Medicare vs. Medicare Advantage: How to Choose

·6 min read

Decoding Medicare health insurance plan options can be daunting for Medicare beneficiaries. Medicare is available for people ages 65 or older, younger people with disabilities, people with Lou Gehrig's disease (also called amyotrophic lateral sclerosis, or ALS) and people with end-stage renal disease (permanent kidney failure requiring dialysis or transplant).

Original Medicare comes in two parts: Part A and Part B. Part A covers a portion of hospitalization expenses, and Part B applies to doctor bills and other medical expenses, such as lab tests and some preventive screenings.

But some individuals may find better value in Medicare Advantage plans. Such plans are run by private insurance companies regulated by the government, and they must offer coverage that's comparable to Original Medicare parts A and B. Most Medicare Advantage plans also include prescription drug coverage, called Part D, which is also available to beneficiaries who keep Original Medicare. With Original Medicare, patients are able to see any provider in the country that accepts Medicare with no restrictions.

[Read: Medicare Fall Open Enrollment: What You Need to Know.]

Medicare Advantage Plans

Some Medicare Advantage plans have a $0 monthly premium, while others come with a higher monthly premium. You must continue to pay your Part B premium, which is $148.50 per month for most beneficiaries in 2021. Medicare Advantage plans are similar to individual health insurance policies you may have received through your employer or signed up for on your own through the individual insurance market, in that they have different monthly premiums, provider networks, copays, coinsurance and out-of-pocket limits. The trade-off for a lower plan premium (or $0 premium) could include higher copays or coinsurance, smaller provider networks, more restrictions on use of services, higher out-of-pocket limits or less generous coverage of prescription drugs.

Whether or not a Medicare Advantage plan costs more, it could be more beneficial or less beneficial for you than Original Medicare. Consumers have to carefully review the details of each plan and make a clear-eyed appraisal of their circumstances, including their health, budget and tolerance for financial risk.

[READ: What Is a Health Savings Account?]

The Pros and Cons of Original Medicare vs. Medicare Advantage if ...

-- You take prescription drugs. As stated, Original Medicare doesn't cover prescriptions unless you enroll in stand-alone Prescription Drug Plan (PDP) Medicare. (The monthly cost of Part D ranged from $0 to $77.10 per month, based on annual income, in 2021.) About 86% of Medicare Advantage plans include prescription drug coverage, according to the Kaiser Family Foundation, a nonprofit, nonpartisan research institute. In some cases your monthly premium will exceed the amount you'd pay for Medicare Part D. However, you aren't able to choose a separate drug plan to go with your Medicare Advantage plan. If you take multiple prescription drugs, you may find a PDP that covers all of your drugs at your preferred pharmacy, whereas with a Medicare Advantage plan, your drug coverage includes whatever that plan offers without a separate choice. The federal government and licensed insurance brokers like have online tools where you can check how much you'll pay for the medications you need. (U.S. News has a revenue-generating agreement with eHealthInsurance, which owns

-- You want a cap on your out-of-pocket health spending. Original Medicare has no out-of-pocket maximum. You keep paying a portion of the cost of services as you use them. Medicare Advantage plans, by law, have an out-of-pocket limit. The average out-of-pocket limit for Medicare Advantage enrollees is $5,091 for in-network services and $9,208 for both in-network and out-of-network services (PPOs). Once you hit that limit, the plan pays for all covered expenses. Many people with Original Medicare opt to purchase a Medigap policy to help minimize out-of-pocket liability.

-- You want an alternative to enhancing your Medicare coverage with private "Medigap" (Medicare Supplement) insurance. Similar to capping your out-of-pocket health spending, Medigap plans cover or help cover certain deductibles, coinsurance and out-of-pocket costs of Original Medicare. Some Medicare Advantage plans, but certainly not all, will be more cost-effective than adding Medigap coverage to Original Medicare. Scrutinize the plan details if this is your reason for considering Medicare Advantage. In most states, you don't have guaranteed issue rights to Medigap outside of your initial Medicare enrollment period. If you enroll in Medicare Advantage, you may not be able to purchase a Medigap policy if you decide to move to Original Medicare later on for a larger provider network or increased access to prescription drugs not covered by your initial plan.

-- You want an alternative to the 20% coinsurance charged by Original Medicare for most services. Medicare Advantage plans structure costs differently and have an out-of-pocket maximum, which limits how much you're required to spend on your medical care each year. However, many Medicare Advantage plans charge 20% coinsurance meaning it may not be the best alternative.

-- You want coverage for vision and dental. Original Medicare doesn't cover these services. Certain Medicare Advantage plans do offer some coverage of these benefits, typically including preventive dental with some cost-sharing and possibly additional premiums.

-- You want the broadest possible choice in doctors and other medical providers. More providers accept Original Medicare than private Medicare Advantage insurance. With Original Medicare, you can see any provider in the U.S. accepting Medicare and almost all providers accept it. Private insurance plans tend to be restricted to a specific network, like a Health Maintenance Organization network. If you travel frequently, you may want to consider staying with Original Medicare for this reason.

-- You want maximum flexibility when seeking medical specialists. Under Original Medicare, you don't need prior authorization from a primary care doctor to see a specialist who is enrolled in Medicare and accepting new Medicare patients, whereas Medicare Advantage plans that are designated HMOs could require you to see a primary care doctor first. Preferred Provider Organization plans may allow you to see a specialist without a referral, but seeing an out-of-network doctor or specialist would cost you more. Most Medicare Advantage plans are either HMOs or PPOs.

-- You're still employed and covered by your employer. You might end up paying an unnecessary premium for Medicare Advantage or could lose your employer-provided coverage. Check with your human resources department and the Social Security Administration for specifics.

-- You have employer-sponsored retiree health benefits that supplement Original Medicare. These benefits wouldn't apply if you switch to Medicare Advantage, so check with your human resources department before signing up for a Medicare Advantage plan.

-- You qualify for Medicaid or a Medicare Savings Program. Low-income Medicare beneficiaries have other options and should contact their state Medicaid office.

[Read: Medicare vs. Medicaid: What Is the Difference?]

Enrolling in Medicare Advantage

If you decide to sign up for a Medicare Advantage plan, you may enroll between Oct. 15 and Dec. 7 -- the period known as Medicare Annual Election Period -- in order for your coverage to start the first of the following year. (Original Medicare has separate enrollment periods for beneficiaries who aren't automatically enrolled.) Because of government regulation, Medicare Advantage premiums are not influenced by age, health status or the method by which a consumer signs up (through a licensed insurance agent, for example, or directly through an insurer). Monthly cost -- and plan availability -- varies from county to county.