Medicare vs. Private Insurance

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.

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

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.

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.

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.

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.

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.

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 plans can work in combination with one another to provide 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.

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.

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.

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.