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Key Takeaways:
- People now have more Medicare choices than ever before, with the average person in America having nearly 50 different plans to choose from.
- You don’t lose any benefits if you choose Medicare Advantage over Original Medicare. In fact, you might even gain extra coverage.
- There is a cap on out-of-pocket spending with Medicare Advantage, but you can control costs with Part A and Part B if you buy a Medicare Supplement plan.
- Almost all Medicare Advantage plans include Part D prescription drug coverage, which means you get all your Medicare benefits in one plan.
- Original Medicare offers maximum flexibility for people who travel frequently within the United States.
- Most people have access to a $0 premium, $0 deductible Medicare Advantage plan.
When you first become eligible for Medicare, you’re suddenly faced with more health insurance options than you’ve ever had before. In addition to Original Medicare, the average beneficiary has access to roughly 50 different Medicare Advantage and Part D plans. Choice is a good thing, but it can also be overwhelming.
If you’re trying to decide whether Original Medicare or Medicare Advantage is right for you, this guide is a great place to start. It explains the similarities and differences between the two types of coverage and gives you a framework for choosing the plan that works best for your individual health and financial needs.
Understanding Medicare coverage
Original Medicare was introduced in 1965 and consisted of two parts. Part A covered inpatient hospital care, while Part B covered doctor visits and most outpatient care. This separation of benefits remains the same today, although the list of covered services has expanded.
Everyone enrolled in Medicare is entitled to the same basic benefits, whether they choose Original Medicare or Medicare Advantage. These benefits include coverage for:
- Medically necessary services to diagnose and treat injuries, illnesses, and diseases
- Medical equipment and devices your doctor believes are medically necessary, such as wheelchairs, oxygen, and prosthetics
- Preventive care including screening tests, most vaccines and immunizations, and routine physical exams
Medicare does not cover prescription drugs (except in very limited situations), routine vision, dental or hearing care, or cosmetic procedures. It also doesn’t pay for long-term care or custodial care received in your home.
Medicare Advantage plans (also called Part C) are an alternative way to get your guaranteed benefits under Medicare. In other words, you don’t lose any coverage if you enroll in a Medicare Advantage plan. In fact, because they are private plans, they can cover extra services, such as routine vision and dental care, which are not covered by Original Medicare.
Medicare Part D
Medicare Part D, which first became available in 2006, is optional prescription drug coverage. It is not included in your Original Medicare benefits.
Medicare sets the baseline benefits for all Part D plans, but insurers can choose to provide additional coverage. Part D plans are private insurance, which means that premiums, deductibles, and cost-sharing are set by the insurance company. The average Part D premium in 2020 is $43.
A quick look at Original Medicare vs. Medicare Advantage
| Original Medicare | Medicare Advantage | |
| What’s included | Part A and Part B | Part A, Part B, and usually Part D |
| Routine vision and dental | No | Usually |
| Extra benefits | No | Yes Often: Fitness memberships, nurse hotline Sometimes: Over-the-counter medications and devices, home meal delivery, non-medical transportation |
| Provider choice | Can be used with any provider that accepts Medicare | The most popular plans require you to use a provider network; some allow you to see any provider that accepts your plan, but you will pay more out of pocket |
| Medicare Supplement plan | Yes, for a separate monthly premium | No |
| Out-of-pocket maximum | No | $6,700 Many plans set their limits below the allowable maximum |
| Foreign travel coverage | No | Yes Most plans offer foreign travel emergency benefits |
What are the costs of Original Medicare vs. Medicare Advantage?
There are premiums, deductibles, and coinsurance for Part A and Part B. People with a qualifying work history get premium-free Part A, but everyone pays a monthly premium for Part B. If you enroll in Medicare Advantage, you must continue to pay your Part B premium plus any additional premium charged by your plan.
Medicare Advantage is private insurance, which means each insurance company sets its own premiums, deductibles, and cost-sharing. Most Americans have access to a $0 premium, $0 deductible Medicare Advantage plan.
The chart below compares 2020 Original Medicare costs with costs for a typical Medicare Advantage HMO:
Comparing Medicare costs
| Part A | Part B | Medicare Advantage | |
| Premium | Most people pay $0; those who don’t qualify pay up to $458 a month | Standard premium is $144.60, although those with high incomes may pay more | $0 (Over 60% of Medicare Advantage members are enrolled in a $0 premium plan) |
| Deductible | $1,408 per benefit period; beneficiaries may have to pay this multiple times a year | $198 a year | $0 for medical expenses $200 for Part D |
| Coinsurance | $352 per inpatient day 61–90, $704 per lifetime reserve day | 20% of allowable charges | $10 for primary care, $30 for specialist care, $285 for hospital admissions |
| Out-of-pocket maximum | None | None | $5,900 |
Additional coverage with Medicare Supplement plans
About 40% of all Original Medicare enrollees choose to enhance their coverage with a Medicare Supplement plan. Medicare Supplement plans help pay your Part A and Part B out-of-pocket costs.
Plan G, the most comprehensive plan currently available to new Medicare enrollees, covers essentially 100% of your out-of-pocket costs, except for the Part B deductible. It also offers a foreign travel benefit of $50,000 over the life of the policy.
Medicare Supplement plans are also private insurance plans, with premiums varying depending on plan type, age, sex, ZIP Code, and smoking status. You can expect to pay $150 to $200 a month for Plan G at age 65. It is important to note that your premiums may increase sharply as you get older.
Are there different types of Medicare Advantage plans?
The following four types of Medicare Advantage plans are currently allowed by CMS:
- Health maintenance organizations (HMOs)
- Preferred provider organizations (PPOs)
- Special Needs Plans (SNPs), which are a special type of HMO limited to qualifying individuals
- Private fee-for-service plans (PFFS)
The overwhelming majority of available plans are HMOs and PPOs. Medicare Advantage HMOs account for roughly 60% of all enrollees, while PPOs account for roughly 30%. Fewer than 10% are enrolled in SNPs and PFFS plans.
Typical Medicare Advantage HMO vs PPO
| HMO | PPO | |
| Network providers | Always, except in the case of emergency care | Not required, but you pay less out-of-pocket for in-network care |
| Part D included | Yes | Usually |
| Additional benefits (vision, hearing, fitness, etc.) | Usually | Usually |
| Primary care physician | Yes | No |
| Referrals for specialist care | Usually | No |
| Prior authorization for procedures | Usually | No |
How does Medicare Advantage work?
When you enroll in Medicare Advantage, Medicare pays the insurance company a portion of your Part A and Part B premiums. In return, the insurance company assumes responsibility for all your health care costs. Medicare Advantage essentially replaces Original Medicare.
Since insurance companies compete for Medicare Advantage members, they are incentivized to offer additional benefits to attract new enrollees. To pay for these extra benefits, these companies take steps to control health care costs. An approved provider network is one of the most common ways insurers lower health costs.
In an approved provider network, the insurance company contracts with specific doctors and hospitals to care for their members at reduced costs. The providers then get a guaranteed pool of patients, while the patients get timely access to quality health care and the insurance company gets predictable costs.
Medicare Advantage plans often have additional rules and restrictions that don’t apply to Original Medicare. For example, your plan may require prior authorization for expensive tests and procedures. Your doctor may need to see if a generic medication works for your condition before your plan pays for a more expensive brand-name drug. These are common ways plans keep costs low.
All Medicare Advantage plans have a yearly out-of-pocket maximum. Once you meet it, your plan pays 100% of covered health care costs.
It’s important to note that even though Medicare Advantage replaces Original Medicare, you still have all your Medicare rights and protections, including the right to appeal a coverage decision.
Original Medicare vs. Medicare Advantage: Which is best?
Medicare coverage is a personal decision unique to the individual. What works best for your neighbor, or even your spouse, may not be best for you. The good news is that all Medicare plans are individual plans, which means you and your spouse can enroll in different plans.
You should think about your health-care needs, budget, and lifestyle when deciding whether Original Medicare or Medicare Advantage is right for you. The table below lists things to consider before you make the final decision:
Original Medicare vs. Medicare Advantage: Which Is Right for You?
| If You Want… | Original Medicare | Medicare Advantage |
| Predictable costs when you get care | X (You pay 20% of allowable charges for covered services) | ✔ (You usually pay a fixed copayment at the time of service regardless of the cost of the visit) |
| Cap on out-of-pocket spending | X | ✔ (All plans have a limit of $6,700 a year or less) |
| Flexibility to travel and use your benefits anywhere in the U.S. | ✔ | X (Most plans use a provider network) |
| Protection against out-of-pocket costs with a Medicare Supplement plan | ✔ (Can be purchased for extra monthly premium) | X |
| A single monthly premium for all your health coverage, including prescription drugs | X (You pay a separate premium for Part D) | ✔ (Premium covers Part D if included in the plan) |
| Fitness, dental, and vision benefits at no extra cost | X | ✔ |
How to change your coverage
The good news is you aren’t locked into your Medicare plan for the rest of your life. If you choose Original Medicare and decide it’s not working for you, you can switch to Medicare Advantage during the next Annual Election Period (between October 15 through December 7).
Similarly, you can switch between Medicare Advantage plans twice a year, or drop Medicare Advantage and return to Original Medicare. Medicare Advantage members can make changes during the fall Annual Election Period and the Medicare Advantage Open Enrollment Period (January 1 through March 31) each year.
With so much flexibility available, you can choose the coverage that best suits your unique budget and lifestyle, even if your situation changes from year to year. For example, if you’re enrolled in Medicare Advantage but plan to spend part of the year in a different state, you might want to switch to Original Medicare for a year so you aren’t locked into a provider network while you travel.
It’s a good idea to use the Medicare Plan Finder to compare available plans in your area each year before the Annual Election Period. You may find a less expensive plan, or discover one with benefits that better meet your needs. To evaluate your options and make a well-informed choice, you can call 844-259-6504 and speak to a licensed Medicare professional.
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