Original Medicare versus Medicare Advantage

I'm covering retirement health insurance in four parts:

1. Original Medicare,
2. Medigap, a private Medicare supplement,
3. Medicare Advantage, and
4. Typical Medicare insurance bundles.

After paying off our home mortgage our standard deduction was higher than our itemized. After retiring the itemized was higher, mostly from buying health insurance.

United Healthcare

The table below summarizes the differences between these two Medicare plan bundles:

1. Medicare Part A (Hospital) and Part B (Medical/Doctor) with a Medigap supplement and a Part D Prescription Drug Plan, and
2. Medicare Advantage Part C with drug coverage.

See the Expanded Medicare Glossary for help with any unfamiliar terms.

	Original Medicare with Medigap and Drugs	Medicare Advantage with Drugs
Enrollment1	• 40 quarters of employment with Medicare payroll deductions automatically qualifies you for Medicare Part A (Hospital) with no monthly premium. • Medicare Part B (Medical/Doctor) requires the payment of a monthly premium. • There is an Initial Enrollment Period of 3 months before to 3 months after the month you turn 65.	• You must be enrolled in Medicare Parts A and B first, then enroll in a Medicare Advantage plan. • In 2017, 33% of Medicare beneficiaries were enrolled in Medicare Advantage plans.7
Access to Services1	• You can go to any doctor or hospital in the United States that accepts Medicare; there is no network. • There are no referrals for specialists and no prior authorization for services.	• Network providers, referrals for specialists, and prior authorization for certain services. • Out-of-network care at a higher cost. • Emergency and urgent care outside the service area, but not follow up or routine care. • Plan changes at the open enrollment period only.
Costs1	• Monthly premium for Part B (Medical/Doctor), and deductibles and coinsurance or copayments. • Out-of-pocket maximum or cap with the separate Medigap plan. • Purchase Part D drug coverage separately.	• Monthly premium for Part C. • Out-of-pocket costs vary and may include yearly deductible, coinsurance or copayments for services, out-of-network provider charges, and other cost sharing. • Cost sharing for chemotherapy, dialysis, and skilled nursing care cannot be more than traditional Medicare charges. • Maximum out-of-pocket limit on cost sharing. • Plans may change benefits, premiums, and copays yearly.
Benefits1	• "Medically necessary health care services" as determined by Medicare. • These are not covered by Medicare, but may be offered by a Medigap plan: dental care, eye examinations for prescribing glasses, dentures, cosmetic surgery, acupuncture, hearing aids and exams, and routine foot care.3	• Plan benefits must be at least equal to traditional Medicare. • Some plans may cover services which are not covered by traditional Medicare, such as dental, hearing and vision care.
Ratings4	• 6% of those with traditional Medicare and Medigap plans rated their insurance as fair or poor in 2012.	• 15% of those with Medicare Advantage policies rated their insurance as fair or poor in 2012. • Although enrollees spent less on premiums and out-of-pocket costs, they were more likely to report cost-related access problems.
Financing2	• Part A: 2.9% tax on earnings paid by employers and employees (1.45% each), for 88% of Part A revenue. Higher-income taxpayers (>$200,000/individual and $250,000/couple) pay 2.35%. The 11% balance is from premiums, Social Security benefit taxes, and interest. • Part B: general revenues (75%), beneficiary premiums (23%), and interest and other sources (2%). Beneficiaries with incomes >$85,000/individual or $170,000/couple pay a higher premium of 35% to 80%. • Part D: general revenues (78%), beneficiary premiums (13%), and state payments for dually eligible beneficiaries (9%). Higher-income enrollees pay a larger premium.	• Revenue sources are similar to traditional Medicare, but HMOs are paid a total per enrollee, rather than fees per service. • Beneficiaries pay the Part B premium and a premium for additional benefits. • 2003 payment formulas purposely overcompensated Part C plans by 12% or more compared to original Medicare financing, to increase availability in rural and inner-city locations.5 • These subsidies to Medicare Advantage providers started phasing out with the Affordable Care Act.4 • Federal funding cuts since 2014 have led to some increases in Medicare Advantage premiums and copays of 50 to 55%.6

My personal decision was Original Medicare with Medigap and a Prescription Drug Plan. This was based on the ability to choose services independent of a network, the higher satisfaction of enrollees, and concern about decreasing Medicare Advantage subsidies. Networks and benefits vary greatly across counties, however, and you may find a perfect fit in a Medicare Advantage plan.

 

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Expanded Medicare Glossary

Resources

References

¹ "Choosing Between Traditional Medicare and a Medicare Advantage Plan", Center for Medicare Advocacy, retrieved August 7, 2016.
² "The Facts on Medicare Spending and Financing", Juliette Cubanski and Tricia Neuman, July 18, 2017.
³ "What Part A & Part B doesn't cover", Medicare.gov, retrieved November 28, 2017.
⁴ "Medigap Vs. Advantage plans", Jennie L. Phipps, Bankrate.com, July 22, 2012.
⁵ "Part C: Medicare Advantage plans", Wikipedia, retrieved December 1, 2017.
⁶ "Impact Of Medicare Advantage Cuts On Seniors Sharply Disputed", Phil Galewitz, Kaiser Health News, February 23, 2014.
⁷ "Medicare Advantage", Kaiser Family Foundation, Oct 10, 2017.