Original Medicare vs Medicare Advantage

There are more Medicare options available today than ever before. Beneficiaries have a large selection of Medicare plans they can choose from based on their healthcare needs and budget. One could argue that there are too many choices, which is why Medicare is so confusing!

One of the first decisions you’ll need to make as you transition into Medicare is if you’d prefer to keep Original Medicare or move to Medicare Advantage. Many factors are at play regarding this decision, and it’s not one you want to make quickly. You’ll need to consider costs, benefits, and the rules and restrictions of each option. Original Medicare vs. Medicare Advantage - which one is right for you? 

We’re going to help you answer that question today by taking a closer look at how each kind of Medicare plan works and some of the costs you should consider in either scenario.

How Does Original Medicare Work?

Everyone begins their Medicare journey by enrolling in Original Medicare, which is supplied by the federal government. If you decide to stay on this option, your benefits will come in two parts - Part A and Part B. These parts of Medicare provide your inpatient and outpatient coverage, respectively.

Beneficiaries who have a qualifying work history will get their Part A benefits premium-free. Part B benefits, however, come with a monthly premium. The Centers for Medicare and Medicaid Services (CMS) sets a standard premium each year, which is what most people pay. High-income earners are subject to an increased premium referred to as IRMAA, the Income-Related Monthly Adjustment Amount.

Because the federal government manages Original Medicare, the benefits are the same for every person who enrolls. Pre-existing conditions do not apply, and there are no waiting periods or other limitations, like provider networks. If you have Original Medicare, you can see any provider who accepts Medicare, and you’ll pay the same amount for covered services.

One thing to note is that most beneficiaries who choose to stay on Original Medicare will need to enroll in a separate Part D plan to get prescription drug coverage. Private carriers offer Part D plans, and you’ll likely have quite a few in your area to choose from. We can help you choose a Medicare Part D plan in Arizona that’s right for you.

Original Medicare Costs

Let’s take a quick look at your 2024 Original Medicare costs.

Part A Premium: Premium-free with a qualifying work history. Those who do not meet that requirement may pay up to $505 per month.

Part A Deductible and Coinsurance: You pay a $1,632 deductible for each benefit period, plus a coinsurance cost depending on how long you’ve been hospitalized.

• Days 1 - 60: $0 coinsurance for each benefit period

• Days 61 - 90: $408 coinsurance for each benefit period

• Days 91 and Beyond: $816 coinsurance per each “lifetime reserve day” after day 90 for each benefit period, with up to 60 days over your lifetime. After that, all costs in that same benefit period are the beneficiary’s.

Part B Premium: $174.70 (Plus IRMAA if applicable.)

Part B Deductible and Coinsurance: $240 deductible per year, then 20% of the Medicare-approved amount.

One thing that surprises many people who choose Original Medicare is that there is no limit on how much you can pay out-of-pocket each year. For example, if you get diagnosed with cancer and need chemotherapy, your 20% coinsurance could amount to quite a bit.

Because of this, we recommend that our Original Medicare clients also enroll in a Medigap plan. Medigap plans, also known as Medicare Supplements, help cover some or even all of the costs we mentioned above. Yes, they do come with an added premium, but it is well worth the additional coverage.

How Does Medicare Advantage Work?

Medicare Advantage has become quite popular among beneficiaries, especially in recent years, as they’ve added more and more benefits. They are heavily advertised on TV, radio, and mailers. But before you jump on the bandwagon, let’s talk about how Medicare Advantage plans work.

Medicare Advantage plans are also called Part C plans. While you must still start by enrolling in Parts A and B, if you choose to enroll in Medicare Advantage, you’ll no longer be getting your medical benefits from the government. Instead, they’ll come from whichever insurance company you purchase the Medicare Advantage plan from. In return, the Medicare program pays the insurance carrier a fee to administer benefits.

The government may not offer Part C plans, but they do still manage the rules and guidelines insurance companies must follow. For example, all Medicare Advantage plans must offer at least as much coverage as you’ll find in Parts A and B. Most plans offer more extensive coverage, including things you won’t find under Original Medicare.

Not all Medicare Advantage plans are created equal. Unlike Original Medicare, they don’t have standardized benefits, and their rules can be a bit more restrictive. Plus, there are many options to choose from. In fact, there are five different kinds of Medicare Advantage plans, and you’ll probably have several of each available in your area.

The two most popular types of Medicare Advantage plans in Arizona are Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs). Generally speaking, HMOs offer lower out-of-pocket costs but limit you to seeing only providers in the plan’s network. PPOs have slightly higher costs but do offer some coverage outside of the network.

There is a lot to learn about Medicare Advantage plans, so be sure to carefully review this option with your advisor at Local Medicare Specialists before enrolling.

Medicare Advantage Costs

Medicare Advantage costs aren’t as straightforward as Original Medicare, but we can talk in general terms here.

First, know that you’ll still be required to pay the Part B premium. On top of that, you’ll have the premium of the Medicare Advantage plan. Most Part C plans have low premiums, and you’ll most likely even be able to find one (or more) in your area that has a $0 premium. The average Medicare Advantage plan in 2024 costs $19 per month.

Outside of a possible monthly premium, your plan will also outline the deductible, copays, and coinsurance costs. For example, you may have a $10 copay for every doctor’s visit or a $250 copay for every MRI. Look at the plans’ evidence of coverage or summary of benefits to get an idea of some of these costs.

If you’re looking at a Medicare Advantage plan that includes Part D coverage, be sure to look at the drug formulary as well. This will tell you which prescriptions are covered and how much they’ll cost to refill.

One important difference between Medicare Advantage and Original Medicare is that Medicare Advantage plans have a maximum out-of-pocket or MOOP. Once you hit your plan’s MOOP, you won’t pay anything for any covered services for the rest of the calendar year.

Original Medicare vs Medicare Advantage: Which One Is Right for You?

There is no right or wrong answer here. Every person has different needs when it comes to their healthcare, and we all have different budgets. What makes sense for one person may not make sense for another - even when it comes to spouses!

What’s important is that you take the time to review both options with your advisor, weigh the pros and cons of either choice and make an informed decision. We can help you do that.

If you’re new to Medicare, need a refresher course, or just want someone to review your current plans, call the experts at Local Medicare Specialists today.