According to the Kaiser Family Foundation, 48% of Medicare enrollees chose a Medicare Advantage plan in 2022. So what makes one Medicare plan better than another and how do you choose?
Understanding Medicare Coverage Basics: Medicare and Medicare Advantage
It’s helpful to understand the basics before we compare the options between Medicare and Medicare Advantage.
When To Enroll
Basic or Original Medicare is available to people age 65 and older or, in some cases, to younger people with certain disabilities. Medicare provides an online tool to help you figure out if you’re eligible. You may be automatically enrolled in both Parts A and B if you’re receiving Social Security benefits four months before you turn 65. Otherwise, you can enroll during your initial enrollment period which begins three months before the month when you turn 65 and ends three months after. You may be eligible for a special enrollment period if you miss this window, or you may have to enroll during the Medicare general enrollment period, which runs from Jan. 1 to March 31 each year.
Original Medicare and Part D
Original or basic Medicare is government run and has two parts: Part A and Part B. Part A covers hospital expenses and often does not have a charge associated with coverage. Part B charges a premium and covers medically necessary services, such as doctor visits, lab screenings, and preventative services. The monthly premium is $164.90 in 2023, down from $170.10 in 2022. Parts A and B don’t cover any prescription drugs you take at home. You would have to add a Medicare Part D prescription drug plan to get prescription drug coverage, or purchase a Medicare Advantage plan with prescription drug coverage. It’s important to note the infamous Medicare “donut hole,” or coverage gap, in Part D prescription drug coverage. The coverage gap officially closed in 2020, but once you and your Part D plan have spent $4,660 in 2023, up from $4,430 in 2022, your drug costs may increase. You’ll generally pay no more than 25% for prescription drugs, however. Once spending has reached $7,400 in 2023, you enter the “catastrophic coverage” phase and your costs reduce to 5% or a small copay.
Medicare Advantage
Medicare Advantage plans, also known as Medicare Part C, are run by private insurance companies and are regulated by the government. They’re essentially a way to receive your Part A and B benefits and they must therefore include coverage similar to Parts A and B. Most Medicare Advantage plans also cover prescription drugs, which eliminates the need to get a separate Part D drug plan. And many provide additional perks that aren’t available with Original Medicare, such as vision, hearing, and dental benefits. But private insurance companies operate Medicare Advantage plans, so they often use a health insurance provider network, such as an HMO or PPO. This could limit where and how you get your medical care.
How To Choose the Right Medicare Advantage Plan
You can choose to enroll in a Medicare Advantage plan if you’re not satisfied with what Original Medicare offers. Medicare Advantage plans can add coverage, and some even pay for a portion of your Part B premium. But you may be limited to network providers, depending on the plan. Consider your preferences and needs when deciding which to choose.
Questions To Ask
Start by comparing plans with the Medicare’s Plan Finder to figure out whether you should get a Medicare Advantage plan in addition to Parts A and B. Consider the following:
Monthly premiums Copay, coinsurance, and deductibles Out-of-pocket limits Provider networks
Ask a few more questions to determine the coverage you need and how out-of-pocket costs could affect you between different plan types.
Do you regularly use prescription drugs? Do you visit the doctor more (or less) frequently? Do you need health insurance when you travel out of state?
Medicare and Medicare Advantage Comparison Table
One of the biggest advantages of Original Medicare over Medicare Advantage is the freedom to access doctors and medical providers without network limitations. Each plan has its pros and cons depending on your needs.
Medicare Advantage and Part D Premium Costs
The average premium for Medicare Advantage Plans is $18 per month in 2023. This is down from $19.52 in 2022. You’re required to have both Parts A and B to enroll in a Medicare Advantage plan, so your MA premium is in addition to what you pay for Original Medicare (Parts A and B). The average 2023 monthly premium for Part D is $31.50 if you’re considering sticking with Original Medicare instead of getting an MA plan, but you want drug coverage. This is down from $32.08 in 2022. You would pay this amount in addition to your Part A or Part B premium. You’re only required to have Part A or Part B to enroll in a Medicare Part D prescription drug plan.
HMO or PPO When Choosing MA Plans?
Consider that HMO plans generally have lower in-network out-of-pocket costs ($4,972, on average) compared to in-network PPO plans ($5,762 to $6,903, on average) when you’re comparing options for Medicare Advantage plans. That’s more than a $1,000 average difference in out-of-pocket costs!
The Bottom Line
Always look at the big picture when you’re comparing the costs of your health insurance plan. A Medicare Advantage plan may seem more costly than a basic Medicare plan, but you might find that a plan with a higher premium but with a lower out-of-pocket maximum may save you money by the end of the year.
