What is the Difference Between Traditional Medicare and an Advantage Plan?

Many Older Americans today are not as familiar with their Medicare policy as they could be. In fact, research shows there is continued confusion over the difference between Traditional Medicare and Advantage Plans. One of our goals, as we prepare for the Medicare Open Enrollment period, is to help you identify the cover you need.

Traditional Medicare covers acute hospital care, a limited number of skilled nursing facility days, home health care, and hospice care for persons who are at least 65 years of age or older and entitled to Social Security retirement insurance or Railroad Retirement cash benefits. A person who has received Social Security disability benefits or Railroad Retirement Disability Income for twenty-four months or longer is also entitled to receive Medicare assistance regardless of his or her age. Further, persons of any age who have end-stage renal disease or amyotrophic lateral sclerosis can also apply for this coverage. 

The cost of the traditional Medicare plan is paid by the Centers for Medicare and Medicaid from the Medicare tax that is deducted from a worker’s paycheck. Presently, this is 1.45% of earnings for employees earning less than $200,000. The ever-increasing cost of the Medicare deductibles, the cost of the Medicare supplement, and the additional cost of the Medicare Part D prescription drug plan, however, may eventually drive most of the 57,000,000 million fee-for-service Medicare beneficiaries into joining the nineteen million Medicare beneficiaries presently enrolled in a Medicare Advantage plan. 

By contrast, a Medicare Advantage plan is owned by a private company that provides all of a beneficiary’s health care and prescriptions through the plan’s health care providers for a capitated rate paid by the Centers for Medicare and Medicaid. The Medicare Advantage company must provide all the services currently available under Medicare Parts A and B. The primary physician who is assigned to the Medicare Advantage beneficiary serves as a gatekeeper to specialists. Thus, the beneficiary’s health care cost is reduced while his or her health is maintained. 

A Medicare Advantage beneficiary, however, loses the right to select any doctor and must select from a panel of physicians offered by the plan. Although Medicare Advantage may seem to save beneficiaries more money at first, they may only save money if the Medicare beneficiary uses the plan’s doctors for all their care. In addition, because Medicare Advantage plans only have one-year contracts, the provider can decide to change its costs and even leave the Medicare program.

We know this article may raise more questions than it answers about your health care needs. As we approach Medicare Open Enrollment, don’t put off learning more about your plan and the coverage you need. We encourage you to always ask us your questions on this or any elder care issue.