Medicare Benefits Vs. Private Health Insurance

If you are age 65 or older, you have a choice between continuing with private health coverage or choosing to enter into U.S. government's Medicare program. Depending on which Medicare option you pick, you'll find that benefits and costs are similar to private health coverage, but with some significant differences.

Medicare Benefits

• Medicare is a health insurance program sponsored by the U.S. government designed to provide coverage for adults 65 years of age or older. You can choose from four parts of Medicare. Part A covers inpatient care in hospitals, skilled nursing facilities and home health care. Part B covers medical insurance with services such as doctor's visits, outpatient care and some preventive services. Finally, Part D helps cover the cost of prescription drugs and helps protect against higher drug costs in the future. You can also choose to get into Medicare Advantage plans (also known as Part C), which operate just like a typical health maintenance organization (HMO) or preferred provider organization (PPO). The Advantage plans limit your choice of medical care to approved providers in the plan, while basic Medicare allows you to make the choice.

Medicare Costs

• Costs of Medicare vary depending on the level of coverage you choose. You can carry original Medicare without paying any monthly premium, but you will have gaps in your medical coverage. If you choose to add Part B (medical care) and Part D (prescription drugs), you typically pay a low monthly premium. Even with original Medicare, Plan B and Plan D, you will still have gaps in your medical coverage. MediGap insurance, a supplemental plan, can help you bridge those gaps, for an additional cost. HMO and PPO-style Medicare Advantage plans require you to pay an additional premium in addition to your Plan B premium, but you don't need to worry about MediGap insurance. Drug coverage is also offered through the Advantage plans.

Private Coverage

• If you elect to forgo Medicare, you can choose from a variety of private health coverage plans with varying levels of coverage, according to the HealthInsurance website. Indemnity plans allow you unlimited choices of physicians, hospitals and health care, but with higher costs. Managed plans, on the other hand, restrict your choice of where you can get medical care and require you to adhere to certain rules, such as staying within your network, but offer affordable coverage. HMO and PPO plans are examples of restrictive health plans, requiring you to visit practitioners within your stated network, or risk incurring financial penalties. Point of service (POS) plans are a hybrid of the two and provide for in-network and out-of-network visits. All these plans cover hospital, medical and drug costs and offer varying degrees of premiums, deductibles and co-payments.

Private Coverage Costs

• With the many choices comes a variety of costs in private health coverage plans. Indemnity plans, while freeing, are generally the most expensive. With an indemnity plan, you pay health care costs up to the cost of a deductible and a percentage of the bill thereafter, typically 20 percent, known as co-insurance costs. These plans can be expensive, especially if you suffer from chronic or serious illnesses. Managed care plans are less expensive options, with affordable monthly premiums and small co-pay options for hospital and office visits, but are restrictive in nature. POS plans allow you greater choice of health care providers but with an additional cost. When choosing, examine costs such as deductibles, co-payments, co-insurance percentages, drug coverage and coverage of pre-existing conditions to get an accurate gauge on costs.