The Pros and Cons of Medicare vs Private Insurance

Updated on September 22, 2020

In 2018 alone, nearly 60 million people enrolled in Medicare or Medicare Advantage plans to help cover the cost of their healthcare needs. As the population grows older, that number is only likely to increase.

Though Medicare is the most common insurance option for retirement-aged individuals, it’s not the only option out there. In fact, many people still choose to enroll in private insurance instead.

So, which type of insurance is better? How can you choose between Medicare and private insurance for your needs?

You need to understand the pros and cons of Medicare vs private insurance. Here’s what you need to know.

Medicare Is Usually Cheaper

When you enroll in Medicare, you’re getting the same quality coverage regardless of which insurance provider you’re working with. This is because all Medicare plans offer the same types of coverage and provide the same types of protection. The only difference between policies is the provider you choose to work with and the prices they charge for coverage.

This means you’ll want to shop around and use this MedicareWire tool to compare plan coverage before you commit to an agreement.

Once you do, you’ll typically save money with a Medicare plan compared to what you’d spend with private insurance. Your deductibles will usually be lower and your insurance will cover more treatment options.

When you enroll in a private insurance policy, you’re subject to the terms of that policy. It’s not backed by the government and it’s up to the insurance provider to determine your maximum out-of-pocket costs for your coverage. The quality of that coverage varies widely and you’ll often end up paying a higher premium rate for better quality coverage as long as you’re enrolled.

The Coverage Lacks True Flexibility

When you enroll in any type of insurance, you’re permitted to see any doctor you wish. However, it’s up to the doctor to decide if they’ll accept your insurance or not. This is the case for both private insurance and Medicare coverage.

Typically, more doctors are willing to accept private insurance than Medicare plans. This is because they already network with those private insurance providers. They’re able to get higher payments from the companies.

For those that enroll in Medicare instead, finding a doctor you like that’s willing to accept your insurance coverage can be more difficult. You could end up paying more for the same services than you would with a private insurance policy. Worse, you may need to change your primary care doctor once you enroll.

If you’re trying to figure out which type of insurance is best for your needs, consider the amount of flexibility you need. Call your doctor and find out what plans they accept and make the decision that works best for you.

You’ll Need to Pay for Supplemental Plans

Unfortunately, Medicare coverage isn’t as complete as traditional insurance. You’ll need to buy supplemental plans if you want your coverage to work like private insurance.

For example, if you need prescription drug coverage, you’ll need to buy a Part D supplement to avoid paying full price.

Private insurance often offers more comprehensive coverage and includes more services than Medicare. This makes it easier to keep track of your healthcare costs and keeps you from having to pay premiums for more than one policy.

That said, Medicare and Medicare Advantage plans can still be a more affordable alternative to private insurance. You just need to remember to shop around and choose the company that offers you the best price.

Try to do this for every supplement plan you buy.

Medicare Helps You Avoid Age Surcharges

Believe it or not, private insurance providers set their own rates. These companies are free to charge different people different amounts anytime they wish. This means if you’re older or are otherwise considered high-risk, you may pay more for coverage.

Medicare plans won’t penalize you for being older or having pre-existing health conditions. The plans exist specifically for individuals over the age of 65.

They assume that you’ll need more frequent medical care and already need prescription medications to manage existing health conditions. They won’t penalize you for being older or using your insurance plans more often.

Dependents Must Enroll Separately

The biggest downside of Medicare vs private health insurance is that you can only enroll for yourself. You’re not permitted to enroll your spouse or other dependents on your policy.

This can mean that you’ll end up paying slightly more for coverage. You’ll also each be responsible for your individual coverage and supplement plans.

One person can’t oversee the policies or make changes in their spouse’s name.

When you enroll in private insurance, you’re allowed to enroll both yourself and any qualified dependents. This means you’ll be able to buy coverage for your spouse, domestic partner, and anyone else the insurance provider accepts as a dependent.

This makes it easier to manage your account and can, in some instances, save you money. If your primary concern is being able to enroll dependents, private insurance is a better choice. However, if you and your spouse are willing to put in the work to enroll independently every year, Medicare may still be the more affordable option.

Choosing Between Medicare vs Private Insurance

Ultimately, choosing between your insurance coverage options is a matter of personal preference. Medicare vs private insurance offers a number of unique benefits and can save you money in the long run if you’re over the age of 65.

However, if you’re still in the workforce and have the money to do so, private insurance can provide you with more comprehensive coverage as you age.

If you’re not sure which option to choose, think about the types of health concerns you have, your budget, and what you’re looking for in an insurance policy. If Medicare makes the most sense, enroll as soon as you’re able.

For more helpful tips on choosing a great insurance plan, check out our latest posts.

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