An Individual’s health should be one of their top priorities in life. Trying to find the correct medical insurance, though, can feel tricky and confusing. For many, the options are Medicare vs private health insurance. It is important to understand and compare the two. With the right information, you will be able to make a proper decision on what is best for you.
Medicare vs. Private Insurance: Comparison Overview
Medicare is a health insurance program established by the federal government.
Private Insurance, on the other hand, is individual or family coverage plans offered by private entities. These plans are not government-funded.
What is the Difference Between Medicare and Private Health Insurance
Primarily, Medicare is for individuals ages 65 or older. Compared to private insurance, Medicare has a higher number of coverage options. On the other hand, private insurance allows coverage for dependents. There are also employer-sponsored private health insurance plans.
You can read about more differences between the two below.
| Medicare | Private Insurance |
Definition | Medicare is a health program funded by the government. There are four parts of Medicare, Parts A through D. | These are health insurance plans offered by private companies. Typically, this will be employer-provided. You can also purchase coverage directly from the insurance company. |
Eligibility Requirements | Most often, only individuals 65 or older are eligible for Medicare. However, those with permanent disabilities or end-stage renal disease can also be eligible. | This varies heavily on the type of coverage plan. For example, your age and medical history can factor into certain eligibility requirements. You are also eligible if your employer offers health insurance. |
Coverage and Benefits | Medicare offers coverage for doctor visits, prescription drugs, and hospital stays. An individual’s coverage may vary depending on the type of plan they have. | Similarly, private insurance also offers doctor visits, prescription drugs, and hospital stays. However, an individual’s plan type and premium can alter the type of coverage they receive. |
Cost and Financing | Medicare is funded by taxes. Premiums are paid by beneficiaries. Cost-sharing may be required for specific services. | With private insurance, individuals must pay the premiums. Typically, cost-sharing is required for services and procedures. An individual’s financial situation and plan type can play a factor when determining their premiums and cost-sharing percentage. |
Quality of Care | This will depend on the provider and the individual’s health situation. | Similarly, this will depend on the provider and the individual’s health situation. In addition, their plan type can be a factor as well. |
Flexibility | Usually, Medicare is more rigid compared to private health insurance. | Private insurance is often more flexible. |
Availability | Medicare is readily available to qualifying individuals living in the United States. | There are options available for individuals living in the United States. However, certain plans may be dependent on a person’s financial situation. |
Pros | There is easier availability for eligible individuals. In addition, costs are typically lower. | Individuals will have a larger option of care providers and more flexibility. |
Cons | There can be a limited network of providers and some services may not be covered. | This is usually more expensive, and restrictions may apply regarding an individual’s eligibility. |
What is Medicare?
Originally founded in 1965, Medicare is a government health insurance program. It is now administered by the CMS (Centers for Medicare and Medicaid Services). It is important to note that there is a difference between Medicare and Medicaid.
Unlike Medicare, each state has its own Medicaid programs. This is designed to help individuals and families with lower income and limited resources. Medicare, though, is designed primarily for people 65 and older. However, younger individuals with disabilities such as permanent kidney failure or ALS (Lou Gehrig’s Disease) also qualify for Medicare.
Medicare Eligibility Requirements
Component | |
Part A - Hospital Insurance | A majority of individuals are not required to pay premiums for Part A Medicare. You can qualify for this if: You receive retirement or disability benefits from Social Security. You receive Medicare below the age of 65 You and another qualifying individual (current or former spouse) paid Medicare taxes for at least 40 work quarters. |
Part B - Medicare Insurance | You must pay a premium each month, even if you didn’t receive any Part B services. Your monthly premium may vary depending on your income level. |
Part C - Medicare Advantage Plans | This varies by plan. Your premium costs may change each year. |
Part D - Drug Coverage | This will also vary by plan. Based on your income, you may need to pay more. |
To determine your eligibility for Medicare, visit their website here.
Medicare Coverage and Benefits
In this section, we will discuss available Medicare coverage and benefits. Typically, Medicare will offer certain benefits. These are hospital stays, doctor visits, and prescription drugs.
Hospital Stays
Part A offers hospital insurance. This would cover inpatient care, hospice, and surgery. Furthermore, it would also cover lab tests, proper nursing facilities, and home health care.
Doctor Visits
Part B will cover doctor visits. They will also cover outpatient services, home health care, and certain preventive services.
Prescription Drugs
You can also apply for a Medicare Drug Plan. This would assist in paying for prescription drugs. Before doing so, you must already have Medicare Part A and/or Medicare Part B.
Alternatively, you can enroll in Medicare Advantage Plan (Part C). This would cover all of the original Medicare (Parts A and B) plus drug coverage. Similar to the Medicare Drug Plan, you must already be enrolled in Parts A and B before applying for the Advantage Plan.
Lastly, you may also apply for Medicare’s supplemental insurance for costs not covered by Medicare.
How Does Medicare’s Cost and Financing Work?
It can be expensive to pay medical costs. With Medicare, you may be subject to paying premiums, deductibles, and coinsurance. It is quite important to understand how financing with Medicare works. You should be aware of what is affordable and how you should plan your budget.
Here is an explanation of these terms and the typical costs you may pay.
Monthly Premiums
A premium is what you must pay each month to have health coverage. For Medicare Part B, your premium will be deducted from your Social Security benefits.
As of 2023, if you need to pay for Part A the monthly premium is $278 or $506 per month. This is dependent on how long you or your spouse worked for and paid Medicare taxes.
Your premium costs may be raised if you fail to enroll in Part B once you turn 65.
Deductibles
A deductible is what you must pay before Medicare begins to pay for covered medical care procedures and services. This varies based on what type of plan you have and what part of Medicare you are enrolled in. For Part A, there is a $1,600 deductible each time you are admitted to a hospital. For Part B, there is a yearly deductible of $226.
Coinsurance
Coinsurance is a cost-sharing service where both you and Medicare pay for services received. Typically, for Part B, you will pay 20% and Medicare will cover the other 80%.
Medicare Advantages
Medical care supplies such as blood-sugar monitors and test strips are covered. However, there is typically a 20/80 percent coinsurance.
You can go to health care providers, pain management specialists, or urgent care facilities that accept Medicare.
Medicare will cover up to 80 percent of physical therapy that is considered medically necessary.
Medicare Disadvantages
You may need to enroll in a separate Part D Medicare Plan for prescription medicines.
Usually, you will be required to visit an in-network provider. If your preferred primary care provider is out-of-network, you may need to seek a new healthcare provider.
Hearing coverage is not covered under Original Medicare. For these benefits, you would need to enroll in Medicare Advantage.
What is Private Insurance?
Private Insurance is medical insurance offered by private companies. These are not funded by the federal government. You can receive private health insurance through your employer. A majority of the United States population falls under this category.
Alternatively, if your employer does not offer health coverage, you can purchase it directly from the insurance company.
There are different types of health insurance plans:
PPO - Preferred Provider Organization
HMO - Health Maintenance Organization
EPO - Exclusive Provider Organization
POS - Point of Service
Each plan is different. Certain plans require you to visit healthcare providers that are in-network.
There are also supplement plans such as dental and vision insurance or fixed indemnity plans. Typically, you would already have health insurance and then add these on.
Eligibility Requirements for Getting a Private Insurance
You may be suitable for private health insurance if you meet any of these qualifications.
Type of Insurance | Eligibility |
Employer-Sponsored Insurance | Your company must offer health insurance. You must be a full-time employee and work at least 30 hours per week. |
Individual Insurance Plan | You are self-employed. You lost your job and can’t afford COBRA. (Consolidated Omnibus Budget Reconciliation ACT) You are over the age of 26 and are no longer classified as a dependent under your parent’s healthcare plan. You are a freelance worker. |
Coverage and Benefits of Private Insurance
A Private insurance plan offers a variety of benefits and coverage. It is required for health insurance plans to cover 10 essential health benefits.
They are:
Emergency services
Hospitalization
Prescription drugs
Pediatric services
Laboratory services
Ambulatory patient services
Mental health and substance use disorder services
Maternity and newborn care
Rehabilitative services
Preventive services
How Do the Benefits Differ?
Unlike Medicare, there is no separate plan needed for prescription drug coverage. Medicare Advantage is similar to a typical private insurance plan.
Hospital Stays
After you reach your deductible, your insurance company will begin to cover your hospital expenses. The percentage they will cover will depend on the type of plan you have. You can also purchase hospital indemnity insurance, a supplemental coverage that can help pay for fees.
Doctor Visits
Most private plans have copays that require you to pay for certain types of healthcare. For example, your plan may have a $30 copay for visiting your primary care doctor and your insurance provider pays the rest once your deductible is. As previously stated, a deductible is the amount of money you must pay before your insurance company will begin to assist. Afterward, you and your insurance company will begin a cost-sharing service called coinsurance. Copays count toward your out-of-pocket maximum but they typically don’t count toward your deductible.
Prescription Drugs
Private Insurance companies help pay for prescription drugs, as pocket costs can be quite expensive. You may need to pay your copay when you pick up the medicine.
How Private Insurance Cost and Financing Works
With private insurance, you must pay monthly premiums, deductibles, and any residual copays/coinsurance.
These numbers will vary greatly based on the type of plan you have and your medical history.
Medicare vs Private Insurance Costs
It is quite tricky to make a direct comparison between the costs of Medicare and Private Insurance. For example, some enroll in Medicare Advantage, which combines Medicare Part A and Part B. In addition, if you receive your health insurance from your employer, they may pay for your monthly premium in partial or full amounts.
It is also important to note that private insurance costs also cover dependents, so you are not just paying for yourself.
Variables such as age and place of residence can also impact the cost of private insurance.
Monthly Premiums
Your monthly premiums are decided by your location, age, and whether or not you have dependents.
With a private insurance plan, there are 5 categories: bronze, silver, gold, platinum, and catastrophic. Your monthly premium will vary depending on what category you have.
Medicare vs. Private Insurance Premiums
Certain Medicare Part A members (those who have paid Medicare taxes for 10 years) do not have to pay a monthly premium. Medicare Part B members usually have a monthly premium of $164.90. On average, premiums for private insurance are more expensive. The cost is even more significant for families.
Deductibles
Your deductible will vary on the type of plan that you have. You are required to pay your deductible for the medical cost before your insurance company will provide coverage. This will reset at the beginning of your new term.
Deductibles Comparison
Typically, deductibles are higher with private insurance companies.
Coinsurance
After paying your deductible, you and your insurance company will split the cost of services and procedures. Depending on what type of service it is, you may have higher pocket costs.
Advantages of Getting Private Insurance
With a PPO plan, you have the ability to stay with your preferred doctor, even if they are not in-network.
Private Insurance offers more flexibility, and they may have shorter wait times and more personalized care.
Disadvantages of Getting Private Insurance
It is typically more expensive compared to Medicare.
Can You Have Both Medicare and Private Health Insurance?
Yes, you can have both Medicare and private health insurance. One will act as the primary payer and pay for covered services. Afterward, the secondary payer will pay for services that the primary payer doesn't cover.
Reasons You Might Need Private Health Insurance
If you have a family, private insurance may be the right choice for you as your dependents will be covered.
You may be someone over the age of 26 disqualifying you as a dependent. In this case, you would need to purchase your own health insurance coverage or be sponsored through your employer.
How to Choose a Health Plan That’s Right For You
When choosing a health plan, you should consider your age, income level, and whether or not you have dependents. You may want to stay with your preferred doctor. With Medicare, you may not have that option.
For more information, you can visit Health Plans of NC.
FAQs About Medicare and Private Insurance
Does Medicare cost less than private insurance?
Yes, Medicare is usually less expensive than private insurance. A Medicare Supplement plan can increase your overall costs.
What services are covered by private health insurance but not Medicare? Should I keep my health insurance if I have Medicare?
It would be wise to apply for Medicare when you are 65. If you like your current health insurance, you can keep both and have a coordination of benefits. If your health insurance is through your employer and you would like to keep it, contact them. They will tell you if you will continue to be covered past the age of 65.
Is private health insurance cheaper than Medicare?
No, private health insurance coverage is usually more expensive than Medicare. Specifically, premiums are significantly higher.
Is Medicare more efficient than private health insurance?
This depends on what is most important to you. If expenses are of high priority, then Medicare is more cost-effective. With Medicare Supplement plans, you may receive greater coverage. However, if you have dependents, then private insurance is clearly more efficient.
At what age or income level does private health insurance become more economical than Medicare?
Private health insurance is more economical for individuals who are under the age of 65 and have higher income levels. Premiums will become less expensive. In addition, private insurance companies increase the costs of premiums as you get older.
Are You Ready to Make a Decision? Give Us a Call
At Health Plans of NC, it is our goal to help you make the right decision for you and your loved ones. We aim to do so to the best of our abilities. You can schedule an appointment with an agent at 800-797-0327.