Published on October 25, 2022

Understanding Traditional Medicare vs. Medicare Advantage

toy umbrella and stethoscope with text medicare advantage plans

The choices for Medicare coverage are more numerous than ever before – including various Medicare Supplement Insurance (MSI) plans and Medicare Advantage.

And if you already have Medicare coverage, it’s possible to change it each year during annual enrollment.

“For anyone considering Medicare and related products, it’s important to compare all your options and decide what’s best for you,” said Jordan Anderson, Vice President of Sales for Avera Health Plans.

“One of the best ways to make an informed decision is to sit down with a knowledgeable agent who knows all the ins and outs of Medicare coverage,” Anderson said.

There are two main options for Medicare coverage:

  • Original Medicare Parts A, B and D with a Medicare Supplement Insurance (MSI) plan.
  • Medicare Advantage, which bundles parts A, B and usually D. No additional supplement is needed.

Original Medicare Plus Medicare Supplement

For example, Original Medicare includes Part A for hospitalization; Part B for expenses like outpatient surgery, clinic visits, diagnostic imaging, therapy and more; and Part D for prescription drugs.

Medicare Supplement Plans (also known as Medigap policies) are necessary to cover the gaps that Medicare doesn’t pay, including deductibles and coinsurance.

Medicare Part B pays 80% of outpatient and professional expenses, and you are responsible for the remaining 20%.

There’s also no cap on out-of-pocket costs. So if you have a $100,000 bill, you would be responsible for paying $20,000 out of pocket if you’re not covered by a Medicare Supplement.

“For people on Original Medicare, a Medicare Supplement plan protects their personal finances if or when they have a major health event,” Anderson said.

Why Consider a Medicare Supplement

“This traditional route is more predictable for people who have need for frequent health care or who do not have savings set aside for health care expenses,” Anderson said. “It’s a budget-friendly option that helps you plan ahead for what you’re likely to pay for health care for the entire year – reducing your worries for unexpected out-of-pocket costs.”

The standard monthly premium for Medicare Part B enrollees will be $164.90 for 2023, a decrease of $5.20 from $170.10 in 2022. The annual deductible for all Medicare Part B beneficiaries is $226 in 2023, a decrease of $7 from the annual deductible of $233 in 2022.

“A general rule of thumb is that you might pay more for monthly premiums with Original Medicare plus Medicare Supplement. But if you have a health event, your out-of-pocket is likely to be lower. In fact, there are plans to choose from that would result in very minimal out-of-pocket costs,” Anderson said.

Medicare Advantage

Medicare Advantage is a Medicare-approved plan from a private company that offers an alternative to Original Medicare. These plans bundle Part A, Part B and usually Part D. In most cases, you can only use providers that are in the plan’s network. Avera collaborates with Wellmark to offer the Blue Medicare Advantage PPO | Avera product.

“Medicare Advantage offers a different way to get Medicare coverage. The plan you select should depend on your life situation and your health status,” Anderson said.

Medicare Advantage is also known as Part C. MA plans may offer extra benefits that Original Medicare doesn’t cover.

MA plans act more like a typical health insurance plan with an annual deductible, co-pays and coinsurance.

Some MA plans have a very low premium plus the Medicare Part B premium of $164.90 for most people. Some plans may have a $0 premium and may help pay all or part of your Part B premium.

“While the premium might be lower, your out-of-pocket costs might be higher, depending on the deductible and/or coinsurance you choose,” Anderson said.

For MA coverage, the yearly out-of-pocket limit for 2023 is $8,300

Why Consider Medicare Advantage

A Medicare Advantage plan might be an attractive option for those who are relatively healthy and/or have savings set aside to cover health care expenses.

Enrollment Periods When You Can Make a Change

Around the time you turn 65, there’s a seven-month enrollment period for you to make these decisions (three months before and three months after your birthday month). And after age 65, there are annual enrollment periods when you can make a change in coverage:

  • Oct. 15-Dec. 7, 2022: Medicare open enrollment, when you can change your Medicare health or drug coverage for 2023. You can join, switch or drop a Medicare Advantage plan or a Medicare drug plan.
  • Oct. 15, 2022-Jan. 15, 2023: Medicare Supplement Insurance (MSI) open enrollment for Avera Health Plans. During this time you can enroll with no health questions asked.
  • Jan. 1-March 31, 2023: If you're in a Medicare Advantage plan, you can change to a different MA plan or switch to Original Medicare (and join a separate Medicare drug plan) once during this time.

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