Medically reviewed by Shilpa Amin, MD, CAQ, FAAFP on March 3, 2020 — Written by Rachel Nall, MSN, CRNA
When a person reaches 65 years of age or experiences a qualifying medical event, they can sign up for Medicare. However, Medicare is not a one-size-fits-all health plan. There are several parts to original Medicare, as well as a combined option called Medicare Advantage, or Medicare Part C.
When a person approaches the age at which they can sign up for Medicare, they may need to look into which plan will suit them and their needs best.
Making the right decision on which plan and packages to adopt can help a person take stress and expenses out of future medical treatment.
Learn more about the plans and costs of Medicare here.
This article will compare the costs and coverage levels associated with both Medicare and Medicare Advantage.
Medicare vs. Medicare Advantage
Traditional Medicare and Medicare Advantage have dramatically different costs. This is because the plans have different philosophies and support people with varying levels of medical need.
Medicare plans cost more, as they tend to cover more services. As a result, a person may have fewer out-of-pocket costs if they become ill and need more frequent care. A person pays a higher premium to avoid having to pay expenses later.
Medicare Advantage, on the other hand, has a lower premium but higher out-of-pocket costs. Some plans even require a person to pay only the Medicare Part B premium and $0 for prescription drug coverage.
This plan may be more suitable for a person who does not often use healthcare services. Having to pay more out-of-pocket costs can be a disadvantage if a person requires regular medical supervision or treatment that their plan does not fully cover, such as imaging, transportation, or home care.
However, the cost of Medicare Advantage plans varies by geographical location.
A person can switch from Medicare to a Medicare Advantage plan or vice versa once per year. If they find that a plan is not working well for them, they may be able to choose another Medicare option.
Costs
When comparing the costs of Medicare and Medicare Advantage, it is best to consider out-of-pocket costs alongside the monthly premium.
The following chart breaks down some of the basic costs for these plans.
| Plan type | Monthly premium |
| Medicare Part A | These plans are free if a person qualifies. Otherwise, it is up to $458 per month. |
| Medicare Part B | These plans cost from $144.60 per month. They may cost more if a person has an income higher than $87,000 per year. |
| Medicare Part D | The cost varies by plan, but the average monthly premium ranges from $13 to $83, according to the Kaiser Family Foundation (KFF). |
| Medicare Advantage | As with Part B, the cost varies by plan. However, in 2019, the average monthly premium was $26.87, according to the Centers for Medicare & Medicaid Services (CMS). Despite this, some Medicare Advantage plans cost much more every month. |
Some people choose a Medicare Advantage plan because they find that they have fewer out-of-pocket costs, according to Medicare.gov.
Medicare Advantage vs. Medicare supplement
Medicare supplement plans help a person cover some of the healthcare expenses that traditional Medicare does not include. Some people also refer to these plans as Medigap.
As with traditional Medicare, the CMS divide Medicare supplement plans by letter. People new to Medicare in 2020 can choose from plans A, B, D, G, K, L, M, and N. Not all insurers offer the same plans in all areas of the country, however.
Plans in Wisconsin, Minnesota, and Massachusetts are also different from the traditional Medigap plans.
Medicare supplement plans can help cover several costs, including:
- copayments for parts A and B
- up to 3 pints of donated blood
- coinsurance for skilled nursing facilities
- yearly out-of-pocket expenses
People with concerns about steep out-of-pocket expenses may choose a Medigap plan. As a general rule, a person cannot have a Medicare Advantage plan and a Medigap plan at the same time.
What is Medicare?
Medicare is a federal health insurance program for people aged 65 years and older, as well as people with certain health conditions and disabilities, such as end stage kidney disease.
When federal government employees designed Medicare, they split it into several separate parts. These parts cover different aspects of medical care and include:
- Part A: Medicare Part A provides hospital coverage, including a hospital stay, hospice care, and necessary care in a skilled nursing facility.
- Part B: Medicare Part B covers doctors’ visits, outpatient services, medical supplies, and preventive medical care.
- Part D: Medicare Part D accounts for prescription drug coverage. A person can select a Medicare Part D plan according to the prescriptions they currently take and the copayment with which they are comfortable.
If a person or their spouse paid Medicare taxes for 30 quarters of work, they would receive Medicare Part A at a discounted rate when they reach 65 years of age. If they paid the same tax for 40 quarters, they would get Part A for free. Some exceptions apply to this, and some people may qualify earlier, such as younger people with specific disabilities.
A person can also choose to pay a monthly premium for Medicare Part A if they do not qualify for the free plan.
Medicare Part B is available for a standard cost that only varies for people with a high income. Medicare Part D costs may differ depending on which plan a person selects and how much they earn.
What is Medicare Advantage?
Medicare Advantage is another name for Medicare Part C. This incorporates parts A, B, and D, alongside some additional services, such as dental, hearing, and vision coverage.
Although the sections below describe the most common types of Medicare Advantage plan, many others are available. In fact, the CMS estimate that there are 1,200 more Medicare Advantage plans available in the United States in 2020 than there were in 2018.
This means that there are around 3,148 available Medicare Advantage plans, according to the KFF.
However, it is important to note that the availability of Medicare Advantage plans can vary by geographical area. For example, there are no Medicare Advantage plans in Alaska.
According to the KFF, areas with higher populations tend to have more available plans. In Miami, Florida, and New York City, for example, there are more than 60 available Medicare Advantage plans.
Medicare Advantage plans usually fall into different categories, including:
Health maintenance organization
A person typically chooses from a list of preferred providers that they must visit for the plan to cover healthcare costs.
Most health maintenance organization (HMO) plans require a primary care doctor to coordinate a person’s care. This means that they must usually refer a person to a specialist before the insurance covers the healthcare costs.
In 2020, an estimated 64% of people with Medicare Advantage plans have an HMO plan, according to the KFF.
Preferred provider organization
A preferred provider organization (PPO) plan covers some or all costs from a set network of healthcare providers.
A person does not usually require a doctor’s referral to see a specialist under these plans, and they typically have a more extensive network of providers to choose from than with an HMO plan. However, PPO plans are usually more expensive than HMO plans.
Private fee-for-service
This plan allows a person to seek care at a provider and pay a fixed amount, upon which the insurance company has already agreed.
Unlike HMOs and PPOs, a person does not have to receive referrals or select a primary care doctor. However, bear in mind that not all doctors who accept Medicare will also accept a private fee-for-service plan.
Special needs plans
A special needs plan is a Medicare plan that supports people with a chronic health condition and other specific needs. Examples of these conditions may include diabetes, end stage renal disease, HIV, and chronic heart failure.
Because people with these conditions often have complex health needs, these plans can account for considerations such as medications and other necessary services.
Summary
Of the 60 million people enrolled in Medicare in the U.S., around 24.4 million beneficiaries enrolled in Medicare Advantage plans, according to the CMS.
People should always weigh up the costs and coverage levels when selecting a plan that best suits their needs. Neither Medicare nor Medicare Advantage is better, but one may be more suitable than the other for people in specific financial or medical circumstances.
Medically reviewed by Shilpa Amin, MD, CAQ, FAAFP on March 3, 2020 New — Written by Rachel Nall, MSN, CRNA