Personal Finance

Choosing Medicare vs. Medicare Advantage

October 6, 2021

The annual election period for Medicare and Medicare Advantage opens October 15 and runs through December 7. Choosing a plan can be overwhelming, as your Medicare health plan decisions affect how much you pay for coverage, what services you get, what doctors you can use, and your quality of care. 

Below, we break down the differences between the two main ways to get Medicare. 

Original Medicare

Core Offering: 

Original Medicare is a federally run program that includes Medicare Part A (hospital insurance) and Part B (medical insurance). This plan enables you to use any doctor or hospital that accepts Medicare within the United States, giving maximum flexibility to people who travel domestically frequently. 

Supplemental Coverage: 

To help cover the cost of prescription drugs, including many recommended vaccines, you can join Medicare Part D (prescription drugs). To help pay your out-of-pocket costs, you can also buy supplemental coverage such as Medicare Supplement Insurance (Medigap) or use coverage from a former employer or union, or Medicaid.

Medicare Advantage

Core Offering: 

Medicare Advantage, also known as Part C, is a private insurance alternative to Original Medicare that bundles together Part A (hospital insurance), Part B (medical insurance), and usually, Part D (prescription drugs). Plans may offer additional benefits Original Medicare doesn’t cover (e.g. vision, hearing, dental) and may also have lower out-of-pocket costs. 

However, Medicare Advantage plans typically require you to use doctors who are in the plan’s network. 

Supplemental Coverage: 

You can’t buy, nor will you need Medicare Supplement Insurance (Medigap). 

How to Choose a Plan

There are a few considerations that are top of mind for most people when choosing a plan: costs, desired coverage, and lifestyle.

My Costs

Costs can be broken out into premiums, deductibles, and copayments. 

Premiums

Premiums are the price of your insurance. 

With Original Medicare, most people qualify for premium-free Part A and pay a standardized premium for Part B. If you choose to join a drug plan, you will pay a separate Part D premium. 

With Medicare Advantage, you are responsible for the monthly Part B premium and your plan’s specific premium. Most Medicare Advantage plans have a $0 premium and may even pay for all or part of your Part B premium. Since most plans include drug coverage, there is no separate Part D premium. 

Deductibles

Deductibles are the set amount you pay for your healthcare before your insurance plan starts to plan. 

With Original Medicare, Part A deductibles are $1,484 and Part B deductibles are $203. Part D deductibles vary by plan. 

Deductibles for Medicare Advantage plans vary by plan. Compare costs for specific plans here. 

Coinsurance/Copayments

Coinsurance or copayments refer to the amount you pay for a covered health care service after you’ve paid your deductible and your insurance plan has started to pay. Copay is typically a set dollar amount (e.g. $40/visit) whereas coinsurance is a percentage of the cost of service (e.g. 20% of the approved cost).

With Original Medicare, you usually pay 20% of the Medicare-approved amount after you meet your deductible for Part B-covered services. There is also no yearly limit on what you pay out-of-pocket unless you have supplemental coverage like Medigap.

With Medicare Advantage, out-of-pocket costs vary but maybe be lower for certain services. These plans have a yearly limit for out-of-pocket expenses and you are not financially responsible for any Part or B services after you meet this limit.

For a more comprehensive summary of costs you can anticipate with Original Medicare and Medicare Advantage, see our post here. 

My Desired Coverage

Original Medicare covers most medically necessary services and supplies in hospitals, doctors’ offices, and other health care settings. Original Medicare doesn’t cover some benefits like eye exams, most dental care, and routine exams.

Medicare Advantage plans must cover all the medically necessary services that Original Medicare covers. Additionally, most plans offer extra benefits not covered by Original Medicare like some vision, hearing, dental, routine exams, and more.

My Lifestyle 

With Original Medicare, you can go to any doctor or hospital that takes Medicare, anywhere in the U.S. This is a good option if you have a vacation home or if you frequently travel within the United States and spend a portion of your time away from home. If you travel internationally, you may be able to purchase a Medicare Supplement Insurance (Medigap) policy that covers care outside the U.S.

With Medicare Advantage, most plans don’t cover services from providers outside the plan’s network and service area. However, select plans may include coverage outside of the U.S.

Visit www.Medicare.gov/plan-compare to shop and compare plans to determine which best fits your needs. The Medicare Call Center can help you with specific questions about billing, claims, medical records, expenses, and more. They can be reached at 1-800-MEDICARE (1-800-633-4227).

If you’re looking for a way to unlock additional money for unexpected medical expenses, Truehold’s sale-leaseback option may be a good solution to allow you to access your home’s equity. Speak to one of our advisors who can provide more information on Truehold’s program, as well as answer questions you have about choosing Medicare or Medicare Advantage.

Further Reading

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