Medicare vs. Medicare Advantage: How to Make the Big Health-Care Decision

Nearing your 65^th birthday? Then you probably know that it’s time to enroll in Medicare. What you may not know is that the majority of Medicare-eligible Americans no longer sign up for traditional Medicare. Most—54% as of 2024—now choose a Medicare Advantage plan instead, an alternative to traditional Medicare offered by a private insurance company.

Bottom Line Personal asked health-care expert Maura Carley what’s driving this ongoing surge in Medicare Advantage enrollment…what are the pros and cons of Medicare Advantage plans versus traditional Medicare…and what people need to know when they make this crucial choice…

What’s the Difference?

Traditional Medicare is accepted by the vast majority of US health-care providers. Medicare Advantage plans, on the other hand, are managed care products like HMOs or PPOs—enrollees may be restricted to in-network providers and/or pay higher costs for out-of-network care.

There are three big reasons why more and more Medicare-eligible people are willing to put up with Medicare Advantage’s restrictive provider networks…

1. Low premiums. Many Medicare Advantage plans advertise a seemingly unbeatable price—$0—but it’s worth noting that these $0 plans come with additional costs. Examples: Enrollees (like those enrolled in traditional Medicare) pay the standard Medicare Part B premium, which is $174.40 per month as of 2024. Enrollees also might pay significant copays and other out-of-pocket costs—as of 2024, Medicare Advantage plans can impose out-of-pocket annual maximums as high as $8,850 for in-network medical services and up to $13,300 when both in-network and out-of-network medical costs are totaled, though most plans set lower maximums.

When shopping, always compare the potential out-of-pocket risk with that of an Advantage plan.  When you use more services, you will have more out-of-pocket costs. With original Medicare and a Medicare supplement, you almost always have far lower out-of-pocket exposure, but you always pay a monthly premium.  Note that there are many different plans—both Advantage and private Medicare supplements—to consider.

2. Extra benefits. Medicare Advantage plans usually include perks that traditional Medicare doesn’t, such as dental, vision and hearing aid coverage—but there’s often less to these perks than enrollees might imagine. Examples: Medicare Advantage plans’ dental coverage may cover little more than dental cleanings (or, if there are more benefits they are limited to once-per-year), and vision and hearing coverage might contribute only a modest amount toward prescription eyewear or hearing aid costs. Always read the fine print. Also consider: Some analysts anticipate that benefits such as these might become skimpier in future years. Medicare Advantage has become expensive for the government—more so than traditional Medicare on a per-enrollee basis. The government has reduced payments to the insurers that offer these plans, and that may encourage the insurers to reduce additional benefits.

3. Marketing. Medicare Advantage plans often are aggressively advertised and promoted by brokers that have financial incentives to sign people up. There’s no comparable marketing push for traditional Medicare.

Reminder: Again, Medicare Advantage could become less appealing in the future—and once you choose Medicare Advantage, it can be challenging to switch to traditional Medicare in later years and be assured that you can buy a Medicare supplement (more about this below).

Which Plan Is Right for Me?

It is not simply a question of whether traditional Medicare or Medicare Advantage is best. The real question is which is best for you. 

You might lean toward Medicare Advantage if…

• You were satisfied with the HMO or PPO that provided your health coverage before you became Medicare-eligible. People most likely to be dissatisfied with Medicare Advantage are those who did not previously have to deal with restrictive HMO or PPO rules and provider networks. If you’ve used HMOs or PPOs successfully for years, a Medicare Advantage plan likely will seem perfectly acceptable to you. Your transition to Medicare Advantage can be almost painless if you choose a Medicare Advantage plan offered by the same insurer that provided the HMO or PPO you had before you became Medicare-eligible. Example: Moving from a Kaiser Permanente HMO to a Kaiser Permanente Medicare Advantage plan might be seamless.
• You’re on a very tight retirement budget. If you cannot easily afford the premiums of a Medicare Supplement plan and a Part D drug plan in your retirement budget, then the lower monthly bills of Medicare Advantage might be your best option.  Most Advantage plans include drug coverage.
• Your retiree health coverage is through a Medicare Advantage plan. It’s becoming increasingly common for the health coverage provided to retirees by some employers and unions to require these retirees to sign up for a particular Medicare Advantage plan or forgo retiree medical.

You might lean toward traditional Medicare if…

• You have serious or complicated health issues or fear that you might in the future…or you know you want access to virtually every hospital in the country. Leading specialists often are not in-network for Medicare Advantage plans. Some leading health-care providers, including the Mayo Clinic, even have declined to accept Medicare Advantage plans’ out-of-network coverage. Most US health-care providers accept traditional Medicare.
• You divide your time among multiple homes. Medicare Advantage provider networks generally are tied to a particular region. That can cause problems for retirees who, for example, winter in the south and summer in the north. Traditional Medicare coverage is accepted throughout the US.
• Your primary goal is to minimize unexpected health bills. If you’re willing to pay a monthly premium to avoid the risk of large copayments or coinsurance, then your best bet is traditional Medicare plus a Medicare Supplement plan.  Supplement plans are private insurance products regulated by the states. In most states and for those new to Medicare, a Plan G supplement provides the most comprehensive medical coverage when paired with traditional Medicare. In addition to a monthly premium for a supplement—and there are many choices of supplements—you must factor in the cost of a Medicare Part D plan for outpatient drug coverage.  And, of course, there are many Part D plans offered.
• You hate dealing with insurance company headaches. Medicare Advantage enrollees face health insurance hassles that include obtaining prior authorization before procedures, being mindful of in-network providers and/or obtaining referrals before seeing specialists. Traditional Medicare is relatively hassle free.
• You’re not certain whether Medicare Advantage or traditional Medicare is better for you. If you can’t decide which to choose, go with traditional Medicare. If you later change your mind, you can easily switch from traditional Medicare to Medicare Advantage during any annual Medicare open enrollment, which runs this year from October 15 through December 7.

As mentioned, if you choose Medicare Advantage, it is trickier to switch in the other direction. You’ll be able to enroll in traditional Medicare during a future open-enrollment period, but if you want to pair that traditional Medicare with a supplement plan, in most states you probably will have to pass medical underwriting to get that supplemental coverage. You might be denied the supplemental coverage or pay inflated premiums for it. Exception: If you signed up for Medicare Advantage when you first became Medicare-eligible and no more than one year has passed since then, you can obtain a Supplement plan without going through the underwriting process. (For more about Supplement plan enrollment rules, “Medigap: What You Need to Know.”)