Medicare vs. Private Insurance

Original Medicare is typically less expensive and more widely accepted than private health insurance. You can use Medicare along with a private insurance plan to cover out-of-pocket costs for your health care. Combinations of Medicare plans can create extended coverage similar to private coverage.

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Terry Turner Senior Financial Writer and Financial Wellness Facilitator Terry Turner has more than 35 years of journalism experience, including covering benefits, spending and congressional action on federal programs such as Social Security and Medicare. He is a Certified Financial Wellness Facilitator through the National Wellness Institute and the Foundation for Financial Wellness and a member of the Association for Financial Counseling & Planning Education (AFCPE®). Read More

Lamia Chowdhury Financial Editor Lamia Chowdhury is a financial content editor for RetireGuide and has over three years of marketing experience in the finance industry. She has written copy for both digital and print pieces ranging from blogs, radio scripts and search ads to billboards, brochures, mailers and more. Read More

Eric Estevez Owner of HLC Insurance Broker, LLC Eric Estevez is a duly licensed independent insurance broker and a former financial institution auditor with more than a decade of professional experience. He has specialized in federal, state and local compliance for both large and small businesses. Read More

A licensed insurance professional reviewed this page for accuracy and compliance with the CMS Medicare Communications and Marketing Guidelines (MCMGs) and Medicare Advantage (MA/MAPD) and/or Medicare Prescription Drug Plans (PDP) carriers’ guidelines.

APA Turner, T. (2023, October 18). Medicare vs. Private Insurance. RetireGuide.com. Retrieved September 9, 2024, from https://www.retireguide.com/medicare/compare/medicare-vs-private-insurance/

MLA Turner, Terry. "Medicare vs. Private Insurance." RetireGuide.com, 18 Oct 2023, https://www.retireguide.com/medicare/compare/medicare-vs-private-insurance/.

Chicago Turner, Terry. "Medicare vs. Private Insurance." RetireGuide.com. Last modified October 18, 2023. https://www.retireguide.com/medicare/compare/medicare-vs-private-insurance/.

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For this comparison, Medicare includes Original Medicare, Medicare Advantage, Medigap and Medicare Part D drug plans — even though some of these are sold through private insurers.

Private health insurance in this comparison includes health insurance you buy on your own — such as through the federal health care insurance marketplace — or health insurance provided to you as a benefit through your employer.

Can You Buy Medicare Plans from Private Insurance Companies?

Original Medicare — Medicare Part A (hospital insurance) and Medicare Part B (medical insurance) — are only available through the federal government. You sign up for Medicare through the Social Security Administration.

But you can buy certain Medicare plans through private insurers

Medicare Advantage Plans Also known as Medicare Part C, Medicare Advantage plans are required by law to cover everything covered by both Medicare Part A and Part B. But these private plans may offer additional coverage that Original Medicare does not provide — such as hearing, vision and dental benefits.

Medicare Part D Prescription Drug Plans Original Medicare does not cover most prescription drugs you take at home. Medicare Part D drug plans are sold by private insurers to help with the costs of your day-to-day prescription drug costs.

Medigap Plans Original Medicare does not pay for all your health care expenses — leaving you with out-of-pocket expenses, including deductibles, copays and coinsurance. Medigap plans — also called Medicare Supplement Insurance plans — are standardized plans that help you cover those “gaps” in Original Medicare coverage.

Original Medicare — along with these three private insurance options — are all considered Medicare.

You have to be enrolled in both Medicare Part A and Part B before you are eligible for Medicare Advantage or Medigap coverage. You cannot enroll in both Medigap and Medicare Advantage plans at the same time.

You only have to be enrolled in either Medicare Part A or Part B to qualify for enrollment in a Medicare Part D drug plan. You can also qualify if you are enrolled in both Part A and Part B.

Maximize your Medicare savings by connecting with a licensed insurance agent. Annual Enrollment is open until December 7th.

How Do Medicare and Private Insurance Costs Differ?

It’s difficult — if not impossible — to compare Medicare costs directly to private insurance costs. There are a wide range of variables that can affect the comparison. But typically, private insurance is more expensive than Medicare.

Part of that is because private insurance rates can be as much as 2.5 times than Medicare rates, according to a 2020 study by the Kaiser Family Foundation.
Insurance costs — whether private or Medicare costs — are reset each year. Original Medicare has a fixed set of costs. But private insurance costs can vary widely from plan to plan.

Original Medicare costs the same regardless of your age or where you live. Private insurance costs can be affected by several factors.

• Benefits included in the plan
• Maximum out-of-pocket expenses
• Where you live
• Your age

The example below compares employer-provided insurance premiums to Original Medicare premiums. It also breaks down the cost of total monthly premiums and an employee’s average share of the cost among employer plans.

Source: Kaiser Family Foundation and U.S. Centers for Medicare & Medicaid Services

Medicare Advantage, Medigap and Medicare Part D drug plan premiums vary from plan to plan. But Medicare and private insurance costs go well beyond just the premiums.

Deductible The share of medical and hospital costs you have to pay each year before your insurance begins paying for your costs. The Medicare Part A deductible is $1,632, and the Part B deductible is $240 in 2024. It varies with other plans.

Coinsurance Coinsurance is a percentage of what you pay for health care costs. For Medicare Part B, you pay 20% of medical treatment costs after you have reached your deductible, for instance.

Copayment Copayments are a specific dollar amount you pay for certain health care items or treatment. This typically applies to prescription drug costs and can vary depending on your plan and the type of drug or service you receive.

Medigap plans can help cover many of the out-of-pocket costs associated with Original Medicare. Medicare Advantage plans can sometimes have lower overall costs than Original Medicare.

How Do Medicare and Private Insurance Coverage Differ?

Coverage varies depending on the private insurance plan you have. It also varies depending on the type and combination of Medicare plans you choose.

Both typically cover hospital and medical visit costs, but there can be a wide difference beyond that. For instance, private insurance typically covers prescription drugs. Original Medicare does not and requires you to buy private insurance — a Medicare Part D plan or other qualified private drug coverage — if you want insurance coverage for your medications.

Medicare coverage is only available to people age 65 and older and for a few other groups. Private insurance coverage is available to anyone regardless of age.

Medicare Coverage

Medicare plans can work in combination with one another to provide coverage.

Private Health Insurance Coverage

Bare minimum private health insurance covers preventative care visits. But it can be customized to include additional coverage — at additional cost.

You can choose an all-in-one coverage plan — covering hospitalization, medical visits, prescription drug, dental, vision and other types of benefits. Or you can choose different add-ons to get only the ones you need.

And unlike Medicare, private health insurance usually allows you to extend your coverage for other family members.

How Do Medicare and Private Insurance Networks Differ?

Original Medicare has the largest network of health care providers in the United States. That means you have the greatest choice of doctors, hospitals and other providers who take Medicare. Private insurance typically has much smaller networks.

With Medicare, you can go to any provider, anywhere in the United States, who accepts Medicare.

Private insurance negotiates contracts with doctors and hospitals within a specific area. These private networks also tend to include fewer doctors and hospitals in network, meaning you have to pay more out of your own pocket if you use those providers — unless it’s an emergency.

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Can You Have Both Medicare and Private Insurance?

You can have both Medicare and private health insurance at the same time.
Each insurance plan you have is called a “payer.” Typically you will have a primary payer and a secondary payer. This indicates the order in which each insurance coverage pays for your health costs.

Medicare and any private health insurance pay a share based on something called coordination of benefits. This is the system that determines which insurance pays first.

• The insurance that pays first — the primary payer — pays up to the limits of its coverage.
• The health insurance that pays second — the secondary payer — only pays for costs not covered by the primary payer.
• The secondary payer may not cover all the costs of your bill — this is true even if Medicare is the secondary payer.
• Any costs not covered by the primary payer and the secondary payer are your responsibility.

Not only can you have both Medicare and private insurance, once you are eligible for Medicare, your employer group health plan or retiree coverage through your job may require you to enroll in Medicare Part B before they will pay your medical bills.

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