Health is wealth, so choosing the right healthcare coverage is a major consideration, especially as you age. When you turn 65, you’re eligible for Medicare, a health insurance program offered by the federal government.
But it’s not that straightforward: When you enroll, you have two coverage options to choose from — Original Medicare and Medicare Advantage. While these plans both offer healthcare coverage, they’re very different when it comes to accessing care.
Here's what to know — including key differences — when comparing traditional Medicare to Medicare Advantage to find the best choice for your health, budget and medical needs.
Original Medicare is a health insurance plan offered by the federal government. It includes both Medicare Part A hospital insurance and Medicare Part B medical insurance as part of your coverage. If you want drug coverage, you must choose to add Medicare Part D separately.
One of the primary benefits of Original Medicare is that there are very few restrictions on who you can see for care. As long as your physician or hospital accepts Medicare, you have your choice of who you can see anywhere across the United States.
That flexibility is particularly attractive if you want to have the freedom of seeing any healthcare provider without the need for a referral.
But that flexibility comes at a cost. One of the main drawbacks of Original Medicare is that there isn’t a cap on your out-of-pocket maximums. Plus, you typically must pay 20% of the cost of care after meeting your deductible — referred to as coinsurance.
To help soften the impact of these expenses, you can get Medicare Supplement Insurance — commonly called Medigap — which pays a share of your out-of-pocket costs.
Cost is a major factor when you’re on a limited or fixed income. Here’s a breakdown of what you can expect to pay for Original Medicare.
Typically, your Medicare Part B premium is deducted directly from your Social Security benefits. If you opt in to Part D, you can either get billed directly or contact your plan to request the payment get deducted from your Social Security benefits.
For both Medicare Part B and Medicare Part D, if your income is over a specific threshold you’ll pay an income-related monthly adjustment amount (IRMAA) on top of your premiums.
Medicare uses your income and tax filing status from two years before to calculate Part B premiums. If you are single or are married and file separately on your taxes and your modified adjusted gross income is greater than $103,000, you’ll pay a higher premium. If you’re married and file jointly and your income exceeds $206,000, you’ll pay more than the standard amount. The premium amount you pay is tiered and based on income.
Related reading: How to budget in retirement: 7 steps to maintaining your finances on a fixed income
Medicare Advantage is health insurance provided by a private insurance company. These plans are Medicare-approved and combine elements of Medicare including Part A hospital insurance, Part B medical insurance and typically Part D drug coverage under one plan. About half (50.4%) of Medicare beneficiaries are enrolled in an Medicare Advantage plan.
Medicare Advantage — which is Medicare Part C — is a viable alternative to traditional Medicare. Instead of getting health insurance from the federal government, you can streamline coverage with more choices by selecting a plan through a private insurer. This can expand your options initially. But an important difference when comparing Original Medicare to Medicare Advantage is access to care.
Medicare Advantage plans generally require you to see providers that are in the specific plan’s network.
So unlike Original Medicare, which allows you to see any doctor who accepts Medicare, with Medicare Advantage, you’re limited to in-network providers and those in your specific service area.
This can add more red tape to the process. For instance, you need to review which providers you can see. If you need to see a specialist, you may need to get a referral, which can lead to delays.
More Medicare Advantage plan beneficiaries (22%) experienced delays compared to those with Original Medicare (13%), according to a 2024 Commonwealth Fund survey.
Where Medicare Advantage plans shine is in the additional benefits and the cost. Through a Medicare Advantage plan, you may have access to more services like dental, vision and hearing coverage. Original Medicare doesn’t include these benefits.
Additionally, some Medicare Advantage plans may cost less than Original Medicare and come with a $0 premium. You’re still responsible for the Part B premium, but some plans help you cover a portion of those costs as well.
In other cases, you may pay both the Part B premium and the Medicare Advantage premium. The Part D costs are typically already baked into the coverage. Medicare Advantage costs vary and depend on the plan you choose.
Plan premium. The premium will vary but could be $0. Some 73% of Medicare Advantage beneficiaries with prescription drug coverage paid no monthly premium aside from Part B in 2023, according to health policy nonprofit KFF. The government reports an average monthly premium for a Medicare Advantage plan is $18.50.
Part B. Generally, you’ll still pay your Medicare Part B premium — which is $174.70 a month in 2024. Some Medicare Advantage plans provide what’s called a giveback benefit, which helps cover some of the costs for your Part B premium. The amount can range from 10 cents to the total monthly premium, according to insurance provider Humana.
Part D. Medicare Advantage plans bundle Part D in the plan, so costs are typically included if you pay a premium.
If your income is above a stated threshold, you’re still responsible for IRMAA charges on Part B and Part D with a Medicare Advantage plan. To pay for Medicare Advantage premiums, you can make payments to the company or set up direct deposit. You can also request for the company to deduct premiums from your Social Security benefits.
Another major difference when comparing Original Medicare to Medicare Advantage is out-of-pocket costs. Unlike traditional Medicare, Medicare Advantage plans do have an out-of-pocket maximum. In 2024, that amount is $8,850, though your specific plan’s maximum can be lower. Original Medicare has no such limit.
While Medigap coverage can help offset costs associated with Original Medicare, Medicare Advantage beneficiaries are not eligible for Medigap.
Original Medicare and Medicare Advantage both offer you health insurance but are delivered in different packages and price points. Weigh each of the following factors before making a decision about your coverage.
When comparing plans, review premiums, deductibles, copayments and out-of-pocket maximums. Keep in mind that Original Medicare has no limit.
“Original Medicare is more costly without Medicare supplement plans since there is a 20% coinsurance. Advantage has lower premiums but copayments are required for services. There is also an out-of-pocket maximum,” explains Pamela Sams, financial advisor and chartered retirement planning counselor at Jackson Sams Wealth Strategies.
But don’t just get lured in by the potential for $0 premiums with Medicare Advantage. You’ll still need to pay for Part B. And if you get seriously ill and need to see a specialist, you’re likely limited to your network and your service area.
Original Medicare offers much more freedom and flexibility with who you see and where, as you can see any healthcare provider that takes Medicare. Medicare Advantage plans require you to see someone in their network and may have restrictions and only cover care in a specific service area.
“Original Medicare is good for those who want flexibility of doctors and hospitals,” says Sams. “Also, those who are frequent travelers. Advantage is suitable for those who want coordinated care and are OK with some restrictions on network providers.”
Consider your needs and where you’re at with your health: Do you need prescription drug coverage or access to a specialist? Do you want dental and vision benefits? Are you expecting high medical costs?
If you don’t need prescription drug coverage and you want to see a specific specialist, Original Medicare can be a good fit. If you want dental and vision benefits or you’re anticipating high medical expenses, Medicare Advantage is a good option, as its plans may come with extra benefits and have an out-of-pocket maximum.
However, be aware that Medicare Advantage typically requires prior authorization, and some plans have denied claims in the past, which you can appeal. (Of the 35 million authorization requests submitted in 2021, Medicare Advantage denied about 6%, according to a March 2024 JAMA Health Forum article. Only 11% of the denials were appealed, with 82% of those appeals successful in overturning the initial decision.)
And there’s another major issue to consider if you opt for a Medicare Advantage plan after the initial enrollment period. If you get sick and find the costs are too high on your Medicare Advantage plan, when you’re eligible, you might consider going back to Original Medicare and getting a Medigap policy to help cover costs.
However, an insurance company could deny you a Medigap policy after the initial enrollment period because of a prior medical condition, such as diabetes or asthma. If you sign up for Original Medicare and a Medigap policy when you first become eligible, pre-existing conditions are not considered.
Related reading: How to budget in retirement: 7 steps to maintaining your finances on a fixed income
You can enroll in Medicare during four specific enrollment periods:
Initial enrollment period. This period spans seven months and is the three months before your 65th birthday, your birthday month and three months after.
Open enrollment period. You can change Medicare Advantage plans, switch from Original Medicare to Medicare Advantage or vice versa each year from October 15 to December 7.
Medicare Advantage open enrollment period. From January 1 to March 31 — or the initial three months on Medicare — you can switch to another Medicare Advantage plan if you’re currently on one or revert back to Original Medicare.
Special enrollment period. The time frame varies, but you can make changes after life changes like moving or losing out on coverage.
Get started with Medicare, U.S. Centers for Medicare and Medicare Services. Accessed July 8, 2024.
Monthly premium for drug plans, U.S. Centers for Medicare and Medicare Services. Accessed July 8, 2024.
CMS Releases 2024 Projected Medicare Part D Premium and Bid Information, U.S. Centers for Medicare and Medicare Services. Accessed July 8, 2024.
IRMAA Sliding Scale Tables, Social Security Administration. Accessed July 8, 2024.
Medicare Monthly Enrollment, U.S. Centers for Medicare and Medicare Services. Accessed July 8, 2024.
What Do Medicare Beneficiaries Value About Their Coverage? The Commonwealth Fund. Accessed July 8, 2024.
Medicare Advantage in 2023: Premiums, Out-of-Pocket Limits, Cost Sharing, Supplemental Benefits, Prior Authorization, and Star Ratings, KFF. Accessed July 8, 2024.
Medicare Advantage and Medicare Prescription Drug Programs to Remain Stable in 2024, U.S. Centers for Medicare and Medicare Services. Accessed July 8, 2024.
Medicare Part B Giveback Benefit explained, Humana. Accessed July 8, 2024.
Coverage Denials in Medicare Advantage—Balancing Access and Efficiency, JAMA Health Forum. Accessed July 8, 2024.
Melanie Lockert is an L.A.-born and Brooklyn-based freelance writer with a decade of experience in personal finance. Melanie started the Dear Debt blog in 2013 and chronicled her journey out of $81,000 in student loan debt. She published a book of the same name in 2016. Her personal finance expertise has been featured on Fortune Recommends, CNN Underscored, Yahoo Finance and Business Insider, among other publications. She is also the host of the Mental Health and Wealth Show and cofounder of the Lola Retreat, a finance event for women.
