Medicare vs. Private Health Insurance: Part 1



Choosing a health care plan that fits your individual needs can be difficult at any age, but it becomes especially difficult for those approaching retirement or living on a fixed income. There are many different types of insurance policies to choose from, and it can be hard to find the right one from you. If you are eligible for Medicare, you may find yourself trying to choose between Medicare and a private health insurance plan. Both options have benefits and risks, and the purpose of this article is to help you understand the differences between the two.

In the first part of this series, we will take a closer look at some pros and cons of standard Medicare coverage.

Medicare is a government-funded health insurance program for individuals who are 65 and older, younger individuals with disabilities, and people with End-Stage Renal Disease. This group of people is extremely large. In fact, according to The State of Aging and Health in America, when the last baby boomers turn 65 in 2030, about 72 million people, or one out of every five Americans, will be an older adult.

This insurance program covers services such as hospital stays, doctor’s visits, and home health care. It is designed to serve individuals who may have costly or complex health care expenses and needs; however, it does not cover prescription drugs.

All taxpaying Americans pay into the insurance program and are able to enroll into it after they turn 65. This insurance program is designed to protect older and disabled Americans from financial instability in the event of an illness or injury. As such, this public program pays for necessary care for those who are eligible.

While this insurance program has benefitted millions of American seniors, there are a few things you should be mindful of when considering to make do with a Medicare only plan:

    • This program does not cover everything you need. Depending on which part of the plan you have, there may be some out-of-pocket costs. Most notably, Original Medicare will not cover prescription drugs.


    • You do have the option to also use private insurance to cover expenses Medicare does not. These plans are often called “Medigap”


  • You don’t have to change doctors, as long as your physician accepts Medicare. Unfortunately, not all physicians and healthcare facilities do.

Generally, Medicare is more cost-effective than private health insurance for individuals on a limited, fixed income. Medicare has a much larger coverage pool, giving the program more bargaining power (in theory). Additionally, the insurance program’s per capita costs are expected to continue rising more slowly than private insurance in the years ahead.

To summarize, Medicare is an insurance plan designed to absorb and distribute risk, and it has benefited millions of Americans. Different plans under Medicare cover different needs, so be sure to carefully research whether Original Medicare is sufficient for your health needs.

In the next installment of this two-part series, we will take a closer look at some of the pros and cons of commercial health insurance plans.


    1., “How Original Medicare Works”


    1. Health Affairs, “Medicare And Commercial Health Insurance: The Fundamental Difference,” February 2012


  1. Aging Care, “Pros and Cons of Medicare Coverage”

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