Original Medicare and Medicare Advantage offer the same Part A and Part B benefits, but they differ regarding healthcare provider network rules, prescription drug coverage, and the availability of additional benefits.
According to the Kaiser Family Foundation (KFF), in 2020, approximately 39% of the 62 million people enrolled in Medicare opted for Medicare Advantage plans.
In this article, we look at original Medicare and Medicare Advantage plans. We provide a comparison of the two options and explain the premiums that a person can expect to pay.
We may use a few terms in this piece that can be helpful to understand when selecting the best insurance plan:
- Deductible: This is an annual amount that a person must spend out of pocket within a certain time period before an insurer starts to fund their treatments.
- Coinsurance: This is a percentage of a treatment cost that a person will need to self-fund. For Medicare Part B, this comes to 20%.
- Copayment: This is a fixed dollar amount that an insured person pays when receiving certain treatments. For Medicare, this usually applies to prescription drugs.
Original Medicare is a government health insurance program that covers hospital and medical costs. It comprises Part A and Part B.
Part A covers hospital costs. It includes inpatient care at a hospital, the care received in a skilled nursing facility while recovering from a health condition, and hospice care.
Part B covers medical costs as an outpatient. It includes preventive care services, doctor visits, laboratory tests, durable medical equipment, and some home health services.
There is limited cover for prescription drugs with original Medicare. However, a person can opt for a stand-alone Medicare Part D prescription drug plan.
Private insurance companies that Medicare has approved administer Medicare Advantage plans. These plans are also known as Medicare Part C.
The plans offer an alternative to original Medicare, combining the benefits of parts A and B and, usually, Part D. Many plans also offer coverage for wellness programs and vision, dental, and hearing care.
There are four main types of Medicare Advantage plans, some of which have strict healthcare provider network rules.
Following a new ruling, as of January 2021, people with end stage renal disease (ESRD) can choose to enroll in either an original Medicare or a Medicare Advantage plan. Prior to this date, these individuals were rarely able to enroll in a Medicare Advantage plan.
The table below shows the differences between the two different Medicare options.
| Original Medicare | Medicare Advantage | |
|---|---|---|
| Costs | Standard charges for Part A and Part B costs, including a monthly Part B premium. After paying the Part B deductible, a person will pay a 20% coinsurance for covered services with participating providers. | Costs vary depending on the specific plan. Possible copayment for in-network care. Plans may charge a monthly premium besides the Part B premium, which is still payable to Medicare. |
| Supplemental insurance (Medigap) | Can pay an additional premium for Medigap to cover some out-of-pocket Medicare costs. | Not available. |
| Prescription drug coverage | Limited prescription drug coverage in certain situations. | Yes, with most plans. |
| Provider access | Able to choose any provider who accepts Medicare. Do not need a doctor’s referral to see a specialist. | Some Medicare Advantage plans require individuals to use only in-network doctors and healthcare providers. May need a referral to see a specialist. |
| Extra benefits (e.g., vision, hearing, dental, etc.) | No extra benefits. | Yes, with many plans. |
| Covered services for travel anywhere in the United States | Yes. | Not all plans provide out-of-state coverage. A person can check with their plan provider for confirmation. |
| Out-of-pocket costs | Yes. | Generally, yes. |
| Deductibles | Yes. | With some plans. |
| Coinsurance and copayments | Generally, yes. | Generally, yes. |
| Premiums | Most people are eligible for premium-free Part A. Most people pay a Part B monthly premium. | Premiums vary but start at $0. People must also pay the Medicare Part B monthly premium directly to Medicare, not the plan provider. |
| Maximum out-of-pocket spending limit | No. | Yes. Plans pay full, eligible care costs after the insured person reaches a specified limit. |
Medicare premiums vary in cost depending on an individual’s circumstances.
Premium-free Part A
If a person or their spouse paid Medicare taxes for 40 quarters while in employment, they typically do not pay a premium for Part A. Medicare refers to this as premium-free Part A.
Part A
If someone has to buy Part A coverage in 2021, they will pay up to $471 every month if they paid Medicare taxes for fewer than 30 quarters.
Those who paid Medicare taxes for 30–39 quarters pay a 2021 monthly premium of $259.
Part B
Medicare bases this premium on a person’s income from the previous 2 years.
The standard Part B premium in 2021 is $148.50 each month.
Part D
People wishing to include coverage for prescription medication may opt for a Part D plan, also known as a prescription drug plan. The monthly premiums for these plans vary. As with Medicare Advantage plans, private insurers administer Part D plans.
The national base premium in 2021 is $33.06, which is 1% higher than the 2020 premium.
Medicare Advantage
Medicare Advantage premiums vary depending on the selected plan.
Some insurance companies offer zero-premium plans with higher out-of-pocket expenses. However, the KFF notes that among those who did pay a premium, the average Medicare Advantage monthly premium in 2020 was $63.
People can compare Medicare Advantage plans using the find a Medicare plan tool on the government website.
Here we look at some of the most frequently asked questions relating to original Medicare and Medicare Advantage coverage.
Do Medicare Advantage plans replace original Medicare?
It would not be accurate to say that Medicare Advantage replaces original Medicare, but Medicare Advantage plans are an alternative way to receive Medicare health coverage with possible extra benefits.
Medicare rules state that Medicare Advantage plans must offer at least the same benefits as original Medicare. However, as private medical insurance companies administer the plans, they have the freedom to provide additional benefits that original Medicare does not offer.
With Medicare Advantage, an individual still pays Medicare directly for their original Medicare premiums, but they may also have to pay a separate premium to the plan provider.
How do I know whether I have original Medicare or Medicare Advantage?
An individual can check their plan documentation, including their membership card, to confirm whether they have original Medicare or Medicare Advantage.
Alternatively, they can access their policy information online at mymedicare.gov. Once an individual has logged in, their plan name displays, along with their enrollment status information.
Another option is to contact Medicare at 800-633-4227. A customer service representative can provide the person with their plan information.
Which is right for me?
A Medicare plan that suits one person may not meet the needs of another person. The best plan for a person will depend on various factors and circumstances, including medical needs, finances, and location.
It is important that individuals carefully assess each plan and find the one that offers them the best healthcare coverage for their situation.
The State Health Insurance Assistance Programs (SHIP) National Network offers free and impartial advice to those who wish to discuss their health insurance plan options, including Medicare, in more detail.
Private insurance companies administer Medicare Advantage plans as another option for people who receive Medicare benefits.
People with a Medicare Advantage plan still receive their original Medicare benefits.
Some people find that one option provides more significant cost savings than the other. The pros and cons of the different plans depend on an individual’s circumstances and location.
Independent advice is available through a person’s local SHIP center.