Private Health Insurance vs. Medicare: Which Is Better for You?

When searching for health insurance, senior individuals can choose between Medicare and private health insurance. The most significant factors deciding between the two are finances and medical needs. There will be differences in benefits and costs when comparing private health insurance vs. Medicare.

Read more below to get Medicare and private health insurance definitions with an overview of the differences in benefits and costs. We hope this will help get you closer to deciding between private health insurance and Medicare.

Enter your ZIP code into our free quote comparison tool above to find private health insurance and Medicare Advantage plans.

What is the difference between private health insurance and Medicare?

Medicare is a type of health insurance provided by the U.S. government, while private companies provide private health insurance. Private health insurance companies may also offer Medicare Advantage plans or Medicare Supplement plans on behalf of the government. In addition, some employers offer private health insurance to their employees.

Medicare is typically available to Americans who are 65 and over. You can use Medicare anywhere that Medicare is accepted, consisting of an extensive network of healthcare providers.

Private health insurance providers generally contract with a limited number of healthcare providers. If you have an HMO, your health insurance provider will only cover services done with the healthcare providers in their network. PPO plans tend to cover more providers and have out-of-network coverage as well, although it may be limited. (For more information, read our “Is private health insurance tax-deductible?“).

How does private health insurance vs. Medicare benefits compare?

Original Medicare (Medicare Part A and Part B) will cover most healthcare services, including inpatient and outpatient care. For example, Part A will cover hospital stays, hospice care, lab tests, surgeries, and more. Part B will cover doctor’s visits, preventative services, durable medical equipment, and more. In addition, Medicare Part D plans cover prescription drugs.

Medicare Advantage plans, offered by private health insurance companies, will include all the benefits provided by Original Medicare. However, most private health insurance companies will also have other benefits, such as vision, dental, or prescription drug coverage. While the benefits are similar to Medicare, the network is likely more similar to private health insurance.

Private health insurance may offer coverage similar to Medicare Advantage plans, but each company will have its coverage limits. In addition, the network and covered services may differ. For example, the company could limit how many times or how often you can receive a certain service.

How does private health insurance vs. Medicare costs compare?

Costs for private health insurance vs. Medicare will vary based on several factors. The average premium for private health insurance plans is $22,221 per year for families and $7,739 per year for individuals. However, if you purchase private health insurance through your employer, the average premium is $5,969 after your employer pays their portion.

Most people do not have to pay a premium for Medicare Part A, but those who do need to pay a premium will pay $274 or $499 per month in 2022. The average premium for Medicare Part B is $170.10 per month. However, individuals who make more than $91,000 per year could pay a premium between $238.10 and $578.30 per month. The average premium for Medicare Part D is $33.37 per month, but you must buy it in addition to other Medicare plans.

The deductible for Medicare Part A is $1,556, while the deductible for Medicare Part B is $233 in 2022. You will also be responsible for paying coinsurance for each. The coinsurance for Medicare Part A will depend on how long you receive treatment, while the coinsurance for Part B is typically 20% of the Medicare-Approved amount for a service.

Out-of-pocket costs and limits will vary for private health insurance plans. However, Medicare Advantage plans from private health insurance companies have an out-of-pocket maximum of $8,700 for one person and $17,400 for a family in 2022.

Should I get private health insurance or Medicare?

Some people may benefit more from Medicare, while others may find private health insurance more suitable. One of the first considerations is your age. If you are under 65, you most likely won’t qualify for Medicare unless diagnosed with a specific condition, such as end-stage renal disease. Therefore, you may be more likely to buy private health insurance.

Private health insurance may also be a better choice for dependents since Medicare is generally only available for individuals. For example, private health insurance allows you to get coverage for your children or spouse.

Some people may also have both Medicare and private health insurance. In these cases, Medicare will establish a primary and secondary payer, where the primary payer is responsible for paying claims first, and the secondary payer will cover the rest. If you have both private health insurance and Medicare, you can contact either company to determine your primary payer.

If you want to compare private health insurance quotes, including Medicare Advantage coverage, enter your ZIP code into our free quote comparison tool below.

Case Studies: Private Health Insurance vs. Medicare

Case Study 1: John’s Dental Coverage

John, a 55-year-old individual, needs dental coverage as part of his health insurance plan. He explores the options of private health insurance and Medicare to determine which would be more suitable for his needs.

In this case study, we compare the availability and extent of dental coverage provided by private health insurance plans and Medicare, shedding light on the differences in benefits and costs.

Case Study 2: Emily’s Prescription Drug Expenses

Emily, relies on prescription medications to manage her health condition. She considers private health insurance and Medicare to evaluate the coverage for prescription drugs.

This case study examines the benefits and costs associated with prescription drug coverage under private health insurance plans and Medicare, offering insights into the potential financial implications for individuals with ongoing medication needs.

Case Study 3: Sam’s Medical Provider Network

Sam, a 63-year-old individual, values the freedom to choose his healthcare providers. He compares private health insurance and Medicare to assess the networks of healthcare providers available under each option.

This case study explores the differences in provider networks, emphasizing the impact on access to healthcare services and potential out-of-pocket costs.

Case Study 4: Lisa’s Financial Considerations

Lisa, carefully evaluates the financial aspects of private health insurance and Medicare. She analyzes premiums, deductibles, coinsurance, and out-of-pocket costs to make an informed decision.

This case study provides an in-depth analysis of the costs associated with private health insurance and Medicare, helping individuals understand the potential financial implications of each option.