Medicare vs Private Health Insurance

You’ve qualified for Medicare, but is it better to keep your private insurance? Can you have both? What’s the difference in coverage between Medicare and standard private insurance? These are questions we often hear when people are new to Medicare. These are great questions. In this article, we will address the differences between Medicare and private Insurance. Can you choose between both? Can you have both? Are there any gaps you should worry about?

What is Medicare?

First of all, what is Medicare?

Medicare is a federal health insurance program for people ages 65 and older. Those with chronic disabilities can access Medicare prior to 65.

There are multiple parts to Medicare:

  • Part A: This is hospital insurance and includes emergency room visits and inpatient care in addition to home healthcare, skilled nursing facility care, and hospice care.
  • Part B: This is medical insurance for your doctor and specialist. It includes preventive healthcare, diagnostics, and treatment for ongoing conditions.
  • Part C: Medicare Advantage. This is an optional portion of Medicare that is offered by private insurance companies and includes Part A and Part B. Part A and Part B are often referred to as Original Medicare.
  • Part D: Prescription drug coverage. This is an add-on to Original Medicare
  • Medigap: These are Medicare supplement policies offered by private insurance companies to cover gaps in coverage and out-of-pocket costs. Medicare Supplemental insurance is not part of the Original Medicare but is regulated by Medicare.


Medicare Parts A and B do not have a max on out-of-pocket costs. This is something to consider as you evaluate whether you need any type of supplemental coverage, including employer-sponsored health plans or Medicare Advantage, or Medicare Supplement plans. Remember that your premiums may be lower with traditional Medicare, but your overall medical costs could be much higher because of out-of-pocket costs.


Set Appointment

This appointment is meant to alleviate any concerns and there is no-cost or obligation to make a change.


What is Private Insurance?

Private insurance is offered by health insurance companies.

You can access private insurance through individual or group plans. Many employers offer health coverage as part of their benefits. When health insurance is offered through an employer, the employer will generally pay a portion or all of the premium.

If you purchase individual insurance, you can also access the federal Healthcare Marketplace. There are four tiers of coverage within the Healthcare Marketplace:

  • Bronze Plans: Cover 60% of healthcare costs.
  • Silver Plans: Cover 70% of costs.
  • Gold Plans: Cover 80% of costs.
  • Platinum Plans: 


Deductibles vary based on the plan. Premiums are higher the more coverage you have. All private plans will structure their coverage differently. You will find a wide variety of structures such as HMOs (Health Maintenance Organizations), PPOs (Preferred Provider Organizations), PFFS (Private Fee-For-Service), and MSAs (Medical Savings Accounts).


Medicare vs Private Insurance Differences

A good way to understand the differences between Medicare and private Insurance is to look at a side-by-side chart of options offered by each.

 MedicarePrivate Insurance
Spouse CoverageNo, spouses must enroll separatelyYes, with some plans spouses and other family members may be included
Overall CostsLess expensiveMore Expensive
Free plansYes, but variedNo common. Employees typically pay a portion
Age Requirement65+ unless you have a chronic condition or a disabilityAny age can be covered
Out of Pocket ExpensesNo max limit for Part A & B. Medicare Advantage and Supplement plans have limitsYes and this will vary depending on the plan
Preventative CareCoveredCovered
Plan OptionsLimited unless you add a Medicare Advantage or Medigap policyMost companies will offer at least 2 plans to choose from
Vision & DentalThis is an add-on to Original Medicare. It can be included in some Advantage plansThese are almost always additional coverages that need to be added.


What are the Gaps in Medicare?

Gaps in Medicare are out-of-pocket expenses. There are no out-of-pocket caps on Medicare Part A and Part B. While Medicare offers excellent coverage with affordable premiums, most people don’t want to rely on it alone. Premiums may not be a big hit to their healthcare budget, but those out-pocket costs can be.

Part A Gaps

Most people will not pay for Part A because of Medicare taxes taken from their paycheck while they worked. Premium costs are not the concern. Medicare has a sizable deductible anytime you are admitted into the hospital.  This tends to increase each year.

Hospital stays can be expensive over time. For days 1-60, there is $0 coinsurance. You will pay the deductible. For days 61-90, there is a $408 co-insurance per day. For days 91 and beyond, there is a $800 co-insurance per day. Medicare also does not pay for blood if it is needed while being hospitalized.

Part B Gaps

Part B involves more costs than Part A. You can defer signing up for Part B if you are still working and have insurance through your job or spouse’s health plan. The monthly Part B premium in 2024 is $174.70 but can be higher if your income is over $87,000. You are also subject to an annual deductible.

The major coverage gap with Part B is that you need to pay a 20% co-insurance for doctor visits and other outpatient services. The out-of-pocket cost can be substantial when you realize Medicare will only cover 80%.


Medicare Costs vs Private Insurance Costs

How do Medicare costs compare to private insurance? Medicare Part A is usually free. Part B costs $174.70 per month for most enrollees in 2024. You can delay purchasing Part B if your private insurance is less expensive. You can even bundle this with a Part D prescription drug plan and a Medicare Supplement policy.

What you need to consider is not only the comparison of monthly premiums but potential out-of-pocket costs. This is where supplemental policies shine. They dramatically limit out-of-pocket expenses depending on what plan you choose.


How does Medicare Compare with My Employer-Sponsored Plan?

If you only have Original Medicare, you will find many gaps between the plan and the employer plan you had. But if you bundle that with a Part D prescription drug plan and a Medicare Supplement policy (Medigap), your coverage will be similar. Often there will be fewer out-of-pocket expenses depending on the type of supplement policy you purchase.


How Do Private Insurance and Medicare Work together?

Are you wondering how private insurance and Medicare work together? If you have private insurance along with Medicare, the two insurance carriers follow a “coordination of benefits.” This process helps them decide which insurer will pay first.

If the employer plan has 20 or more employees, the group plan will usually pay first. If the employer plan has fewer than 20 employees, Medicare will usually pay first. The primary insurance will pay the medical claims first and the secondary will pay for any services it covers but the primary does not. This is where it can be helpful to talk with an agent to look over your policies for any coverage gaps.

If you are covered by an employer plan, you can delay Part B Medicare until you are no longer covered. You do need to remember to sign up for Part B as soon as that coverage ends. You have up to eight months to sign up for Part B without incurring late penalties. Some people will still retain employer health benefits when they retire. Some employers or union members will extend these benefits. If you are a retiree with continuing health benefits, Medicare will always be primary. Your private health plan becomes a secondary plan.

Another category that some fall into is the FEHBP. This is the Federal Employees Health Benefits Program. If you are covered by this program, you are not required to join Medicare Part B when you retire. If you want to enroll later, you would incur permanent late penalties for the Part B plan.

If you have coverage from the Veterans Administration, you are not required to enroll in Part B, but the VA recommends it. Medicare expands VA coverage beyond its network of hospitals and doctors. Before you become eligible for Medicare, you will receive a letter in the mail telling you how to complete your “Medicare Initial Enrollment.” This questionnaire will ask about other coverage you have and allow for the coverage to be automatically coordinated.


Choosing Private Insurance

If you choose to use private insurance, you need to understand the Medicare window. There is a seven-month window during which you can apply for Medicare. The period begins three months before your 65th birthday and ends three months later. If you apply at any time outside the window, there may be a lapse in coverage and penalties.

If you are concerned about potential gaps in coverage between Medicare and private plans, Medicare has established options: Medicare Supplement plans and Medicare Advantage plans.


Medicare Supplement Plans (Medigap)

As you’ve seen with Medicare, you are still responsible for around 20 % of your medical bills. Because of this, many people buy additional coverage to pay those out-of-pocket costs that Medicare does not pick up. One of the most popular ways to protect your financial well-being when you are on Medicare is to use a Medicare Supplement product or more commonly known as Medigap.

Medigap was created by the federal government to be delivered through private companies to assist with out-of-pocket costs. The good news is that coverages are regulated by the federal government. Regardless of what company you choose, they will be the same.

Basics of Medicare Supplements

There are 10 Medicare Supplement plans on the market. Availability varies based on the insurance company and where you live. Following are the basic plans most customers choose:

Plan A

Plan A is the most basic plan. All other plans build off this coverage. Plan A covers Part A Medicare co-insurance, including an extra 365 days of hospital costs. Part B 20% co-insurance is covered, along with three pints of blood and Part A hospice care

Plan B

Plan B is identical to A except it covers the Part A deductible.

Plan C

Plan C adds coverage for the Part A coinsurance for using a skilled nursing facility, and also covers the Part B deductible. With Plan C, you also have coverage for the medical expense of foreign travel emergency medicine.

Plan D

Plan D modifies Plan C. It includes everything Plan C does except it removes the Part B deductible.

Plan F

Plan F and Plan G are the most comprehensive Medicare Supplements you can buy. Along with the coverages included in Plan C, you also have coverage for Part B excess charges. One thing to remember about Plan F is that availability is restricted. If you are new to Medicare in 2021, you can not purchase this plan. It is available if you have been enrolled in Medicare prior to that date.

Plan G

Plan G offers the same coverages as Plan F, EXCEPT it does not cover the Part B deductible. The reason people choose this plan is that they can often save more than $200 in premium cost over Plan F. This more than covers the deductible cost.

Just like Plan F, G covers Part B excess charges. Under traditional Medicare, doctors are allowed to charge an extra 15% to the patient beyond the portion that Medicare reimburses. These costs can be high and Plan G & F will cover these charges. A High Deductible Plan G was introduced in 2021. Currently, you need to hit a $2,800 deductible before coverage begins with Plan G. The only main benefit missing from this list is the Part B deductible.

Plan N

Plan N is similar to Plan G except it does not cover Part B excess charges. You may also be required to pay some copayments. The copayments are up to $20 for office visits and $50 for emergency room visits, but they are not always applicable.


Medicare Advantage Plans

The Medicare Advantage plan is also referred to as Medicare Part C. In a nutshell, Medicare Advantage bundles Original Medicare with Part D prescription drug coverage. Vision and dental coverage are also included.

The reason Medicare Advantage is attractive to seniors is because it simplifies additional coverage by bundling everything into one package. Costs are usually less than other options. Advantage plans are built on networks like an HMO, where medical professionals are able to coordinate your care.

There are downsides to Medicare Advantage. Because of managed-care options, it is not available in every area. And where it is available, you will be locked into the doctors in their networks.


Set Appointment

This appointment is meant to alleviate any concerns and there is no-cost or obligation to make a change.


Key Takeaways

When comparing coverages between Original Medicare and private health Insurance, private insurance wins. You can build a product with Medicare that is as good if not better than private insurance by adding options such as Medicare Advantage or Medicare Supplement products. You can be enrolled in Medicare and continue receiving private health benefits. As you have seen, there are certain ways benefits will apply. You also need to keep an eye on enrolling in Plan B whenever the private insurance no longer covers you.

Medicare Nationwide is committed to helping seniors through the maze of Medicare. Regardless of where you are on the journey, we can help you look at your current coverages to identify gaps or even cost savings. Talk with one of our agents to learn more and find what kind of options you have to improve your healthcare coverage.

Prefer to chat by phone? Give us a call at 1-888-559-0103.