Original Medicare or Medicare Advantage? Compare Out-of-Pocket Costs
Health insurance is a requirement in life, especially as one grows older. In the United States, people aged 65 or older, as well as some younger individuals with specific medical conditions, are covered by Original Medicare.
There are two key types of medicare plans: Original Medicare and Medicare Advantage. Both plans provide coverage for services and health care, but they differ in their out-of-pocket charges. Costs incurred are the amount paid personally by you when undergoing treatment, excluding the amount covered by the insurance.
This guide will explain the straightforward differences in out-of-pocket costs between original Medicare and Medicare Advantage plans.
What is Original Medicare?
Original Medicare refers to the standard health insurance scheme offered by the government, which is administered by the state, meaning they have full control over how it is executed. It is divided into two core parts:
- Part A (Hospital Insurance): Includes services such as attending to patients in facilities known as hospitals, nursing homes (Also called rest homes), hospice facilities, as well as some home-based patient support known as home nursing.
- Part B (Medical Insurance): Include nurses and doctors attending to patients (Also known as practitioners of medicine or healthcare professionals), stationary medical services, medical apparatus, and services aimed at warding off illnesses (Also known as preventive medicine).
Out-of-Pocket Costs in Original Medicare
Premiums
- Most individuals do not pay a premium for Part A if they worked and paid Medicare taxes while employed.
- Part B has a monthly premium. That amount can change from year to year and may also depend on your income.
Deductible
- Starting in 2025, the Part A hospital deductible is $1,676 per benefit period; this continues to rise each year.
- Part B has its annual deductible.
Coinsurance and Copayments
- Generally, for most of the doctor services under Part B of Original Medicare, you would pay a deductible, then 20% of the Medicare-approved amount for the services.
- For hospital stays, after a specified amount of time, you may pay coinsurance on a per-day basis.
No Out-of-Pocket Maximum
- Each year, spending is out of control as no limits have been set on the services covered under Original Medicare.
- The threshold is set for Medicare Advantage somewhere around a $2,000 annual cap and is also managed.
Medigap
- Medigap (Medicare Supplement Insurance) is designed to cover some additional expenses not met by Original Medicare, including copayments and coinsurance.
- Each Medigap plan sets its premiums, and some have an out-of-pocket limit, such as Plan K: $7,220 and Plan L: $3,610 in 2025.
What is Medicare Advantage?
Medicare Advantage (also referred to as Part C) is an option on offer instead of Original Medicare. It is registered with private companies that have received permission from Original Medicare to furnish other services as well. These plans will have to extend their original coverage, meaning the offers given under a medicare advantage plan.
Out-of-Pocket Costs in Medicare Advantage
Premiums
- Most Medicare Advantage plans come with low or even $0 premiums, though you must still pay your Part B premium.
Deductibles
- Some plans have no deductible, while others do. Deductibles vary by plan.
Copayments and Coinsurance
- Services are either paid for in a certain amount (copayment) or a percentage (coinsurance). The plan determines these amounts.
Out-of-Pocket Maximum
- Medicare Advantage plans have an annual maximum out-of-pocket limit. The current maximum in 2025 is $9,350, though many plans have lower limits.
- After reaching this limit, the plan pays 100% of the covered costs for the remainder of the year.
Prescription Drugs
- Coverage for prescription medications is available in most Medicare Advantage plans.
- Starting in 2025, there is an annual cost of $2,000 for out-of-pocket expenses, which is capped, the same as Part D in Original Medicare.
Supplemental Benefits
- Additional benefits are offered in the majority of the plans, including dental, vision, hearing, and wellness programs.
- These can help minimize total healthcare costs.
Factors That Affect Your Costs
- Health requirements: The need to frequently visit a doctor or stay in a hospital will increase your overall costs.
- Choice of plan: Each Medicare Advantage plan comes with its own perks. Compare premiums, copays, deductibles, and out-of-pocket maximums.
- Provider Networks: You might be restricted to certain doctors or hospitals under some Medicare Advantage plans.
- Area: Plan options and expenses differ from place to place.
- Wealth: Individuals with a higher income bracket might have to pay additional fees for Part B and Part D.
A 2024 spotlight report published in 2023 by KFF revealed that 51 percent of Medicare beneficiaries were enrolled in Medicare Advantage plans. This figure is increasing every year. It seems that a lot of people enroll in Advantage plans because of the additional benefits they offer as well as the out-of-pocket maximum.
Nevertheless, a 2022 U.S. Government Accountability Office (GAO) study found that prior authorization requirements and narrowed provider slips on Advantage plans made it difficult for some people to access care.
Planning For Costs Not Covered
- Try to assess your healthcare needs at least once a year.
- Every year during the open enrollment period, try to assess available plan options.
- See if your doctors and hospitals accept Medicare Advantage plans, and if they do, see if they’re in network.
- Evaluate your prescription requirements and see whether your medications are covered.
- Consider opting for Medigap if you already have Original Medicare for added coverage.
In Summary
Both out-of-pocket expenses and annual limits are crucial factors for consideration when choosing between Original Medicare and Medicare Advantage. Original Medicare has an unmanaged payment structure yearly, but adding Medigap insurance is available for more security.
Medicare Advantage has a yearly spending cap with a ‘maximum out-of-pocket’ limit; these factors help alleviate financial pressure. All plans will incur $2,000 in prescription drug costs starting in 2025. Original Medicare is much more tailored based on individual healthcare needs, region, and available plans, as well as annual choices made.
Make sure to evaluate your needs and healthcare options yearly to avoid being overbilled in managed healthcare expenditures. Hence, it will promote smoother healthcare spending and avoid budgeting surprises.
FAQs
Original Medicare includes monthly premiums (mainly for Part B), annual deductibles, and 20% coinsurance for most services. It does not have a yearly out-of-pocket maximum, so costs can add up without a Medigap plan.
It depends on the plan. Medicare Advantage plans often have lower premiums and include a yearly out-of-pocket maximum, which Original Medicare lacks. However, you may face copays, network restrictions, and prior authorization requirements.
Yes, you can switch during Medicare’s Open Enrollment (October 15–December 7) each year. However, switching from Medicare Advantage to Original Medicare might require a health screening if you want to buy a Medigap plan.
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