Medicare vs. private insurance:

Medicare vs. private insurance: post thumbnail image

People looking for health insurance can choose between Medicare and private companies. The best option will depend on a person’s healthcare needs and financial situation.

The federal government provides original Medicare, and private companies administer private health insurance and Medicare Advantage plans on behalf of the government.

The cost of private insurance varies by plan type and coverage levels. In addition, some employers provide private insurance as a perk. A person should assess what they need from health insurance to help guide their plan choices.

We may use a few terms in this piece that can be helpful to understand when selecting the best insurance plan:

  • Deductible: This is an annual amount that a person must spend out of pocket within a certain time period before an insurer starts to fund their treatments.
  • Coinsurance: This is a percentage of a treatment cost that a person will need to self-fund. For Medicare Part B, this comes to 20%.
  • Copayment: This is a fixed dollar amount that an insured person pays when receiving certain treatments. For Medicare, this usually applies to prescription drugs.

Coverage that private companies offer

The health insurance that Medicare-approved private companies provide varies among plan providers, but it may include coverage for the following:

  • assistance with Medicare costs, such as deductible, copays, and coinsurance
  • prescription drug coverage through Medicare Part D plans
  • coverage for additional benefits, such as vision, hearing, and dental care

Additional benefits are generally available through Medicare Advantage plans, which include original Medicare (Part A and Part B) coverage.

A person must be enrolled in original Medicare to be eligible for the private insurance plans.

What are the cost differences?

Private insurance premiums vary greatly, depending on the person’s location, age, and chosen type of coverage. For example, high deductible plans often cost less per month than those that charge a low deductible. The reason for this is that the insurers cover their costs by having people contribute a higher amount toward their healthcare expenses before the company fund any treatment.

However, Medicare plans may cost more because they do not have an out-of-pocket limit, which is a requirement of all Medicare Advantage plans.

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