After you have enrolled in Original Medicare, which consists of two parts – Part A and Part B – you’ll need to decide if you want to continue your coverage under Original Medicare or if you want to extend your healthcare benefits by enrolling in a Medicare Advantage plan.
How are the two plans different? Which one offers more benefits and overall coverage? How much does each of them cost? How do I know which one is right for me?
We’ll answer all these questions in this article. Read on!
An Overview of Original Medicare
When you are enrolled in Original Medicare, you obtain your healthcare benefits directly from the federal government. These benefits are administered in two separate parts, Part A and Part B.
Medicare part A offers coverage for inpatient hospital stays or care in a skilled nursing facility. It will also cover hospice care and some instances of home health care. Medicare Part B offers coverage for outpatient services like doctor visits, radiograph images, and lab tests. It will also provide assistance for durable medical equipment (wheelchairs, hospital beds, home oxygen equipment) and also covers many preventive services.
Most Medicare beneficiaries receive Part A benefits premium-free. As long as you or your spouse has worked for 40 quarters or ten years and paid Medicare taxes during that time, you are eligible for premium-free Part A. If you do not qualify for premium-free Part A, your premium will be based on how many quarters you did pay Medicare taxes.
Part B benefits do come with a monthly premium that is set by the federal government. The government sets a standard premium rate ($148.50 in 2021), but high-income earners will pay a higher premium. (The government uses your adjusted gross income from two years prior to determine which rate you qualify for.) Part B premiums generally increase each year.
Coverage under Medicare Parts A and B is the exact same for everyone enrolled. You will be eligible to enroll upon your 65th birthday, and no one can be denied coverage based on health history or pre-existing conditions. The only way to lose benefits is if an individual stops paying the monthly premiums.
Medicare beneficiaries can choose to see any provider who accepts Medicare assignment. Currently, this includes about 95% of all providers in the United States, an approximate total of 900,000 physicians. There are no networks under Original Medicare, and you will pay the same amount for covered services no matter which doctor you choose to receive care from.
Original Medicare does not cover 100% of your healthcare costs, nor does it offer benefits for outpatient prescription drugs or routine dental, vision, and hearing services. More on that later in this article.
An Overview of Medicare Advantage
The Medicare Advantage program replaces your benefits under Original Medicare. It is often referred to as Medicare Part C. The Medicare program allows private insurance companies to sell Part C plans that bundle the coverage offered in Parts A and B. Instead of obtaining your healthcare benefits from the federal government, you will apply for coverage through one of the approved private insurance carriers. The federal government then issues that company a payment based on its enrollment numbers.
Medicare Advantage plans must offer minimum coverage that is equal to coverage in Medicare Parts A and B. However, these plans also allow for additional benefits not found in Original Medicare. Most Part C plans have benefits for routine dental, vision, and hearing services and also include prescription drug coverage.
There are several types of Medicare Advantage plans, and your coverage will be determined by the type of plan you enroll in, as well as the specifics of that plan. Because plans are not the same across carriers, monthly premiums vary. There are many Medicare Advantage plans that offer premium-free options. However, you will still have to pay the Medicare Part B premium.
To be eligible for a Part C plan, you will need to first be enrolled in Medicare Parts A and B. Your plan choices will then depend on your area of residence.
We’ve talked about premiums for both Medicare Advantage and Original Medicare. Let’s discuss some of the other costs involved in both plans.
As we mentioned, the federal government sets the premiums for Parts A and B. They will also determine the deductibles and coinsurance. A good estimate for out-of-pocket expenses is 20% of the cost of covered services.
Medicare Advantage plan members will still pay the Part B premium. They will also be responsible for any premium set by the specific Part C plan. However, instead of a 20% out-of-pocket expense, these plans typically come with set copays per visit. Another important thing to note is that there are usually limits on out-of-pocket spending in a Medicare Advantage plan. That is not the case in Original Medicare.
There is another big factor when discussing cost differences between these two types of healthcare coverage. Individuals who choose to stay enrolled in Original Medicare often find other policies to supplement their coverage. They usually choose to enroll in a Medicare supplement plan, also called a Medigap plan. These plans are structured to help with the 20% in out-of-pocket costs but do not offer any additional benefits as Medicare Advantage plans do. Because of that, these individuals will need a separate Medicare Part D policy. Medicare Part D covers prescription benefits. They also may consider a Dental, Vision, and Hearing (DVH) policy. Of course, all of these policies have their own premiums and limitations.
While not all-inclusive of everything you should consider, this information should give you a good idea of the major differences between Medicare Advantage and Original Medicare. Call The Medicare Gurus today, and we can help you decide which one is best for you.