What’s the difference between Original Medicare and Medicare Advantage?

Original Medicare, also called Parts A and B, has been an option from the start of Medicare in 1965:

  • Part A covers hospital stays.
  • Part B handles physician visits, outpatient care, medical supplies and preventive services.

The Centers for Medicare and Medicaid Services (CMS) runs the national program. People with Original Medicare are also eligible for Part D and Medigap. Part D is a prescription drug benefit, while Medigap helps pay for out-of-pocket costs.

Meanwhile, private insurers offer Medicare Advantage plans with CMS oversight. Most people with Medicare have Original Medicare, but that’s changing.

CMS predicts that more than 33.8 million people will have Medicare Advantage in 2024. There will also be more plan options as private insurers plan to expand plan offerings.

A small number of carriers make up the most Medicare Advantage members, but many insurers have grown their Medicare Advantage membership over the past few years. According to the Kaiser Family Foundation, “four in ten (40%) beneficiaries can choose among Medicare Advantage plans offered by 10 or more firms." 

Almost two-thirds of Medicare Advantage members are in HMOs. About one-third are in PPOs, which have higher premiums, but more flexibility, such as a larger network.

Most Medicare Advantage plans include prescription drug coverage. A separate Part D plan is not required. Added benefits include prescription drugs, vision and dental.

How much does Original Medicare costs?

Medicare Part A is free for most Americans -- as long as you paid Medicare taxes for at least 40 quarters. So, if you worked for 10 years and paid Medicare taxes, you won’t have to pay premiums for Part A.

People who didn't pay enough previous taxes pay between $274 and $499 monthly for Part A.

Part A had a $1,600 deductible in 2023 You’ll have to pay for health care services until you reach that deductible if you're hospitalized.

Here's how Part A costs work when you're hospitalized:

  • A deductible and no coinsurance for days 1 to 60 of each benefit period.
  • A coinsurance amount per day for days 61 to 90 of each benefit period.
  • A coinsurance amount per “lifetime reserve day” after day 90 of each benefit period (up to 60 days over your lifetime).
  • All costs for each day after you use all the lifetime reserve days (after day 150).

Part B costs $174.70 monthly for most Americans in 2024. Also, higher-income people may have to pay higher premiums.

The Part B annual deductible was $226 in 2023, which is $6 less than in 2022 but much lower than most Medicare Advantage plans. Once you reach the deductible, Medicare pays 80% of Medicare allowed amounts and you pay the other 20%.

How much does Medicare Advantage costs?

Medicare Advantage costs vary by state, insurer, plan type and specific offering.Insurers also offer plans with no premiums. However, you may pay more out of pocket for those plans when you need health care services because you may be paying a lower monthly plan premium.

Medicare Advantage plans vary widely. It’s essential to dig into each plan to find out which one works best for you.

For instance, you may find a plan with higher premiums, but with more supplement benefits. Nearly all Medicare Advantage plans have prescription benefits.

CMS has also expanded insurer Medicare Advantage options. Now, they can offer reimbursements for rides to doctor appointments, meal delivery and adult care services. While most plans offer dental, vision, and, or hearing, individuals on both Medicare and Medicaid are the beneficiaries most likely to receive these added benefits. People with chronic illnesses may also get help for grocery shopping, improved home environments and transportation for non-medical needs.

How much does Medicare Part D cost?

You can couple a Part D prescription drug plan with Original Medicare, which doesn’t have prescription benefits.

But the amount you pay for Part D deductibles, copayments, and/or coinsurance varies by plan.

The Medicare.gov website, which is managed by CMS, states that drug coverage costs vary depending on:

  • Your prescriptions and whether they’re on your plan’s list of covered drugs (formulary).
  • What “tier” the drug is in.
  • Which drug benefit phase you’re in (like whether you’ve met your deductible, or if you’re in the catastrophic coverage phase).
  • Which pharmacy you use (whether it offers preferred or standard cost sharing, is out of network, or is mail order).Your out-of-pocket drug costs may be less at a preferred pharmacy because it has agreed with your plan to charge less.
  • Whether you get extra help paying your Medicare drug coverage costs.

How much does Medigap cost?

Medigap helps pay Medicare cost sharing for people with Original Medicare. There are 10 standardized Medigap plans, which enable you to compare apples-to-apples.

Private insurers offer Medigap policies. These plans help pay for Medicare co-payments, deductibles and coinsurance, including hospital stays, physician service or prescription drugs but do not pay for prescription drugs except for those covered under Part B.

The cost of Medicare varies, but you may find high-deductible policies under $100 a month. Other Medigap plans, which have lower deductibles, can cost more than $300 monthly.

Medigap premiums may vary based on beneficiary age and health conditions depending on the plan.

Costs by Medicare plan

Here's a breakdown of monthly premiums by Medicare plan. Make sure you understand the deductible for your specific plan and how that affects out-of-pocket costs. You may find a low-premium Medicare Advantage plan, but it may have much higher out-of-pocket costs than Original Medicare.

Type of MedicareAverage monthly premiums
Original Medicare$174.70*
Part DVaries
Medicare AdvantageVaries
MedigapVaries, as low as under $100 to more than $300 depending on policy

*Medicare Part A is usually free. This is Part B and the most common amount paid. Some people with high income may have to pay more. Medigap costs may vary.

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Medicare

People who are 65 and over qualify for Medicare. You can choose Original Medicare (also called Parts A and B), which is offered by the federal government, or Medicare Advantage (also called Part C), which private insurers provide. The average annual premium for Original Medicare is about $1,600. Medicare Advantage's average yearly premium is $336, but you may have higher out-of-pocket costs than Original Medicare.
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Medicaid

Low-income Americans qualify for Medicaid. Thirty-eight states expanded Medicaid eligibility, so lower-middle-class Americans may also be eligible in those states. Medicaid offers comprehensive benefits, but at little to no cost depending on your income. Each state has its own eligibility. Some states are flexible with Medicaid eligibility for people who are pregnant, a parent or disabled. If your household income is below 138% of the federal poverty level, you're likely eligible for Medicaid if you live in a Medicaid expansion state. That level is $17,609 for an individual, $23,791 for a family of two, $29,974 for a family of three and $36,156 for a family of four. Non-Medicare expansion states have stricter income guidelines. Check with your state's Medicaid program to see if you qualify.
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The Affordable Care Act lets children stay on a parent's health plan until the age of 26. Having a child on a parent's health plan may or may not increase premiums. It depends on whether you already have family coverage when adding the child to the plan. If a parent already has family coverage, adding a child won't likely increase premiums. However, going from single or couple to family coverage could cause premiums to skyrocket. The average single coverage employer-sponsored plan premium is $1,186. The average family plan is $5,447.
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Most people with private health insurance get their coverage through a job. employer-sponsored health insurance is usually cheaper than individual health insurance unless you qualify for Affordable Care Act subsidies. Job-based plans are generally less expensive because businesses often pick up more than half of employer-sponsored health insurance premiums. Kaiser Family Foundation estimates the average premiums for a single coverage employer-sponsored health plan is $1,186 and the average family plan is $5,447 annually.
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Employer plans are often one of these types of four plans. Click on each one to find out more.
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Preferred-provider Organization (PPOs)

  • Pay higher premiums with a lower deductible
  • You have access to more providers, but pay much more for health insurance
  • You don't want to choose a primary care physician
  • You don't want to get a referral
  • You want the ability to get out-of-network care
Preferred-provider organization (PPOs) plans are the most common type of employer-based health plan. PPOs have higher premiums than HMOs and HDHPs, but those added costs offer you flexibility. A PPO allows you to get care anywhere and without primary care provider referrals. You may have to pay more to get out-of-network care, but a PPO will pick up a portion of the costs.
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Health maintenance organization (HMO)

  • Pay higher premiums with a lower deductible
  • Restricted network of providers with lower premiums
  • You want to choose a primary care physician
  • You don't mind getting a referral
  • You don't care about the ability to get out-of-network care
Health maintenance organization (HMO) plans have lower premiums than PPOs. However, HMOs have more restrictions. HMOs don't allow you to get care outside of your provider network. If you get out-of-network care, you'll likely have to pay for all of it. HMOs also require you to get primary care provider referrals to see specialists.
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High-deductible health plans (HDHPs)

  • Pay lower premiums with a higher deductible
High-deductible health plans (HDHPs) have become more common as employers look to reduce their health costs. HDHPs have lower premiums than PPOs and HMOs, but much higher deductibles. A deductible is what you have to pay for health care services before your health plan chips in money. Once you reach your deductible, the health plan pays a portion and you pay your share, which is called coinsurance.
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Exclusive provider organization (EPO)

  • Restricted network of providers with lower premiums
  • You don't want to choose a primary care physician
  • You don't want to get a referral
  • You don't care about the ability to get out-of-network care
Exclusive provider organization (EPO) plans offer the flexibility of a PPO with the restricted network found in an HMO. EPOs don't require that members get a referral to see a specialist. In that way, it's similar to a PPO. However, an EPO requires in-network care, which is like an HMO.
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Individual insurance/Affordable Care Act
The Affordable Care Act created insurance exchanges that allow people to compare plans. The health law also requires insurers to accept everyone and not charge them exorbitant rates. People who make below 400% of the federal poverty level qualify for subsidies to help pay for an ACA plan.
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Silver is the second most popular plan in the ACA exchanges, with 35% of people with a Silver plan. Silver has lower premiums than any plan except for Bronze. However, it has lower out-of-pocket costs than Bronze. Silver plans pick up 70% of the costs, while members pay 30% The average single coverage in a Silver plan is $481 monthly and $1,179 for a family plan.

Bronze is the most popular type of plan in the ACA exchanges, with 41% of members with a Bronze plan. These plans have the lowest premiums, but also the highest out-of-pocket costs in the exchanges. Bronze plans pick up 60% of the costs, while members pay 40%. The average single coverage monthly cost in a Bronze plan is $440 and $1,080 for a family plan.

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The Affordable Care Act created insurance exchanges that allow people to compare plans. The health law also requires insurers to accept everyone and not charge them exorbitant rates. People who make below 400% of the federal poverty level qualify for subsidies to help pay for an ACA plan.
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Platinum plans have the highest premiums but the lowest out-of-pocket costs. So, you pay more for the coverage initially but less than other plans when you need health care services. Platinum plans pick up 90% of the costs, while members pay 10%, Not many health insurers offer Platinum plans. Only 2% of members in ACA plans have a Platinum plan, so you may have trouble finding one. The average monthly premiums for single coverage in a Platinum plan is $706 and the average family coverage costs $1,460.

Gold plans have lower premiums than Platinum, but higher premiums than Silver and Bronze. Gold also has lower out-of-pocket costs than Silver and Bronze, but higher than Platinum. Gold plans pick up 80% of the costs, while members pay 20%. The average monthly premium for a single Gold plan is $596. Family coverage averages $1,426 per month.

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Choosing a Medicare plan

Whether you choose Original Medicare or Medicare Advantage depends on many factors:

  • Plans offered in your area
  • Costs
  • Quality of care
  • Other coverage, such as an employer group health plan
  • Provider and hospital network
  • Added benefits
  • Type of plan

Your first step should be to see if your providers and favored hospitals and facilities are considered in-network. You don’t want to sign up for a Medicare Advantage plan only to find out that your doctor isn’t in-network.

Also, look into the plan specifics. For instance, a health maintenance organization might be a cheaper option but are you OK with only going to providers in-network? Consider whether your potential out-of-pocket costs are affordable.

CMS offers star ratings for plans. The federal agency rates plans with star ratings that come from membership surveys, quality and performance.

You can use CMS’ Medicare Plan Finder to compare Original Medicare and Medicare Advantage plans.

Costs are a critical piece when deciding on a Medicare plan, but make sure you understand your options before deciding.

Sources:

Medicare Advantage and Part D plans and benefits offered by the following carriers: Accendo, ACE-Chubb, Aetna Medicare, AFLAC, Allstate - National General, Anthem Blue Cross Blue Shield, Aspire Health Plan, Capitol, Centene Corporation,  Cigna-HealthSpring, Dean Health Plan, Devoted Health, GlobalHealth, Health Care Service Corporation, Humana, Lumico - Elips, Manhattan Life - MAC, Molina Healthcare, Mutual of Omaha, Oscar Health Insurance, Premera Blue Cross, Medica Central Health Plan, SCAN Health Plan, Scott and White Health Plan now part of Baylor Scott & White Health, UnitedHealthcare®

Disclaimer:
Insurance.com is not affiliated with or endorsed by the government or Federal Medicare program. Plans are insured or covered by a Medicare Advantage organization with a Medicare contract and/or a Medicare approved Part D sponsor. Enrollment in the plan depends on the plan’s contract renewal with Medicare. We do not offer every plan available in your area. Currently we represent 10 organizations which offer 100 products in your area. Please contact Medicare.gov, 1800-MEDICARE, or your local State Health Insurance Program (SHIP) to get information on all of your options Not all plans offer all of these benefits. Benefits and availability may vary by carrier and location. Limitations and exclusions may apply. Every year, Medicare evaluates plans based on a 5-star rating system. Part B Premium give-back is not available with all plans. Actual Part B premium reduction could be lower. Deductibles, copays and coinsurance may apply. Enrollment in the described plan type may be limited to certain times of the year unless you qualify for a Special Enrollment Period.

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