Medicare vs. Medicare Advantage: Which Should I Choose?
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When it’s time to sign up for Medicare, one of the first and most substantial decisions you face is whether to choose Original Medicare or Medicare Advantage. In 2022, 45% of Medicare beneficiaries have a Medicare Advantage plan, according to data from The Chartis Group. The decision will depend on several factors, including where you live, your current and potential health care needs and your financial situation.
Both options provide coverage for your major medical needs. But your out-of-pocket costs and choices for doctors and hospitals will depend on the program you choose.
Original Medicare vs. Medicare Advantage: Overview
To better understand how to approach this choice, here’s some information on how these different programs work.
Medicare is government health insurance coverage provided to people age 65 and older and younger people living with certain disabilities. Original Medicare includes two parts: Part A and Part B, which cover different aspects of your health care:
Part A is hospital insurance, covering things like inpatient hospital care, skilled nursing facility care, hospice care and some home health care.
Part B is medical insurance, covering things like doctor’s visits, preventive services and durable medical equipment.
If you opt for Original Medicare, you can see any medical provider or use any medical facility in the country that accepts Medicare.
Medicare Supplement Insurance
There’s also Medicare Supplement Insurance, or Medigap, which is additional insurance you can buy from private health insurance companies to cover certain deductibles, copays and coinsurance that Medicare doesn’t cover. Because Medicare has no out-of-pocket spending cap for Parts A and B, experts recommend buying a Medigap plan if you opt for Original Medicare.
You can purchase a Medigap plan during the six-month period that starts once you’ve turned 65 and have enrolled in Medicare Part B. During that time, your health and medical history can’t be factored into insurers’ pricing or coverage decisions. Afterward, unless you live in one of four states with different rules (Connecticut, Massachusetts, Maine and New York), insurers can charge you more or deny you coverage based on your health status or medical history.
In other words, if you choose a Medicare Advantage plan, you may not be able to switch back later to Original Medicare with a Medigap plan.
“It doesn’t mean you can’t switch, and I’ve had people be able to switch,” says Katy Votava, who holds a doctorate in health economics and nursing and is president and founder of Goodcare — a consulting firm focused on the economics of Medicare. “But it’s certainly not guaranteed, and in many parts of the country it would be impossible.”
Medicare Advantage — also called Medicare Part C — is a bundled alternative to Original Medicare sold by private health insurance companies that includes Medicare Part A and Part B and often additional benefits, which may include some coverage for dental and vision care. Most Medicare Advantage plans also include Part D prescription drug benefits. Many plans have no premium; however, you’ll still be responsible for paying your Part B monthly premiums, unless you sign up for a Medicare Advantage plan with a Part B give back benefit, which covers part or all of your Part B premium.
Medicare Advantage plans work like traditional health insurance plans you may have gotten through an employer, in which there’s a network of providers and you must stay within the network to have your care covered. You’ll typically pay for care as you seek it, in the form of a deductible, copays and coinsurance. If you’re healthy with no significant medical needs, you might spend very little on a Medicare Advantage plan. If you have a serious condition, the out-of-pocket costs can add up. Although these plans are required to have an out-of-pocket cap on spending, it can be as high as $8,300 in 2023.
Medicare Advantage networks and coverage can change year to year. It’s important to understand that if you have a serious health issue, you may not have access to the specialists you prefer if they’re out-of-network.
“The insurance carrier is in charge, and they get to decide what’s medically necessary or not, instead of the government,” says Scott Schwalich, a certified financial planner in Centerville, Ohio. “The insurance carrier is a little more profit conscious, and they’re a little bit more stringent on what is medically necessary in some situations.”
Original Medicare vs. Medicare Advantage: Coverage features
Unlimited network of providers
Preauthorization required for specialized care
Ability to purchase a Medigap plan
Ability to move/travel and keep your plan
Possibly, if the Medicare Advantage plan allows.
Extra benefits like some coverage for dental, vision and hearing care
Cap on out-of-pocket costs
No cap, but a Medigap plan covers certain out-of-pocket costs.
Original Medicare vs. Medicare Advantage: Cost
Your overall costs for Original Medicare or Medicare Advantage depend on how often you seek medical care and whether you have (or can purchase) a Medigap plan.
Monthly base costs
Part A premium: Typically $0.
Part B premium: Starts at $164.90 per month in 2023.
Part D premium: Varies by plan; average is $31.50 per month in 2023.
Part A premium: Typically $0.
Part B premium: Starts at $164.90 per month in 2023.
Premium for the Medicare Advantage plan: Varies by plan, may be $0. Part D coverage is usually included in the plan.
If you seek medical care
You’ll be responsible for deductibles and coinsurance for Medicare Part A and Part B.
You’ll be responsible for deductibles, copays and coinsurance as described by the plan.
You can buy a Medigap plan that will cover certain Part A and Part B out-of-pocket costs. Average cost: Varies by plan.
There’s no out-of-pocket max for Original Medicare. However, if you have a Medigap plan, you’ll be covered for certain out-of-pocket expenses.
Up to $8,300 in 2023.
How to choose between Original Medicare and Medicare Advantage
The choice between Original Medicare and Medicare Advantage should take into account your financial situation and your health status now and what it might be in the future, plus how much flexibility you want in your medical providers.
Consider Original Medicare if you:
Want provider flexibility. With Original Medicare, you can see any medical provider or visit any facility in the country that accepts Medicare. “With a Medicare Advantage plan, you have to use the network that is provided by your insurance,” says Carolyn McClanahan, a physician-turned-CFP in Jacksonville, Florida. “Let’s say you get cancer, and you want to go to [Memorial] Sloan Kettering [Cancer Center]. If they’re not in your network, you can’t go there.”
Are a frequent health care user. If you have a chronic health condition or otherwise seek regular health care, you have more choices for care on Original Medicare. You also have the option to purchase a Medigap plan, which will cover certain deductibles, copays and coinsurance for treatment under Medicare Part A and Part B. Once you pass your initial Medigap open enrollment window, it can be difficult — if not impossible — to get a Medigap plan later.
Can afford a Medicare Supplement Insurance plan. Original Medicare has no cap on out-of-pocket costs, meaning if you need significant care, you could be on the hook for thousands of dollars in deductibles, copays and coinsurance. Medigap plans cover certain out-of-pocket costs.
Plan to spend your retirement traveling. Medicare Advantage plans typically require that you use care providers within a geographic service area, and once you get outside that area, you’ll be covered for emergency care only. Original Medicare offers access to a national network of providers — no matter where you are in the U.S.
Like to minimize risk. Although Medicare Advantage can work for many people, there’s the possibility of developing a serious medical issue later. People often want to seek care from the best specialists — who may not be in their plan’s network — or are surprised by the high costs of their copays and coinsurance. "For most people, if it's financially affordable, I'm always in favor of Original Medicare with a Supplement,” Schwalich says. “I've seen too many scenarios where, later, people would do anything to go back in time and enroll in a Supplement, but they're stuck."
Consider Medicare Advantage if you:
Live in an area with a broad network. If there are Medicare Advantage plans in your area with a wide network of providers, including a few top-notch hospitals, you’ll have more options when it comes to your health care decisions. “There are areas where they can work very well,” Votava says.
Can’t afford a Medicare Supplement Insurance plan. If you can’t afford the out-of-pocket costs for a Medigap plan, Medicare Advantage offers many $0-premium plans. But you’ll still be responsible for any deductibles, copays and coinsurance that are required if you seek medical care — up to the out-of-pocket maximum of the plan — which could be as high as $8,300 in 2023. You’re also still responsible for your Medicare Part B premiums. If you have expensive medical needs, paying a monthly Medigap premium will often be more affordable.
Don’t mind getting referrals. Medicare Advantage plans often limit you to the providers within their network. If you’re allowed to go out-of-network, you’ll likely need preauthorization and your care will usually be more expensive.
Choosing your Medicare coverage is a big decision, and if you’re feeling overwhelmed, a financial planner or Medicare consultant can help guide you.
“So many people think Medicare is one-size-fits-all, and it’s completely individualized,” says Kari Vogt, a CFP and licensed insurance agent in Columbia, Missouri. “What can you afford on a month-to-month basis? Are you someone who doesn’t want to worry about getting a referral? It’s just about being properly educated on how things function.”