Medicare Supplement vs. Medicare Advantage: Is One Better Than the Other?
Before you can make a decision on which Medicare option is best for your needs, you must first understand the basics of Medicare Supplement (Medigap) and Medicare Advantage and plans. These are very different insurance plans with distinct benefits. The answer to the question "Is one better than the other?" depends on your circumstances and needs.
Medicare Supplement Insurance (Medigap)
Medicare Supplement Insurance, also called Medigap, is an insurance policy designed to pay for out-of-pocket costs and health-care expenses not covered by Original Medicare, Part A and Part B. In every state but Massachusetts, Minnesota, and Wisconsin, there are ten standardized Medicare Supplement plans (Plans A through N), meaning that coverage details do not change. For example, a Plan F in Vermont provides the same amount of coverage as a Plan F in Florida. Because these plans are sold by private insurance companies, pricing can vary by provider. The ten plans have different combinations of benefits and deductibles that can be reviewed on our Medicare Supplement page.
Insurance companies that sell Medicare Supplement Insurance are not required to offer all ten plans. They are required by law to at least sell Medigap Plan A, and if they are going to offer more plans, they must offer Plan C or Plan F.
While Medigap plans always have more benefits than Medicare Part A and Part B, they do not offer prescription drug coverage. Prescription drug coverage can be added through a stand-alone Medicare Part D plan.
Medicare Advantage (Medicare Part C)
Medicare Advantage plans, also known as Medicare Part C, are health plans offered by private insurance companies. They provide the standard hospitalization and medical coverage of Original Medicare, Part A and Part B, with the exception of hospice care (you still have this coverage through your Part A insurance). Medicare Advantage plans may include additional benefits that are not part of Original Medicare, such as vision, dental, hearing, and prescription drug coverage.
There are many different types of Medicare Advantage plans, although not every plan type may be available in your area. A health maintenance organization (HMO) is a network of health-care providers and facilities where you choose a primary care physician to coordinate your care. A preferred provider organization (PPO) is also a network of health-care providers and facilities but typically you do not need to select a primary care physician, and you have more flexible options regarding out-of-network care. A private fee-for-service (PFFS) plan is a mode of benefit delivery where you are not limited to a network, but there are no guarantees that your doctor or hospital will accept the plan. Special needs plans (SNPs) come in three varieties: plans for those with a chronic or disabling medical condition, plans for people in institutions or needing full-time care, and plans for beneficiaries who are eligible for both Medicare and Medicaid.
If you choose to receive your Medicare health coverage through a private Medicare Advantage plan, you must continue paying your Part B premium regardless, because you remain enrolled in Original Medicare (Part A and Part B), even after joining a Part C plan.
Comparing Medicare Supplement vs. Medicare Advantage plans
In short, Medicare Supplement Insurance is a policy that's added to Original Medicare, Part A and Part B, to provide additional coverage. Medicare Advantage is a private plan option that effectively replaces your Original Medicare coverage. The two don't work together, and it is prohibited for anyone to sell you a Medigap policy when you already have a Medicare Advantage plan, unless you going to switch back to Original Medicare.
As mentioned above, the standardized Medigap plans are uniform in the 47 states that offer them. A given plan type (e.g., Plan F) has the same benefits regardless of the insurance company that provides the policy, or the state in which you reside. This is not true of Medicare Advantage plans, however, because coverage details may vary by plan.
Excluding prescription drug coverage, any standard Medigap plan with Original Medicare, Part A and Part B, will have more benefits than a standard Medicare Advantage plan since a Medicare Advantage plan is only required to duplicate Medicare Part A and Part B benefits. However, as mentioned above, some Medicare Advantage plans offer benefits beyond those found in Part A and Part B.
Some Medicare Advantage plans offer prescription drug coverage (often for an additional monthly cost). With a Medigap plan, in contrast, you would need to enroll in a separate prescription drug plan. However, remember that the total cost of drug coverage, as well as coverage for the specific drugs you are taking, is of utmost importance when comparing your options. In some cases, you may find that Medigap with a stand-alone prescription drug plan has lower total costs than a Medicare Advantage plan with drug coverage. In other cases, the reverse might be true.
Comparison is key
When choosing between a Medigap plan and a Medicare Advantage plan, take the time to do your research. Remember that while the benefits of Medigap plans are standardized in the states having plans A through N, their prices are not. Plan F from one insurance company may be significantly cheaper than Plan F from a different company in the same state. Read the benefit descriptions of every Medigap and Medicare Advantage plan you are considering. Be certain to look at:
- Monthly premium
- Doctor and healthcare facility restrictions
- Anticipated plan costs given your typical use of health-care and hospitalization services
- Prescription drug coverage cost sharing as it relates to your medication usage
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Medicare Advantage Plans, sometimes called "Part C" or "MA Plans," are offered by private companies approved by Medicare and provide Medicare Part A and Part B coverage. Medicare prescription drug coverage is insurance run by an insurance company or other private company approved by Medicare. A Medicare Supplement plan is a health insurance plan provided by a private company that fills in the "gaps" in original Medicare coverage.