How Does Original Medicare and Medicare Advantage Work?

People with Medicare can get their health coverage through either Original Medicare or a Medicare Advantage (MA) Plan (also known as a Medicare private health plan or Medicare Part C).

Original Medicare is the traditional fee-for-services program offered directly through the federal government. If is sometimes called Traditional Medicare or Fee-for-Service (FFS) Medicare. Under Original Medicare, the government pays directly for the health care services you receive. You can go to any doctor and hospital that takes Medicare, anywhere in the country.

In Original Medicare:

  • You go directly to the doctor or hospital when you need care. You do not need to get permission or authorization from Medicare or a referral your primary care doctor for most services
  • You are responsible for a monthly premium for Part B. Some also pay a premium for Part A.
  •  You typically pay a coinsurance, or percentage of the full cost, for each service you receive.
  • There are limits on the amounts that doctors and hospitals can charge for your care.

If you want prescription drug coverage with Original Medicare, in most cases you will need to actively choose and join a stand-alone Medicare private drug plan, also called a Part D plan. Part D is offered through private insurance companies.
Unless you choose otherwise, you will have Original Medicare when you first enroll in Medicare.

Medicare Advantage Plans, also known as Medicare private health plans or Part C, are plans that contract with the federal government and are paid a fixed amount per person to provide Medicare benefits.

The most common types of Medicare Advantage Plan are:

  • Health Maintenance Organizations (HMOs)
  • Preferred Provider Organizations (PPOs)
  • Private Fee-For-Service (PFFS)

You may also see:

  • Special Needs Plans (SNPs)
  • Provider Sponsored Organizations (PSOs)
  • Medical Savings Accounts (MSAs)

Remember, you still have Medicare if you enroll in an MA Plan. This means that you likely pay a monthly premium for Part B (and a Part A premium, if you have one). If you are enrolled in an MA Plan, you should receive the same benefits offered by Original Medicare, and many MA Plans include prescription drug coverage.

  • You generally need to see providers who are in your plan’s network and service area to pay the lowest cost for services. In many plans, you must get prior authorization or a referral from your primary care provider for specialty services, procedures, and durable medical equipment.
  • You will often pay fixed copayments per service or item you receive. These costs vary from plan to plan. Plans cannot charge higher copayments or coinsurances than Original Medicare for certain services, like chemotherapy and dialysis, but they can charge higher cost-sharing for other services.
  • All Medicare Advantage Plan must include a limit on your out-of-pocket expenses for Part A and B services. For example, the maximum out-of-pocket cost for HMO plans in 2020 is $6,700. These limits tend to be high.
  • An MA Plan may offer certain benefits that Medicare does not cover, such as dental and vision care, caregiver counseling and training, and certain in-home support like housekeeping. Not all MA Plans cover additional benefits, so check with a plan directly to learn what benefits it covers.

MA Plans may have different:

  • Networks of providers
  • Coverage rules, including prior authorization and referral requirements, that can constrain how and when you receive care
  • Premiums (in addition to the Part B premium)
  • Cost-sharing, including deductibles and copayments for covered services (see How Do the Original Medicare and MedicareAdvantage Costs Work?)

Even plans of the same type offered by different companies may have different rules, so you should always check with a plan directly to find out how its coverage works.

You can join an MA Plan if:

  1. You have Medicare Parts A and B
  2. You live in the plan’s service area
  3. And, you do not have End-Stage Renal Disease (ESRD), except in limited circumstances
    1. Note: If you have ESRD and need dialysis or a kidney transplant, you may enroll in an MA Plan if you join a Special Needs Plan that specifically accepts people with ESRD, or if other special circumstances apply. Additionally, beginning in 2021, people who have ESRD will be able to enroll in any Medicare Advantage Plan as long as they have Medicare Parts A and B and live in its service area.

 

Many Medicare Advantage Plans also offer prescription drug coverage (Part D). If you join an MSA plan or a PFFS plan without drug coverage, you can enroll in a stand-alone Part D plan. Remember that people with Original Medicare who want Part D coverage also enroll in a stand-alone Part D plan.

If you have health coverage from your union or employer (current or former) when you become eligible for Medicare, you may automatically be enrolled in an MA Plan that they sponsor. You have the choice to stay with this plan, switch to Original Medicare, or enroll in a different MA Plan. Be aware that if you switch to Original Medicare or enroll in a different MA Plan, your employer or union could terminate or reduce your health benefits, the health benefits of your dependents, and any other benefits you get from your company. Talk to your employer/union and your plan before making changes to find out how your health benefits and other benefits may be affected.

Read More: What Are Medigaps?
Learn About: When Choosing Original Medicare and Medicare Advantage What Should I Take into Consideration?
Return to: Medicare Advantage

This content was created and copyrighted by the Medicare Rights Center ©2020. Medicare Rights Center is a national, nonprofit consumer service organization that works to ensure access to affordable health care for older adults and people with disabilities. These materials are presented here with support from YourMedicare.com and may not be distributed, modified or edited without Medicare Rights’ consent.

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