Medicare Choices: Original Medicare vs. Medicare Advantage vs. Medicare Supplement

When you become eligible for Medicare, you have three basic ways to structure your coverage: Original Medicare only, Original Medicare with a Medicare Supplement and Part D drug plan, or Medicare Advantage. These options work very differently when it comes to premiums, deductibles, copays, prescription coverage, doctor choice and your potential out-of-pocket costs. Let's break them down in plain English.

Original Medicare Only: The 80/20 Basics

Original Medicare consists of Part A and Part B. Part A generally helps cover hospital and inpatient care, while Part B covers doctors, outpatient care, preventive services and other medically necessary services. After you meet the Part B deductible, Medicare generally pays 80% of the Medicare-approved amount for covered Part B services, and you pay 20%. The important thing to remember is that Original Medicare by itself has no annual out-of-pocket maximum, so that 20% can add up if you need a lot of medical care.

You also pay a monthly Part B premium. If you want prescription drug coverage, you generally need a separate Part D drug plan, which has its own premium and may have a deductible and other out-of-pocket costs. One of the biggest advantages of Original Medicare is provider choice. You can generally see any doctor or hospital that accepts Medicare anywhere in the United States, and you usually don't need a referral to see a specialist.

Original Medicare + Medicare Supplement + Part D

A Medicare Supplement plan, also called Medigap, does not replace Original Medicare. It works alongside it. Medicare pays its share first, and your Supplement can then help pay certain remaining covered costs, depending on the plan. You pay a monthly premium for your Supplement, and those premiums can increase over time.

Medicare Supplement plans do not include prescription drug coverage, so if you want drug coverage, you generally need a separate Part D plan. That means you're paying your Part B premium, your Medicare Supplement premium and your Part D premium. Your Part D plan can also have a deductible and other prescription costs. For people who can comfortably afford those premiums, this combination can be very appealing because you have broad access to Medicare providers and the Supplement can help cover much of the cost-sharing Original Medicare leaves behind. The tradeoff is the additional monthly cost, and both Supplement and prescription drug plan premiums can increase over time.

Medicare Advantage: Another Way to Get Your Medicare

Medicare Advantage, also called Part C, is an alternative way to receive your Medicare Part A and Part B benefits through a private insurance company approved by Medicare. Most Medicare Advantage plans also include Part D prescription drug coverage, so your medical and prescription coverage can be combined into one plan instead of purchasing a separate drug plan.

Many Medicare Advantage plans have no additional monthly premium beyond your Medicare Part B premium, while others may have a small additional monthly premium. Instead of the basic Original Medicare 80/20 structure, Medicare Advantage plans generally use plan-specific copays, coinsurance and deductibles. Many plans have $0 copays for primary care visits and covered preventive services, while specialists and other services may have their own copays or coinsurance. The exact amounts vary by plan.

Another important advantage is that Medicare Advantage plans have a yearly maximum out-of-pocket limit for covered Medicare services. Once you reach that plan's limit, the plan pays 100% of covered Medicare services for the rest of the year. Many plans also offer additional benefits that Original Medicare generally doesn't provide, such as dental, vision, hearing, gym or fitness memberships, and over-the-counter allowances that may help pay for approved products such as certain pain relievers, bandages, first-aid supplies and shower chairs. These benefits vary by plan, so always look at the actual benefits offered.

What Should You Watch For?

Medicare Advantage can offer a lot of value, but don't choose a plan based only on the monthly premium. Check whether your doctors are in the network, make sure your prescriptions are covered and look at your copays and other potential costs. Depending on the plan, referrals or prior authorization may also be required for certain services.

So Which One Makes Sense for You?

With Original Medicare only, you have Part A and Part B, pay your Part B premium and generally pay 20% of covered Part B services after meeting the deductible, with no annual out-of-pocket maximum. With Original Medicare + a Supplement + Part D, you pay the Part B premium, Supplement premium and Part D premium, while the Supplement can help with Medicare's cost-sharing and Part D provides prescription coverage. With Medicare Advantage, you continue paying your Part B premium, and your plan may have no additional premium or a small monthly premium. Most plans include prescription drug coverage, and you pay plan-specific copays and other costs when you use healthcare, with an annual out-of-pocket maximum and potentially valuable extra benefits.

For many people, the combination of low monthly premiums, included prescription coverage, copays, an annual out-of-pocket maximum and additional benefits makes Medicare Advantage an attractive option. But there isn't one Medicare plan that's right for everybody. Your doctors, prescriptions, healthcare needs, budget and preferences all matter.

Don't choose a plan just because it says "$0 premium." Look at the whole picture. Make sure the plan fits your doctors, prescriptions, healthcare needs and budget.

That's what I do. I'll explain it until it makes sense.