If you already have Medicare Parts A and B (or will soon), you can choose to receive your Medicare benefits via a Medicare Advantage plan with a private insurance company. In fact, almost half of all eligible Medicare beneficiaries do. The number of Medicare beneficiaries enrolled in a Medicare Advantage plan has more than doubled since 2007, and the trend shows no sign of slowing down, as more Medicare Advantage plans are available in 2023 than in any year in the past 13 years. But is Medicare Advantage better than Medicare?
That depends on a few factors like how much flexibility you value and a cap on annual expenses, and whether you want additional benefits like vision, hearing, and dental coverage, even how much you travel. There’s no one-size-fits-all answer, but you can consider the relative pros and cons of each in light of your personal situation to make the best choice.
Original Medicare: Key Features
Original Medicare, also referred to as “traditional Medicare,” is a fee-for-service program that consists of two parts: Part A (hospital insurance) and Part B (medical insurance).
Fee-for-service means that you aren’t required to use in-network providers to get a preferred rate and you don’t need a referral to see a specialist; you can use any provider that contracts with Medicare.
Medicare Part A
Medicare Part A covers inpatient care in hospitals, skilled nursing facilities, hospice care, and limited home healthcare services. Most people do not pay a premium for Part A, as long as they or their spouse paid sufficient Medicare taxes while working. The Medicare Part A deductible is $1,600 in 2023.
Medicare Part B
Medicare Part B covers outpatient care, preventive services, medical supplies, and various doctor services. Part B requires a monthly premium, which is $164.90 in 2023. The Medicare Part B deductible is $226 in 2023.
Both Parts A and B charge coinsurance amounts or copays once you’ve met the deductible. Original Medicare does not cover most prescription drugs, dental care, vision care, or hearing aids. It also does not place a limit on your annual maximum out-of-pocket expenses (unless you buy a Medicare supplement plan—Medigap—that does).
Part D Prescription Drug Coverage
If you have traditional Medicare and want prescription drug coverage, you’ll need to purchase a Part D prescription drug plan. Part D is a stand-alone prescription drug plan offered by private insurance companies approved by Medicare. The average Medicare Part D premium is $31.50 per month in 2023.
Each plan has a list of covered drugs (a “formulary”) and may have different pricing tiers, copayments, or coinsurance.
Medicare Supplement Plans (Medigap)
Medigap policies are sold by private insurance and help cover some of Original Medicare’s out-of-pocket costs, such as deductibles, copayments, and coinsurance. They are only available if you’re enrolled in Original Medicare. (If you have a Medicare Advantage plan, you can’t get a Medigap policy.)
Medigap policies are standardized, meaning that each plan type offers the same benefits, regardless of the insurance company, but premiums for Medigap policies can vary, even for the same standardized plan, and may be more expensive if you miss Medigap open enrollment.
During your Medigap open enrollment period, which starts the month you turn 65 and are enrolled in Medicare Part B, you can buy any Medigap policy in your state, regardless of your health status. If you miss this window, you may not qualify for a Medigap plan or could pay a higher premium—making Medicare Advantage a stronger value proposition.
Medicare Advantage: Key Features
Medicare Advantage, also known as “Part C,” is an alternative way to receive your Original Medicare benefits, and most Medicare Advantage plans in 2023 (89%) include Part D prescription drug coverage as well. These plans are offered by private insurance companies approved by Medicare. Medicare Advantage plans cover the same services as Original Medicare plus additional benefits, such as dental care, vision care, and transportation benefits, among others.
A few Medicare Advantage plans do not include Part D prescription drug coverage. In this case, you can purchase a separate Part D drug plan or choose a Medicare Advantage plan that includes drug coverage.
Almost all Medicare Advantage plans have a provider network; in 2023, 98% of available Medicare Advantage plans were either an HMO (58%) or a PPO (40%). In other words, you’ll either need to see in-network doctors and specialists (HMO) or you’ll pay a lot less to do so (PPO).
Some Medicare Advantage plans may charge a monthly premium in addition to the Part B premium. However, most Medicare Advantage plans don’t charge any premium, and a few will pay a portion of the Part B premium to you. Medicare Advantage plans often have lower out-of-pocket costs relative to Original Medicare. And all Medicare Advantage plans are required to cap your annual out-of-pocket spend at $8,300 for 2023, but many plans have a lower maximum out-of-pocket.
You cannot use Medigap policies with Medicare Advantage plans. If you choose Medicare Advantage, the plan itself will have cost-sharing structures and out-of-pocket limits to help manage your expenses.
Differences Between Original Medicare and Medicare Advantage
- Provider networks: With Original Medicare, you can see any doctor or specialist who accepts Medicare, without the need for a referral. Most Medicare Advantage plans have a provider network, which restricts your choice of healthcare providers.
- Maximum out-of-pocket costs: Original Medicare has no out-of-pocket maximum, while Medicare Advantage plans have annual out-of-pocket limits—$8,300 for 2023. This means that once you reach the limit, a Medicare Advantage plan will cover 100% of your Medicare- approved expenses for the rest of the year.
- Part D prescription drug coverage: Original Medicare does not include prescription drug coverage—you would need to purchase a separate Part D prescription drug plan. But since most Medicare Advantage plans include drug coverage, you can avoid the extra step and expense.
- Additional benefits: Most Medicare Advantage plans include dental, vision, fitness, hearing, and telehealth benefits. Original Medicare does not cover these costs.
- Travel considerations: Since Original Medicare doesn’t depend on a provider network, your Medicare benefits are good nationwide. However, Medicare Advantage coverage is limited to the plan’s service area, which means your plan may not cover you while traveling (except for emergency care).
- Medigap: Medigap is available to Original Medicare beneficiaries only and is designed to supplement that coverage, for an extra premium. However, many Medicare Advantage plans offer benefits similar to Medigap (coverage for Part A and B deductibles and coinsurance), but without the extra premium.
Pros and Cons of Medicare Advantage Plans vs. Original Medicare
In a nutshell, most Medicare Advantage plans provide similar coverage to Original Medicare with a Part D prescription drug plan and a Medicare supplement plan. Premiums and overall costs tend to be lower with Medicare Advantage, especially if you expect to have high costs for care. (That’s because Original Medicare doesn’t limit your annual expenses, whereas Medicare Advantage does.)
The trade-off is that you need to seek care within a network provider, and will need to get referrals for specialists if you choose an HMO. With Original Medicare, you have much greater flexibility in choosing a physician and aren’t limited by geographical constraints when traveling.
It’s crucial to compare the benefits offered by Medicare Advantage plans and Original Medicare in the context of your personal situation. For example, if you travel regularly, perhaps you summer in one location and winter in another, Original Medicare may be a better fit since you can see any Medicare-participating doctor in any domestic location for ongoing, non-emergency care.
Best Medicare Advantage Plans
When choosing a Medicare Advantage plan, consider factors such as the plan’s network, benefits, coverage, out-of-pocket costs, and the insurance company’s reputation for customer service and plan satisfaction.
UnitedHealthcare is the largest provider of Medicare Advantage plans in the country, enrolling 28% of Medicare Advantage beneficiaries in 2022. It offers a range of AARP-branded Medicare Advantage plans, including HMO, PPO, and private fee-for-service (PFFS) options with additional drug coverage in the Medicare donut hole (also known as the “Medicare coverage gap”).
The second-largest provider of Medicare Advantage plans in 2022, Humana came in second out of nine insurers in JD Power’s 2022 Medicare Advantage Study, which ranked companies by overall customer satisfaction. Humana provides a variety of Medicare Advantage plans and offers an over-the-counter drug benefit but features several plans with additional coverage in the Medicare donut hole.
Aetna, a CVS Health company, offers more Medicare Advantage plans with additional drug coverage in the gaps than any other provider we reviewed. Its plans are well-priced for the coverage and many features $0 copays for primary care providers and specialists. It does not offer PFFS plans.
Blue Cross Blue Shield
As a nationwide federation of independent companies, Blue Cross Blue Shield (BCBS) offers Medicare Advantage plans through its local affiliates, providing a range of options and coverage levels. BCBS plans with drug coverage generally receive high Medicare star ratings from the Centers for Medicare and Medicaid Services (CMS). PFFS Medicare plans are not available.
Among the major companies offering Medicare Advantage, we found that Cigna has the lowest average premium ($5.53 per month) and the second-lowest average drug deductible ($50.67 per month) for its 2023 Medicare Advantage plans with drug coverage. Cigna provides a selection of Medicare Advantage plans, including options with drug prescription coverage, dental, and vision benefits, but came in eighth out of nine companies in JD Power’s 2022 Medicare Advantage Study. Plans are available in 26 states. PFFS plans are not available.
Kaiser is a regional provider of Medicare Advantage plans, offering coverage in California, Colorado, Georgia, Hawaii, Maryland, Oregon, Virginia, Washington, and the District of Columbia. Kaiser members are very happy with their Medicare Advantage plans. The company is ranked first out of nine companies by JD Power for customer satisfaction, and the CMS gives all its Medicare Advantage plans five stars (the highest rating). However, the company only offers HMO plans and does not include transportation benefits.
Can I Switch From Original Medicare to Medicare Advantage?
Yes, you can switch from Original Medicare to Medicare Advantage during specific enrollment periods. Medicare Open Enrollment runs from October 15 to December 7 every year—during this time, you can change from Original Medicare to Medicare Advantage or vice versa.
Can I Switch From Medicare Advantage to Medigap?
Yes. You can switch from a Medicare Advantage plan to Original Medicare and then buy a Medigap policy during certain times of the year. You’re allowed to make the switch during the annual Medicare Open Enrollment or Medicare Advantage Open Enrollment periods, or if you qualify for a special enrollment period. Most likely, you’ll need to answer underwriting questions and gain approval to get a Medigap policy.
What Is the Best Medicare Advantage Plan?
To choose the best Medicare Advantage plan, consider factors such as the plan’s provider network, coverage for the services you need, additional benefits, prescription drug coverage, out-of-pocket costs, and the insurance company’s reputation. You can use the Medicare Plan Finder tool at Medicare.gov to compare plans available in your area.
What Happens If a Doctor Does Not Accept Medicare?
If your doctor does not accept Medicare, you may face higher out-of-pocket costs or need to find a new healthcare provider. However, you still may be able to file a claim for services rendered by providers considered “non-participating.” But you may need to pay the full amount at the time of service, and your provider is allowed to charge 15% over the Medicare-approved amount.