medicare Advantage in 2021 Enrollment Update & Key Trends,” Kaiser Family Foundation, https://www.kff.org/medicare/issue-brief/medicare-advantage-in-2021-enrollment-update-and-key-trends/
ii“Medicare Advantage in 2021: Premiums, Cost Sharing, Out-of-Pocket Limits & Supplemental Benefits,” Kaiser Family Foundation, https://www.kff.org/medicare/issue-brief/medicare-advantage-in-2021-premiums-cost-sharing-out-of-pocket-limits-and-supplemental-benefits/
iii“Medicare Advantage 2021 Spotlight: First Look,” Jeannie Fuglesten Biniek, Meredith Freed, Anthony Damico, Tricia Neuman, Oct. 29, 2020, Kaiser Family Foundation, https://www.kff.org/medicare/issue-brief/medicare-advantage-2021-spotlight-first-look/
iv“Understanding Medicare Advantage Plans,” Page 6, Centers for Medicare and Medicaid Services, https://www.medicare.gov/Pubs/pdf/12026-Understanding-Medicare-Advantage-Plans.pdf
v“How are Seniors Choosing and Changing Health Insurance Plans”, Kaiser Family Foundation, https://www.kff.org/medicare/report/how-are-seniors-choosing-and-changing-health-insurance-plans/