When a person reaches 65 years of age or experiences a qualifying medical event, they can sign up for Medicare. However, Medicare is not a one-size-fits-all health plan. There are several parts to original Medicare, as well as a combined option called Medicare Advantage, or Medicare Part C.
When a person approaches the age at which they can sign up for Medicare, they may need to look into which plan will suit them and their needs best.
Making the right decision on which plan and packages to adopt can help a person take stress and expenses out of future medical treatment.
This article will compare the costs and coverage levels associated with both Medicare and Medicare Advantage.
Traditional Medicare and Medicare Advantage have dramatically different costs. This is because the plans have different philosophies and support people with varying levels of medical need.
Medicare plans cost more, as they tend to cover more services. As a result, a person may have fewer out-of-pocket costs if they become ill and need more frequent care. A person pays a higher premium to avoid having to pay expenses later.
Medicare Advantage, on the other hand, has a lower premium but higher out-of-pocket costs. Some plans even require a person to pay only the Medicare Part B premium and $0 for prescription drug coverage.
This plan may be more suitable for a person who does not often use healthcare services. Having to pay more out-of-pocket costs can be a disadvantage if a person requires regular medical supervision or treatment that their plan does not fully cover, such as imaging, transportation, or home care.
However, the cost of Medicare Advantage plans varies by geographical location.
A person can switch from Medicare to a Medicare Advantage plan or vice versa once per year. If they find that a plan is not working well for them, they may be able to choose another Medicare option.
When comparing the costs of Medicare and Medicare Advantage, it is best to consider out-of-pocket costs alongside the monthly premium.
The following chart breaks down some of the basic costs in 2021 for these plans.
|Plan type||Monthly premium|
|Medicare Part A||These plans are free if a person qualifies. Otherwise, it is up to $471 per month.|
|Medicare Part B||These plans cost from $148.50 per month. They may cost more if a person has an income higher than $88,000 per year.|
|Medicare Part D||The cost varies by plan, but the projected 2021 average premium is $42.05, according to the Kaiser Family Foundation (KFF).|
|Medicare Advantage||As with Part D, the cost varies by plan. However, in 2020, the average monthly premium was $25, according to the KFF.|
Some people choose a Medicare Advantage plan because they find that they have fewer out-of-pocket costs, according to Medicare.gov.
Medicare supplement plans help a person cover some of the healthcare expenses that traditional Medicare does not include. Some people also refer to these plans as Medigap.
As with traditional Medicare, the CMS divides Medicare supplement plans by letter. People new to Medicare in 2021 can choose from plans A, B, D, G, K, L, M, and N. Not all insurers offer the same plans in all areas of the country, however.
Plans in Wisconsin, Minnesota, and Massachusetts are also different from the traditional Medigap plans.
Medicare supplement plans can help cover several costs, including:
- copayments for parts A and B
- up to 3 pints of donated blood
- coinsurance for skilled nursing facilities
- yearly out-of-pocket expenses
People with concerns about steep out-of-pocket expenses may choose a Medigap plan. As a general rule, a person cannot have a Medicare Advantage plan and a Medigap plan at the same time.
Medicare is a federal health insurance program for people aged 65 years and older, as well as people with certain health conditions and disabilities, such as end stage kidney disease.
When federal government employees designed Medicare, they split it into several separate parts. These parts cover different aspects of medical care and include:
- Part A: Medicare Part A provides hospital coverage, including a hospital stay, hospice care, and necessary care in a skilled nursing facility.
- Part B: Medicare Part B covers doctors’ visits, outpatient services, medical supplies, and preventive medical care.
- Part D: Medicare Part D accounts for prescription drug coverage. A person can select a Medicare Part D plan according to the prescriptions they currently take and the copayment with which they are comfortable.
If a person or their spouse paid Medicare taxes for 30 quarters of work, they would receive Medicare Part A at a discounted rate when they reach 65 years of age. If they paid the same tax for 40 quarters, they would get Part A for free. Some exceptions apply to this, and some people may qualify earlier, such as younger people with specific disabilities.
A person can also choose to pay a monthly premium for Medicare Part A if they do not qualify for the free plan.
Medicare Part B is available for a standard cost that only varies for people with a high income. Medicare Part D costs may differ depending on which plan a person selects and how much they earn.
Medicare Advantage is another name for Medicare Part C. This incorporates parts A, B, and D, alongside some additional services, such as dental, hearing, and vision coverage.
There are around 3,550 available Medicare Advantage plans, according to the KFF, and although the sections below describe the most common types of Medicare Advantage plan, many others are available.
However, it is important to note that the availability of Medicare Advantage plans can vary by geographical area. For example, there are no Medicare Advantage plans in Alaska.
According to the KFF, in 2021, Florida, and California, will have up to 41 additional plans available, compared with 2020. Other areas of the country may see decreases in plan availability.
Medicare Advantage plans usually fall into different categories, including:
Health maintenance organization
A person typically chooses from a list of preferred providers that they must visit for the plan to cover healthcare costs.
Most health maintenance organization (HMO) plans require a primary care doctor to coordinate a person’s care. This means that they must usually refer a person to a specialist before the insurance covers the healthcare costs.
In 2021, an estimated 62% of people with Medicare Advantage plans have an HMO plan, according to the KFF.
Preferred provider organization
A preferred provider organization (PPO) plan covers some or all costs from a set network of healthcare providers.
A person does not usually require a doctor’s referral to see a specialist under these plans, and they typically have a more extensive network of providers to choose from than with an HMO plan. However, PPO plans are usually more expensive than HMO plans.
This plan allows a person to seek care at a provider and pay a fixed amount, upon which the insurance company has already agreed.
Unlike HMOs and PPOs, a person does not have to receive referrals or select a primary care doctor. However, bear in mind that not all doctors who accept Medicare will also accept a private fee-for-service plan.
Special needs plans
A special needs plan is a Medicare plan that supports people with a chronic health condition and other specific needs. Examples of these conditions may include diabetes, end stage renal disease, HIV, and chronic heart failure.
Because people with these conditions often have complex health needs, these plans can account for considerations such as medications and other necessary services.
Around 24 million of all Medicare beneficiaries enrolled in Medicare Advantage plans, according to the KFF.
People should always weigh up the costs and coverage levels when selecting a plan that best suits their needs. Neither Medicare nor Medicare Advantage is better, but one may be more suitable than the other for people in specific financial or medical circumstances.
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