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How Original Medicare And Medicare Advantage Differ

By Zawn Villines
Original Medicare and Medicare Advantage have identical eligibility requirements. Medicare Advantage, however, is private insurance that offers slightly different benefits.

Since the 1990s, Medicare recipients have been able to choose private health plans as an alternative to original Medicare. These health plans, once called Medicare Part C, are now known as Medicare Advantage.

Most Medicare recipients still choose the original program, but in 2019, 34% of Medicare beneficiaries opted to enroll in Medicare advantage. In 2016, 29% of new Medicare beneficiaries chose an Advantage plan during the first year of enrollment. The two programs offer similar benefits, but there are some important distinctions.

Medicare vs. Medicare Advantage: The Basics

If you have original Medicare, the goverment directly pays for your Medicare benefits. In contrast, with Medicare Advantage plans, you receive your benefits from private medical insurance companies that Medicare has approved. There are several types of Medicare Advantage Plans:

  • Health Maintenance Organization (HMO) plans. HMO plans limit you to doctors, healthcare providers, and hospitals that fall within the plan's network—except for emergency or urgent care needs. Under these plans, you'll typically have to get a referral from your primary care doctor in order to access certain forms of diagnostic testing or see a specialist. 
  • Preferred Provider Organization (PPO) plans. In a PPO plan, you can choose from a number of doctors, healthcare providers, and hospitals within your plan's network. You pay less to see in-network providers, and pay more if you opt for providers that are not in your plan's network. 
  • Private Fee-for-Service (PFFS) plans. These plans pay for a certain amount to doctors, healthcare providers, and hospitals for your care, while you also pay a certain amount. Some who opt for this plan access care from providers and hospitals in their PFFS plan. For others, these plans define a network within which members can choose their providers. These providers offer lower rates than those outside of the network. 
  • Medical Savings Account (MSA) plans. In these plans, which are similar to non-Medicare Health Savings Account plans, you choose your healthcare services and providers. MSA plans blend a high-deductible insurance plan with a medical savings account. Your high-deductible health plan will only begin to cover your healtcare costs after you meet a high yearly deductible, which each plan determines differently. But you can use money that the plan deposits into your MSA to fund your healthcare costs prior to meeting your deductible. 

The Official U.S. Government Site for Medicare online states that you must live in the service area of you prospective plan and also have Medicare Part A and Part B in order to join a Medicare Advantage Plan.

Both Medicare and Medicare Advantage are also legally required to cover certain basic health services, though the costs you pay and the specific services that are covered vary.

Medicare Advantage began in 1995, though similar programs were available as early as the 1970s. The key distinction between the two programs is that Medicare is government health insurance, while Medicare Advantage is private health insurance that the government helps fund.

Medicare vs. Medicare Advantage: Differences

Both Medicare and Medicare Advantage will fund most basic health costs, including doctor's visits and hospital stays. The specific cost of each plan, as well as the out-of-pocket copays and other costs, vary. Some key differences between the two programs include:

  • Original Medicare includes Medicare Part A (hospital care) and Part B (medical care) only. People who want prescription drug coverage must purchase a Medicare Part D plan. Medicare Advantage often includes Part D, and may offer coverage for services original Medicare will not cover.
  • You can use original Medicare at any doctor or hospital that accepts the program. Medicare Advantage programs may limit you to specific in-network providers.
  • Out-of-pocket costs with Medicare Advantage plans are usually lower.
  • The government sets prices for various services offered under original Medicare plans. With a Medicare Advantage plan, you may pay a different rate based on the rate negotiated by the insurer. This rate may be higher or lower than the original Medicare rate.

Why Choose Medicare Advantage?

Medicare Advantage plans must offer benefits comparable to original Medicare. The government regulates these plans, ensuring that they meet certain basic care requirements. The costs and copays for various services, however, may be different. For some people, Medicare Advantage is a better choice. You might choose Medicare advantage because:

  • There are more options. In 2018, the average Medicare beneficiary could choose from 21 plans, though some regions offered even more choices.
  • Premiums may be lower on some plans. Some even offer $0 premiums, though this usually means you'll pay higher copays.
  • There is usually prescription drug coverage. Original Medicare does not cover prescription drugs unless you enroll in Part D. In 2019, 90% of Medicare Advantage policies offered prescription drug coverage.
  • You may pay less for expensive services. Medicare Advantage plans are legally required to limit your out-of-pocket maximum costs. With original Medicare, you keep paying costs no matter how much you spend. In 2020, the out-of-pocket maximum for most Medicare Advantage costs was $6,700.
  • There is often coverage for services original Medicare will not fund. Each plan is different, so it is important to compare and review plan documents. However, many Medicare Advantage plans offer dental or vision coverage. Original Medicare, by contrast, covers only medical and hospital care.