With so many healthcare options available in the United States, it can be difficult and confusing choosing the right option for you. In this article, we will explain the differences between Medicare vs. Medicare Advantage.
To start, Medicare Advantage provides a fixed set of options for you whereas Medicare provides you with a “buffet” style choice of options. For example, a 65-year-old has options regarding their health insurance plan/benefits. Options include traditional Medicare, which is federally run, or Medicare Advantage, which is handled through private insurance. Traditional Medicare includes Part A (hospital), Part B (outpatient) and a separate entity Part D (prescription drugs). Medicare Advantage is also known as Part C which includes Part A, B, and almost always D, with extra benefits such as dental, vision, hearing, and sometimes even gym memberships combined into one comprehensive plan.
The number of enrollees to Medicare Advantage has increased greater than that of traditional Medicare. This increase in Medicare Advantage can be due to what they offer compared to traditional Medicare. There are both advantages and disadvantages to both traditional Medicare and Medicare Advantage, ranging from costs, plan offerings, and flexibility of provider options.
Regarding costs, traditional Medicare has a $0 premium for the hospital, but there is a deductible when a patient visits the hospital. There is a low premium when a patient visits their physician, but the patient pays 20% co-insurance for all physician fees, lab, and testing with no out-of-pocket maximum. There is a low or $0 premium for patient’s prescription medications. There are different tiers/ formulary medications under Medicare Part D where the patient must pay a certain amount of copays. Furthermore, there is a period of time during the year when the patient falls in a “donut hole” in which the patient must cover all costs until the prescription drug plan kicks back in. In addition, there is supplement Medicare also known as Medigap plan or Medicare Part G, which is optional. The coverage is through commercial insurance where the individual is buying the additional insurance to help cover costs/expenses from traditional Medicare. It has a low premium and primarily just helps the beneficiary cover the out-of-pocket costs from traditional Medicare. On the other hand, Medicare Advantage (MA) has a low or $0 premium. MA enrollees must still pay an annual Part B premium set by the government premium for the MA plan. Most MA plans have set copay amounts for physician visits (e.g., $10, $20) which means lower out-of-pocket costs than traditional Medicare. MA plans make about $1.6k from each beneficiary.
For physician and hospital reimbursement through traditional Medicare, the price is set by the governmental branch of Centers for Medicaid & Medicare Services (CMS) and there is no negotiation. It is a straight fee for service with no referrals needed. Because most physicians accept traditional Medicare, there are many options the beneficiary may choose from. Some patients favor the flexibility they have in traditional Medicare by having the ability to go to most providers in the United States. For Medicare Advantage, a unit cost of 95-105% of what Medicare will pay for an individual claim would be capitated and value-based payments to physician groups (e.g., devoted) to receive part of the payment the government gives MA plans to essentially keep patients healthy. All MA plans are either a health maintenance organization (HMO) with a primary care gatekeeper or a narrow-network preferred provider organization (PPO) plan with fewer choices in doctors and hospitals than traditional Medicare. Under MA plans, a referral may be required to see a specialist.
How does a patient pick which plan they want to have? A patient needs to go through the advantages and disadvantages of each plan and pick the plan most suitable for them. If a patient travels a lot within the United States, maybe traditional Medicare would be a better choice regarding provider flexibility. If a patient prefers having the extra services such as dental, hearing, and vision, maybe Medicare Advantage would be better. Each patient must reason with which plan they choose.
Switching Medicare coverages is possible, but only during certain time periods of the year. During January 1 to March 31, patients who already have Medicare Advantage can switch to a different Medicare Advantage plan or to traditional Medicare and a part D prescription drug plan. From October 15 to December 7, there is open enrollment period for Medicare Advantage and Medicare Part D. A patient’s first year of Advantage coverage is a one-time trial period to switch from Medicare Advantage to traditional Medicare, Medigap OR Part D plan.
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