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Medicare Advantage vs. Medicare Supplements: 3 Key Differences

Senior woman looking at differences in Medicare Advantage and medicare supplements.

Medicare Advantage vs. Medicare Supplements – The first decision you’ll need to make after enrolling in Medicare Parts A and B is how you want to supplement your Original Medicare benefits. You have two options: Medicare supplements and Medicare Advantage plans. But how are they different, and how do you know which one is right for you?

Today, we’ll review the three biggest differences between Medicare supplements and Medicare Advantage plans.

What is a Medicare supplement plan?

Medicare supplement plans are also called Medigap plans. They are denoted by a letter of the alphabet. The current Medigap plans are A, B, C, D, F, G, K, L, M, and N. Private insurance companies sell these plans, and the benefits are the same no matter who you purchase one from. The only thing the insurance carrier is allowed to dictate is the monthly premium.

The goal of a Medicare supplement is to fill in the gaps left by Original Medicare. Parts A and B offer excellent healthcare coverage, but they do leave beneficiaries with deductibles, copayments, and coinsurance costs. In addition, there is no annual out-of-pocket maximum with Original Medicare. In cases of hospitalization or major health conditions, costs will add up quickly. That’s why many people choose a Medicare supplement.

A Medigap plan is your secondary insurance. Once Parts A and B have paid their share, your Medigap plan will come in to pick up the pieces. Some of the plans leave you with little to no out-of-pocket expenses.

What is a Medicare Advantage plan?

Medicare Advantage is Part C of Medicare. Like Medigap plans, Part C plans are also optional. You won’t pay a penalty if you don’t enroll in Medicare Part C. While the goal of these plans is similar to Medicare supplements, they work quite differently.

If you enroll in Part C, you’ll get all of your Medicare benefits from whichever company you choose to enroll with. You’ll still technically have Parts A and B, but benefits will be paid by the insurance company, not the federal government. You are still required to pay the Part B premium.

So, if these plans both work to reduce your out-of-pocket costs, what makes them so different? Let’s review the three key differences between Medicare supplements and Medicare Advantage plans.

Senior couple enjoying time on the beach together as they discuss the differences in Medicare Advantage and medicare supplements.
A Medigap plan is your secondary insurance. Once Parts A and B have paid their share, your Medigap plan will come in to pick up the pieces.

Medicare Advantage vs. Medigap

You must know how Medicare Advantage plans and Medigap plans operate so that you can choose the one that’s best for you. The two types of Medicare plans are very different and will have a huge impact on your healthcare benefits.

Premium Differences

Cost is the very first difference just about everyone notices, so let’s start there.

Premiums for Medigap plans will depend on various things, including which letter-plan you choose, your age, gender, tobacco use, and state of residence. Plan G is currently one of the most popular plans on the market. For newly-eligible beneficiaries, Plan G will cost between $110 – $180 per month. In addition, the premium is likely to increase each year since one of the rate-setting factors is age.

Premiums for Medicare Advantage plans can be as low as $0 per month. (Now you know why this is the first thing people notice!) Don’t let that number fool you, though. There are other costs associated with Advantage plans that you wouldn’t have if you enrolled in a supplement like Plan G. You’ll have deductibles, copays, and coinsurance amounts. How much each of those is depends on your specific plan.

Benefits Included

Most Medicare Advantage plans include extra benefits not found in Original Medicare. Common additions include vision and hearing care, routine dental care, gym memberships, transportation to doctor’s visits, meal delivery, home risk assessments, and prescription drug coverage. They may even have a stipend for over-the-counter medications and reward you for things like annual checkups.

Medicare supplements, on the other hand, only offer coverage for procedures and services that are also included in Parts A and B. If Part A or B denies benefits for a service, your Medicare supplement will deny it as well. If you choose a Medigap plan, you’ll need to enroll in a separate Part D prescription drug plan. Otherwise, you will be penalized. You may also want to consider additional policies to get the same benefits as those included in Medicare Advantage.

Network Participation

The last most important thing to understand about these two types of plans is the provider networks.

If your doctor accepts Medicare, they will also accept your Medigap plan. It does not matter which insurance company your plan is under.

The same is not true of Medicare Advantage plans. There are several kinds of Advantage plans. Two of the most common are Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs). If you enroll in either kind, you’ll need to find doctors that participate in the network. Seeing providers outside of the network will result in higher costs for you – potentially the entire bill!

We’ve barely scratched the surface of how Medicare supplements differ from Medicare Advantage plans, but this should have given you foundational knowledge of the two plans. Our expert Medicare advisors are here to answer any questions you have and to help you decide which type of Medicare plan will work for you. Give us a call today!

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