Difference Between Medicare & Private Health Insurance

Medicare and private health insurance often work together to meet the expenses incurred by older Americans, but there are distinct differences in the two. Congress adopted Medicare in 1965 to cover medical care and expenses of Americans when they reach age 65. Although Congress has refined and made changes to the Medicare program, the basics continue to be the same.

History

• Medicare is a social insurance, and it met with opposition when first approved by Congress. With 45 years of background in the success of the program to provide insurance to older Americans, the opposition has subsided. Payroll taxes finance Medicare. Employers and employees both contribute, and the Social Security recipients who receive Medicare also contribute to the fund with a monthly payment.

Differences

• Medicare is government-run health care, and availability is limited to persons over age 65 and those with certain disabilities. Private health insurance may cover a specific group like employees and may provide coverage as selected by the insured. There are deductibles and co-payments in both plans. Health Maintenance Organizations and Preferred Provider Organizations groups provide individual insurance plans with limitations, paying a greater percentage for in-house or preferred service providers.

Significance

• Medicare has four parts: A is hospital insurance, B is medical insurance, C is Medicare Advantage, run by private insurance companies, and D is prescription drug coverage run by private companies under contract with Medicare. Medigap covers gaps in Parts A and B and comes from private insurers as a substitute for Medicare Advantage. You cannot use both Medicare Advantage and Medigap, and you do not need either so long as you have private health insurance.

  Older Americans who are employed may not be ready to give up their private health insurance, and do not have to, even though they need to sign up for Medicare at 65. Because Medicare has a co-payment that is 20 percent for some services, the private health insurance works as secondary health coverage to cover these expenses.

Coordination

• If you have Medicare coverage and private health insurance, read carefully and ask questions. Double payment does not exist, even if you have two kinds of coverage. Medicare is usually primary coverage for covered expenses. Private medical insurance covers the co-insurance amount, usually 20 percent of the total charge. Private insurance may also cover expenses not covered by Medicare.

Warning

• If you are an older worker and are continuing your employee health insurance under COBRA, be certain that you meet the requirements for signing up for Medicare and Medigap coverage. The AARP explains a problem with COBRA connecting with Medicare coverage if you miss the eight-month window for signing up. You may have to wait until open enrollment the following year and then another six months for coverage. This leaves the potential for no insurance coverage for several months.