Comparing Medicare and Medicare Advantage

What makes one plan better for you than another?

An older man stands in a drugstore and reads the label on a bottle of pills.
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As you near age 65, or once you qualify for Medicare, you might breathe a sigh of relief at the prospect of having low premium (or even free) government health insurance. Unfortunately, choosing between Medicare and Medicare Advantage can be a confusing process; each has its pros and cons. According to the Kaiser Family Foundation, 32% of Medicare enrollees are on a Medicare Advantage plan, so what makes one Medicare plan better than another? How do you choose?

Understanding Medicare Coverage Basics: Medicare and Medicare Advantage

Before we compare the options between Medicare and Medicare Advantage, it is helpful to understand the basics.

Medicare

Original or basic Medicare is government run and has two parts: Part A and Part B. Part A covers hospital expenses and often does not have a charge associated with coverage. Part B may have a premium associated with it depending on your situation, and coverage is generally for doctors’ visits, lab screenings, preventative tests, and other coverage. Part A and B do not cover the prescription drugs you take at home. You would have to add Medicare Part D to get prescription drug coverage.

Medicare Advantage

Medicare Advantage plans are run by private insurance companies and regulated by the government. They must include coverage similar to original Medicare Part A and B. In addition to Part A and B type coverage, most Medicare Advantage plans cover prescription drug coverage. Because private insurance companies operate Medicare Advantage plans, they may have health insurance provider networks which could limit where and how you get your medical care.

How to Choose the Right Medicare Plan

Health care needs are highly individualized. Basic or original Medicare is available to people aged 65 and older, or, in some cases, younger people with disabilities. (Medicare provides an online tool to help you figure out if you’re eligible.) Although you can automatically get Medicare when you qualify at 65 (or three months before), you may not want to settle for original Medicare because you have other options. Medicare Advantage can add coverage and offer other options that basic Medicare will not.

Depending on your medical needs, these advantages may or may not be worth the added cost of a Medicare Advantage plan.

Questions to Ask

These are the basic plan features you need to compare to help you decide what kind of Medicare plan is best for you, and if it is a cost-effective choice:

In addition to the above basics, you should ask a few more questions to determine how much coverage you need, and how out-of-pocket costs could impact you:

You can also get help understanding your options from your local State Health Insurance Assistance program 

Medicare and Medicare Advantage Comparison Table

One of the biggest advantages of original Medicare over Medicare Advantage is the freedom to access doctors and medical providers without network limitations. Each plan has its pros and cons depending on your needs.

  Medicare Medicare Advantage
Medicare Part A & B Yes (Part B is optional) Yes, includes A & B
Preventative Care Yes: learn more about Medicare preventative care Yes
When and How to Enroll You can sign up for Medicare three months before you are 65: learn more about applying for Medicare. During the special enrollment period
Dental Benefits No Yes, with many plans
Vision Care (Eye exams or glasses benefits No Yes, with many plans
Extra Benefits No May include routine hearing checks, fitness benefits, and other perks
Prescription Drug Coverage No, but available as an add on through Medicare Coverage D or may have limited coverage for specific situations Yes, with many plans
Prescription Drug Coverage No, but available as an add on through Medicare Coverage D or may have limited coverage for specific situations Yes, with many plans
Choice of Medical Providers If the provider you choose accepts Medicare, then you may use your Medicare coverage. Many doctors and medical providers accept Medicare. You may be limited to a network or have higher out-of-pocket costs out-of-network.
Access to Specialists Yes, without a referral. You may need a referral before you can see a specialist with some plans.

If you qualify for Medicaid or a Medicare Savings Program, be sure and check your options before you explore a Medicare Advantage program, as both can save you money.

Medicare Advantage Premium Costs 

More than half of Medicare Advantage enrollees pay no premium for prescription drug coverage (other than Part B coverage). The average premium Medicare Advantage enrollees with prescription drug coverage is $70 per month.

If you would like to check how much your Medicare premium would be, and if you qualify for various Medicare plans, try the Medicare Eligibility and Premium Calculator.

Out of Pocket Spending

Original Medicare has no out-of-pocket maximum. Medicare Advantage maximum out of pocket spending is $6,700 in-network or $10,000 combined in-network and out-of-network. Some plans offer even lower out of pocket limits.

  Medicare Medicare Advantage
Maximum out-of-pocket limit No Yes
Deductible Yes: learn more about Medicare deductibles Some plans may have deductibles; this will vary by insurer.
Co-insurance or Co-pays Yes Yes

HMO or PPO When Choosing Medicare Advantage Plans?

When comparing options for Medicare Advantage plans, consider that HMO plans have had lower out of pocket costs ($4,908 on average) compared to PPO plans ($5,908-$6,519 average). That’s a $1,000 average difference in out of pocket costs! 

Always look at the big picture when comparing the costs of your health insurance plan. A Medicare Advantage plan may seem more costly than a basic Medicare plan, however, if you compare the premiums, co-pays, and out-of-pocket maximums and do the math you might find that a higher premium plan with a lower out-of-pocket maximum may save you money by the end of the year.