Differences between Medicare and Medicare Advantage

Comparison Article

In the United States, Medicare is a federal health insurance program primarily for individuals aged 65 and older, as well as younger people with specific disabilities or end-stage renal disease. The program is divided into two main pathways: Original Medicare and Medicare Advantage. Original Medicare consists of Part A (hospital insurance) and Part B (medical insurance), which are administered directly by the federal government. Medicare Advantage, also known as Medicare Part C, allows beneficiaries to receive their Medicare benefits through private insurance companies approved by the Centers for Medicare & Medicaid Services (CMS).

Comparison of Program Structures

The choice between these two options involves trade-offs regarding provider access, cost predictability, and supplemental coverage. Under Original Medicare, beneficiaries can visit any doctor or hospital in the United States that accepts Medicare. Most healthcare providers participate in the program. In contrast, Medicare Advantage plans typically use provider networks, such as Health Maintenance Organizations (HMOs) or Preferred Provider Organizations (PPOs). Patients in these plans may need to choose a primary care physician or obtain referrals to see specialists. Using a provider outside of the plan's network often results in higher costs or a lack of coverage.

Cost structures also differ. Original Medicare requires a monthly premium for Part B, and beneficiaries are generally responsible for a 20% coinsurance for medical services after meeting an annual deductible. There is no annual limit on out-of-pocket expenses. To mitigate these costs, many people purchase Medicare Supplement Insurance, known as Medigap. Medicare Advantage plans often have lower premiums—some as low as $0—but require copayments for specific services. A significant feature of Part C is the mandatory out-of-pocket maximum, which limits the total amount a member pays for covered services each year.

Comparison Table

Feature	Original Medicare	Medicare Advantage
Administration	Federal government (CMS)	Private insurance companies
Provider Choice	Any provider accepting Medicare	Restricted to plan networks (HMO/PPO)
Monthly Premium	Part B premium (and Part A if not vested)	Part B premium plus potential plan premium
Out-of-pocket Limit	No annual limit	Mandatory annual limit
Drug Coverage	Requires separate Part D plan	Usually included in the plan
Supplemental Insurance	Compatible with Medigap	Not compatible with Medigap
Referral Requirement	Usually not required	Often required for specialists
Extra Benefits	Limited (excludes most dental/vision)	Often includes dental, vision, and hearing

Venn diagram comparing Differences between Medicare and Medicare Advantage

Prescription Drugs and Additional Benefits

Original Medicare does not include coverage for most outpatient prescription drugs. Beneficiaries must enroll in a standalone Prescription Drug Plan (Part D) to obtain this coverage. Conversely, the majority of Medicare Advantage plans include prescription drug coverage (MAPD) as part of the bundled benefit package.

Medicare Advantage plans frequently offer benefits not found in Original Medicare, such as routine dental exams, vision hardware, and hearing aids. These additions are funded by the rebates private insurers receive from the government for meeting specific quality and cost targets. However, Medicare Advantage plans often employ utilization management tools like prior authorization, which requires the insurer's approval before certain procedures or medications are covered.