Over 28 million Medicare beneficiaries are enrolled in Medicare Advantage plans in 2023. Medicare Advantage provides an alternative way to receive your Medicare benefits through private insurers. But how do the costs compare to original Medicare? Is Medicare Advantage ultimately more expensive than sticking with traditional Medicare parts A and B?
Understanding how Medicare Advantage plans are priced relative to original Medicare can help you determine the most affordable option when signing up for Medicare or evaluating plans during open enrollment.
Medicare Advantage cost vs Original Medicare
When comparing overall costs, here are some key factors to consider for Medicare Advantage plans vs original Medicare:
- Monthly premiums – Original Medicare plan has a standard Part B premium. Medicare Advantage plans may have $0 or low monthly premiums.
- Out-of-pocket costs – Original Medicare has high deductibles and coinsurance. Medicare Advantage caps annual out-of-pocket spending for those eligible for medicare.
- Prescription drug coverage – You need to get a separate Part D plan with original Medicare. Most Medicare Advantage plans include prescription drug coverage.
- Additional benefits – Medicare Advantage plans offer extra benefits like dental, vision and hearing not provided under original Medicare.
- Travel coverage – Original Medicare covers care nationwide. Medicare Advantage may limit you to in-network coverage only.
These factors all contribute to comparing the overall costs between Medicare Advantage and original Medicare. We’ll break them down in detail.
Medicare Premium Cost Comparison
One of the most visible costs of Medicare coverage is the monthly premium you pay. How do premiums compare between “Medicare Advantage and original Medicare?
- The standard Medicare Part B premium is $170.10 per month in 2023 for most enrollees. Higher income beneficiaries pay more for medicare enrollment.
- Many Medicare Advantage plans have $0 monthly premiums beyond the Medicare Part B premium.
- The average Medicare Advantage premium for 2023 is just $19 per month.
- Premiums for Preferred Provider (PPO) plans average $40 per month.
- Private Fee-for-Service plans have the highest average premium at $113 per month.
In most locations, Medicare Advantage plans are available with monthly premiums under $50 per month on average. Depending on the plan, Medicare Advantage can cost significantly less than original Medicare premiums over the course of a year.
Medicare out-of-pocket costs
Next, let’s examine deductibles and out-of-pocket costs for Medicare Advantage and original Medicare:
- The Medicare Part A deductible for hospital care is $1,600 per benefit period in 2023.
- The Medicare Part B deductible is $226 per year.
- Original Medicare has no cap on annual out-of-pocket spending.
- Most Medicare Advantage plans have annual out-of-pocket maximums from $3,000 to $7,500.
- The average Medicare Advantage deductible is around $100.
- Many Medicare Advantage plans have no deductible.
Medicare Advantage plans typically have lower deductibles and cap your total out-of-pocket costs for the year. This can provide substantial cost savings compared to original Medicare.
Prescription Drug Coverage Costs
Since original Medicare does not cover prescription drugs, you need to purchase a separate Medicare Part D plan. How do drug coverage costs differ?
- The average Medicare Part D premium is $32 per month in 2023.
- 99% of Medicare Advantage plans include prescription drug coverage.
- The average MA-PD plan premium is $19 per month.
- Copays for generics average $2 under Medicare Advantage vs $1-$2 for Part D stand-alone plans.
Medicare Advantage plans with bundled Part D coverage provide significant savings compared to buying separate Medicare prescription drug plan.
Medicare Advantage Plan Extra Benefits
Most Medicare Advantage plans cover additional benefits beyond what original Medicare offers:
- Dental – Average allowance of $1,500 per year
- Vision – Typically $100-$200 in yearly eyewear allowances
- Hearing – Many plans cover hearing exams and hearing aids
- Fitness – Gym memberships and other wellness benefits
These extra benefits included in Medicare Advantage plans increase the value versus spending for original Medicare alone.
Is Medicare Part C Ultimately More Expensive for enrollees?
When tallying up all costs – premiums, deductibles, copays, drug coverage, and extra benefits – Medicare Advantage plans typically cost less overall than original Medicare for similar coverage. Key reasons:
- Lower or $0 premium costs
- Out-of-pocket spending limits
- Minimal deductibles
- Built-in drug coverage savings
- Added benefits not available with original Medicare
However, costs can vary significantly between different Medicare Advantage plans. Higher premium PPO and PFFS plans may exceed original Medicare costs for some beneficiaries.
The best way to determine if Medicare Advantage or original Medicare is more affordable for your personal situation is to:
- Review Medicare Advantage plan options in your ZIP code.
- Compare premiums, deductibles, and out-of-pocket costs.
- Factor in drug plan costs under original Medicare.
- Consider extra benefits provided.
- See if your doctors and hospitals are in-network.
While Medicare Advantage offers cost savings in most areas for many Medicare beneficiaries, doing thorough research allows you to determine the most cost-effective coverage choice when signing up for Medicare.
We’re Here to Help
You do not have to spend hours reading articles on the internet to get answers to your Medicare questions. Give the licensed insurance agents at Glidden Group a Call at (208) 962-0077. You will get the answers you seek in a matter of minutes, with no pressure and no sales pitch. We are truly here to help.
How do costs compare between Medicare Advantage plans and Original Medicare?
Studies show Medicare Advantage plans can provide comparable services to Original Medicare program but at a lower cost. On average, Medicare Advantage costs less than Original Medicare with estimates ranging from 5-17% savings for Medicare Advantage enrollees relative to traditional Medicare spending per beneficiary.
What are the different types of “Medicare Advantage plans?
The main types of Medicare Advantage plans include HMOs, PPOs, Private Fee-for-Service plans, and Special Needs Plans. Each Medicare Advantage type of plan offers different networks, costs, and coverage rules so beneficiaries can choose the plan that fits their needs during Medicare open enrollment.
What is Medicare Part C?
Medicare Part C refers to Medicare Advantage plans. It allows eligible Medicare beneficiaries to enroll in a Medicare Advantage plan offered by private insurance companies instead of traditional Medicare Parts A and B. Part C combines Part A, Part B, and often Part D into one plan.
What does Medicare Advantage cover compared to Original Medicare?
Medicare Advantage plans must cover all services Original Medicare covers except hospice care. Many plans offer extra benefits not covered by traditional Medicare like vision, hearing, dental, and more. Costs for Part A and Part B benefits may be lower with Medicare Advantage plans.
When can you enroll in a Medicare Advantage plan?
The Medicare Advantage open enrollment period runs from January 1 to March 31 each year. During this time, people in Medicare can switch between Medicare Advantage and Original Medicare or change to a different Medicare Advantage plan.
Do you need a Medicare Supplement plan with Medicare Advantage?
No, because Medicare Advantage plans provide an alternate way to get Medicare coverage, you cannot purchase a Medicare Supplement insurance plan. If you join a Medicare Advantage Plan, there is no need for supplemental coverage.
Does Medicare pay 100% of Medicare Advantage plan costs?
No, beneficiaries still pay part of their medical costs when enrolled in a Medicare Advantage plan. However, total out-of-pocket costs are often lower compared to Original Medicare. On average, Medicare covers 60% of the total cost of benefits per enrollee.
Can you have both Medicare and Medicaid?
Yes, low-income seniors and younger people with disabilities who qualify for both Medicare and Medicaid are called “dual eligibles.” They get coverage from Medicare and Medicaid which helps pay for Medicare out-of-pocket costs.
What are the parts of Medicare?
The four parts of Medicare include: Part A which covers hospital insurance; Part B covers medical insurance; Part C offers Medicare Advantage plans; and Part D provides prescription drug coverage.
How do I compare Medicare Advantage plans?
When comparing Medicare Advantage plans, look at the plan’s coverage, costs like premiums/copays, extra benefits offered, and which doctors and hospitals are in-network. Checking star ratings can also help compare quality of plans available in your county.