Original Medicare vs Medicare Advantage Part 2

In a previous article on Medicare vs. Medicare Advantage, we discussed some of the differences between original Medicare and private Medicare Advantage insurance plans. In this issue, we’ll discuss the cost differences between these plans.

To figure your total costs under original Medicare, add up the following:

• Part A premiums. Free for most people who enroll when they first become eligible.
• Part B premiums. $104.90 monthly for most people. Higher-income people, about 5 percent of beneficiaries, will pay more. This affects people filing taxes as “married, filing jointly” with a modified adjusted gross income (MAGI) greater than $170,000. If you file taxes using a different status and your MAGI is greater than $85,000, you will also pay more. In addition, if you don’t enroll when first eligible, you’ll pay an additional late enrollment penalty for as long as you have coverage.
• Part D premiums. The Centers for Medicare & Medicaid Services (CMS) estimated average 2014 premiums for basic Medicare Part D plans at $31 per month. Actual premiums will vary with location and the plan you select. As with Part B, higher-income individuals will pay higher premiums.
• Medicare supplement premiums. Your costs will vary depending on the plan you select, your ZIP code, gender and certain health criteria. Although plans are standardized, different insurers may charge different amounts for the same coverage. To help you estimate, Plan F is the most popular plan. In Kansas City (ZIP 66102), prices for someone in good health range from $127 to $235 a month. Someone in Manhattan with good health would pay more, from $136 to $469 per month.

Medicare Advantage differs significantly from original Medicare. Private insurers, rather than the federal government, offer Medicare Advantage Plans. These insurers contract with Medicare to provide you with all your Part A and Part B benefits. If you enroll in a Medicare Advantage Plan, the insurer covers your Medicare services, rather than the Medicare program.

If you enroll in Medicare Advantage, you’ll pay premiums directly to the insurer. Plans typically include prescription drug benefits, which original Medicare doesn’t cover. Some also provide vision and hearing benefits, which you will not get with original Medicare. For 2014, Medicare Advantage premiums average $32.60 per month. Your actual costs could vary greatly, depending on your location and level of benefits in the plan you choose.

Medicare Advantage Plans include health maintenance organizations, preferred provider organizations, private fee-for-service plans, special needs plans, and Medicare medical savings account plans. The U.S. Department of Housing and Human Services says more than 99 percent of Medicare-eligible individuals live within a plan’s service area, so nearly all Medicare-eligible individuals will have a Medicare Advantage plan available to them.

Other Considerations

As with other types of health insurance, your ultimate costs depend upon more than your monthly premiums. Each Medicare Advantage Plan can charge different out-of-pocket costs. These include:

• The annual deductible
• The copayment or coinsurance, or the amount you pay for each office visit or service you use. For example, some plans require you to pay $20 whenever you see a doctor. Copayments and coinsurance amounts under MA plans can differ from those under Original Medicare.
• Whether you use network providers or not. Some plans, particularly PPO or HMO plans, will cover a lower percentage of your charges if you use a provider that’s not a member of its network.
• The annual out-of-pocket limit. Original Medicare places no limit on your annual out-of-pocket expenses. However, Medicare rules require MA plans to limit out-of-pocket costs for medical and hospitalization charges to $6,700 per year.