You might breathe a sigh of relief at the prospect of having low-premium (or even free) government health insurance as you near age 65, or once you qualify for Medicare. Unfortunately, that may not be the case. And choosing between Medicare and Medicare Advantage (MA) can be a confusing process, because each has its pros and cons.
According to the Kaiser Family Foundation, 42% of Medicare enrollees chose a Medicare Advantage plan in 2021. 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 $170.10 in 2022, up from $148.50 in 2021.
Original Medicare does not require that you use a provider network, such as a PPO or an HMO. You can go to any provider who accepts Medicare, and you generally don't need a referral to see a specialist.
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 $4,430 in 2022, up from $4,130 in 2021, your drug costs may increase. You’ll generally pay no more than 25% for prescription drugs, however.
Once spending has reached $7,050 in 2022, you enter the "catastrophic coverage" phase and your costs reduce to 5% or a small copay.
Drug coverage through a Medicare Advantage plan may be better than Part D drug coverage during the coverage gap phase or Medicare "donut hole."
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.
You must be enrolled in both Part A and Part B in order to purchase a Medicare Advantage plan.
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:
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?
Enter each drug using the Medicare Plan Finder tool at Medicare.gov to find MA plans that cover the specific prescription drugs you take.
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.
|Original Medicare||Medicare Advantage|
|Preventative Care||Yes; learn more about Medicare preventative care.||Yes|
|When and How to Enroll||You can sign up for Medicare during your initial enrollment period, general enrollment, or a special enrollment period.||You can enroll during your initial enrollment period, open enrollment, general enrollment, or a special enrollment period.|
|Dental Benefits||No||Yes, with many plans.|
|Vision Care (Eye Exams or Glasses Benefits)||No||Yes, with many plans.|
|Extra Benefits||No||May include routine hearing checks, fitness benefits, and other perks.|
|Prescription Drug Coverage||No, but available through Medicare Part D.||Yes, with many plans.|
|Choice of Medical Providers||You can use any provider who accepts Medicare.||You may be limited to a network or have higher out-of-pocket costs for out-of-network providers.|
|Access to Specialists||Yes, without a referral.||You need a referral before you can see a specialist with some plans.|
|Out-of-Pocket Maximum||No, but out-of-pocket limits are available with some Medigap plans.||Yes: $7,550 in-network, $11,300 combined in- and out-of-network|
Original Medicare has no out-of-pocket maximum. You could be vulnerable to large medical expenses if you end up needing a lot of care. But Medicare Advantage’s maximum out-of-pocket spending for 2022 is $7,550 for in-network and $11,300 combined for in- and out-of-network costs. Many MA plans offer lower out-of-pocket limits.
Medicare Advantage and Part D Premium Costs
The average premium for Medicare Advantage Plans is $19 per month in 2022. This is down from $21.22 from 2021. 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). Many MA plans have a $0 premium, however.
The average 2022 monthly premium for Part D is $33 if you're considering sticking with Original Medicare instead of getting an MA plan, but you want drug coverage. This is up from $31.47 in 2021. 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.
Try the Medicare Eligibility and Premium Calculator if you would like to check how much your Medicare premium would be and if you qualify for various Medicare plans.
HMO or PPO When Choosing MA Plans?
Consider that HMO plans generally have lower in-network out-of-pocket costs ($4,566, on average) compared to in-network PPO plans ($5,873 to $6,707, 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.
Kaiser Family Foundation. "Medicare Advantage in 2021: Enrollment Update and Key Trends."
Centers for Medicare & Medicaid Services. "Understanding Medicare Advantage Plans," Page 13.
Centers for Medicare & Medicaid Services. "What Part B Covers."
Centers for Medicare & Medicaid Services. “2022 Medicare Parts A & B Premiums and Deductibles/2022 Medicare Part D Income-Related Monthly Adjustment Amounts.”
Centers for Medicare and Medicaid Services. "Medicare Program—General Information."
Centers for Medicare & Medicaid Services. "Costs In the Coverage Gap."
Centers for Medicare & Medicaid Services. “Copayment/Coinsurance in Drug Plans.”
Delaware Department of Human Resources. "Your Medicare Prescription Drug Coverage," Page 67.
Centers for Medicare and Medicaid Services. "Medicare Advantage Plans."
Louisiana Department of Insurance. "2022 Medicare Advantage Plans Ascension Parish," Pages 1-2.
Centers for Medicare & Medicaid Services and the Department of Health and Human Services. "Medicare Program; Contract Year 2023 Policy and Technical Changes to the Medicare Advantage and Medicare Prescription Drug Benefit Programs."
Centers for Medicare & Medicaid Services. "CMS Releases 2022 Premiums and Cost-Sharing Information for Medicare Advantage and Prescription Drug Plans."
Centers for Medicare & Medicaid Services. "Costs for Medicare Advantage Plans."
Kaiser Family Foundation. "Medicare Advantage in 2021: Premiums, Cost Sharing, Out-of-Pocket Limits and Supplemental Benefits."