Original Medicare vs Medicare Advantage: A Two-Part Series

Which saves you more money, Original Medicare or Medicare Advantage?

The correct answer is, “it depends.” Both forms of medical coverage have unique costs and benefits.  You’ll make your choice based on different factors in your own situation, so there’s no definitive answer to the question.

In this article, we’ll explore Original Medicare, while next week we’ll talk about Medicare Advantage.

First, some definitions.

Original Medicare is, like its name suggests, Medicare in its Original form. Medicare is the federal health insurance program for seniors and certain younger people with disabilities. A small portion of every employee’s paycheck goes toward the Medicare tax, which funds the program. Under Original Medicare, seniors age 65 and older are automatically eligible for coverage in Part A and Part B. Part A covers inpatient services and Part B covers outpatient.

Medicare Advantage (MA) is a  private health plan that administers Medicare benefits. Private insurance companies contract with the federal government to provide these plans. MA plans must cover all the services Medicare covers, however they may have different rules, costs and restrictions on the services. In addition, many MA plans offer benefits beyond Original Medicare, such as dental and vision coverage.

Here’s a more detailed overview of each type of plan, and what you can expect to pay:

Original Medicare

On the face of it, Original Medicare looks cheaper than MA. If you or your spouse contributed to Social Security for at least 10 years, you get Part A free. Plus, the standard monthly premium for Part B is well below average for comparable private coverage.  The monthly premium will change based on your income and whether you’re receiving Social Security benefits at the same time.

While Original Medicare’s premiums certainly are low, they don’t present a full picture of the costs you’ll encounter. Medicare has a high cost-sharing ratio that can leave you with thousands of dollars of medical bills. Here’s what you have to pay with Original Medicare:

  • Deductible

    Medicare starts covering your medical bills after you meet your annual deductible. The Part B deductible is relatively low, just $183 for 2018. The Part A deductible is higher at $1340 per benefit period. (The benefit period ends when you haven’t gotten inpatient care for 60 days in a row, so you can have a few benefit periods in one year.)

  • Part A Coinsurance

    Part A covers inpatient hospital stays at 100% for the first 60 days once you meet your deductible. It covers 100% of skilled nursing care for the first 20 days. After the first 60 and 20 days respectively, there is a coinsurance per day. After 100 days of inpatient care, Part A coverage ends.

  • Part B Coinsurance

    Part B covers 80% of services, leaving the 20% coinsurance for you. Unlike most private insurance plans, there is no yearly limit on your out-of-pocket expenses, so expenses can add up after a while.

  • Non-covered Services

    Some medical expenses aren’t covered by Medicare at all. These include most prescription drugs, dental care, and vision care.

For some relief from the never-ending coinsurance payment, many Medicare beneficiaries opt to also take out a Medigap plan. Medigap plans are standardized supplemental plans that cover a lot of the out-of-pocket costs. The most popular plans in New Jersey average $100-$150, but you can get a plan for as low as $60 a month.

The other alternative to Medicare’s high out-of-pocket cost is enrolling in a Medicare Advantage plan. Look out for our blog post next week where we’ll discuss the pros and cons of Medicare Advantage.

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