Medicare and private insurance differ in several important ways when it comes to provider networks, premiums, and out-of-pocket costs. This article explores the key differences between Medicare and commercial insurance to consider when deciding on coverage.
Medicare Overview
Medicare is the federal health insurance program primarily for Americans 65 and older. Some younger Americans with disabilities also qualify for Medicare.
The program has several parts:
Medicare Part A covers home health services, hospice care, skilled nursing facility care, and hospital stays. There is no monthly premium for Part A.
Medicare Part B covers doctor visits, preventive care, durable medical equipment, and more. For Part B, most pay a monthly premium.
Medicare Part C (Medicare Advantage) plans are offered by commercial insurers to combine Parts A and B coverage, often with prescription drug coverage. These plans have monthly premiums.
Medicare Part D provides prescription drug coverage.
These plans often change, making verifying Medicare coverage essential to ensure seamless care from the provider's perspective.
Commercial Insurance Overview
Medicare Advantage, sometimes referred to as Medicare Part C, is a commercial insurance alternative to Original Medicare. These plans are offered by private insurance companies approved by Medicare and often operate as HMOs or PPOs. They combine the benefits of Medicare Parts A and B and frequently include additional coverage, such as vision, dental, hearing, and prescription drugs.
Some key things to know:
Plan Design and Administration. Medicare Advantage plans are administered by private insurers but approved and regulated by Medicare. Sometimes, they combine Parts A, B, and D into a single plan, with additional benefits like vision and dental. If you're considering changes to your Medicare coverage, such as learning how to disenroll from Medicare Part A, it’s important to understand the implications on your benefits. Commercial insurance plans are designed independently and may not align with Medicare’s regulations.
Cost Structures: Medicare Advantage plans typically offer competitive premium rates, sometimes as low as $0 (excluding the Part B premium).
Networks: Unlike Original Medicare, which allows access to any provider accepting Medicare, Medicare Advantage plans typically require enrollees to use a defined network of doctors, hospitals, and other providers. HMOs mandate in-network care (except for emergencies), while PPOs allow some out-of-network services at a higher cost.
Key Differences: Original Medicare vs. Medicare Advantage
When choosing between Original Medicare and Medicare Advantage, there are key differences to consider in terms of costs, coverage, provider choice, and more.
Coverage Differences
Original Medicare (Part A and B) covers medically-necessary hospital and medical services and supplies. It does not cover most prescription drugs, routine vision, dental, or hearing care.
Medicare Advantage plans cover everything Original Medicare covers. Most plans offer extra benefits like dental, vision, and hearing coverage, but benefits vary by plan. Most Medicare Advantage plans include prescription drug coverage.
Cost Differences
The out-of-pocket costs may be different under Original Medicare vs. Medicare Advantage.
Typical Original Medicare Costs:
Part B premium
Part A and Part B deductibles
20% coinsurance for most Part B services
Hospital copays for lengthy inpatient hospital stays
No annual out-of-pocket spending limit
Typical Medicare Advantage Costs:
Part B premium
Low or $0 plan premium - varies by plan
Copays for hospital & medical services - the amount varies by plan
Out-of-pocket annual limit protects you from high medical costs
So with Original Medicare, while premiums may be lower, the patient could end up paying more throughout the year for medical services because there is no limit. Medicare Advantage provides financial protection lacking in Original Medicare.
Provider Network Differences
With Original Medicare, a patient can see any doctor or hospital in the U.S. that accepts Medicare. Need to see a specialist or get care when traveling? No problem.
Medicare Advantage plans typically require to use of doctors and facilities in the plan’s network within a service area, except for emergency and urgent care. Seeing out-of-network providers will cost more.
However, many Medicare Advantage plans offer out-of-network coverage for certain services, and some plans provide worldwide emergency coverage.
Enrollment Eligibility Differences
Anyone eligible for Medicare Part A and enrolled in Part B can join any Medicare Advantage plan offered in their area, provided they live there.
Which is Better - Original Medicare or Medicare Advantage?
There is no one “best” option. It depends on the personal situation and preferences of the patient. Key factors in deciding between the two include:
Premium costs + out-of-pocket spending limits
Network size + provider access flexibility
Prescription drug coverage needs
Desired extra benefits like dental or vision
Travel frequency within the U.S. or abroad
Tips for Choosing Between Options For Patients
Make sure the doctors are in-network with any Medicare Advantage plan you’re considering. That makes getting care easier.
Look closely at premiums AND estimated out-of-pocket costs. Medicare Advantage offers a cap on how much you’ll pay.
Compare prescription drug coverage on Medicare Advantage plans to see if it meets medication needs.
Think about extras like dental or vision coverage that may help fill gaps in Original Medicare.
Consider if you want nationwide access to providers or are comfortable using an in-network doctor and hospital system.
Changing Between Original Medicare and Medicare Advantage
What if the patient is enrolled in Medicare Advantage but later decides he or she would prefer Original Medicare or vice versa? There are several options options. Here are key times patients can switch your coverage:
During the Annual Enrollment Period from October 15 to December 7 each year, you can enroll in, switch or drop a Medicare Advantage plan or switch to Original Medicare for the following year.
From January 1 to March 31 each year, you can enroll in a Medicare Advantage plan or disenroll and switch back to Original Medicare. This applies to those enrolled in a Medicare Advantage plan.
It’s important to understand special enrollment period rules for certain qualifying events like moving or losing other coverage that may allow changes outside these periods.
Conclusion
While both Original Medicare and Medicare Advantage plans cover hospital and medical services, there are trade-offs to each option. Medicare Advantage offers more benefits but less flexibility, while Original Medicare offers open access but higher out-of-pocket costs.
