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Medicare Supplement vs. Medicare Advantage Plans: Which Type May Be Right for You?

October 6, 2016

Before you can make a decision on which Medicare option may be best for your needs, you must first understand the basics of Medicare Supplement (Medigap) and Medicare Advantage plans. These are very different Medicare plans with distinct benefits. The answer to the question “Is one better than the other?” depends largely on your individual circumstances and needs.

As you consider your specific health needs, budget, and preferences, here is a comprehensive comparison of Medicare Supplement plans and Medicare Advantage plans so you can make an informed decision about the type of coverage that may work for you.

Medicare Supplement insurance (Medigap)

Medicare Supplement, 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 MassachusettsMinnesota, and Wisconsin, there are 10 standardized Medicare Supplement plans (Plans A through N), meaning that coverage details do not change for plans of the same letter type. For example, a Plan G in Vermont provides the same amount of coverage as a Plan G in Florida. Because these plans are sold by private insurance companies, pricing can vary by insurance company and location. The 10 plans cover different combinations of benefits and can be reviewed on our Medicare Supplement page.

Insurance companies that sell Medicare Supplement insurance are not required to offer all 10 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 may help with certain costs not covered by Part A and Part B (such as Part B excess charges or emergency overseas coverage), they do not offer prescription drug coverage. If you’re enrolled in Original Medicare, prescription drug coverage is available through a stand-alone Medicare Part D Prescription Drug Plan.

Medicare Advantage (Medicare Part C)

Medicare Advantage plans, available through the Medicare Part C program, are Medicare plans offered by Medicare-approved private insurance companies. You’re still enrolled in the Medicare program with a Medicare Advantage plan; you’re just getting your Original Medicare coverage in a different way. These plans 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 Part A of Original Medicare). Medicare Advantage plans may include additional benefits that are not part of Original Medicare, such as routine vision or dental, hearing, and prescription drug coverage.

To be eligible for Medicare part C coverage, you must:

  • Be enrolled in Medicare Part A and Part B.
  • Live in the service area of a Medicare Advantage plan.
  • Not have end-stage renal disease, with some exceptions.

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) plan has a network of health-care providers and facilities you must use to be covered (with the exception of emergency or urgent care services). With this type of plan, you choose a primary care physician to coordinate your care, and you’ll need referrals for specialist care.

A Preferred Provider Organization (PPO) plan* also has a network of health-care providers and facilities but typically doesn’t require you to select a primary care physician. You also have more flexible options regarding out-of-network care, although your cost sharing may be higher if you use a non-network provider.

A Private Fee-for-Service (PFFS) plan typically doesn’t have provider networks; instead, you can see any doctor or provider that will contract with your plan and provide you care on a case-by-case basis. There are no guarantees that your doctor or hospital will accept the plan’s terms and conditions, although some PFFS plans do have provider networks of doctors and hospitals that are on contract with the plan to always treat you.

Special Needs Plans (SNPs) come in three varieties: Plans for those with certain chronic or disabling medical conditions; plans for people in institutions or needing nursing-level care at home; and plans for beneficiaries who are eligible for both Medicare and Medicaid (also known as dual eligibles). If you’re interested in a Special Needs Plan in your area, you must meet the eligibility requirements that the plan targets to enroll; for example, you can’t enroll in a Dual-Eligible SNP in your service area if you don’t have both Medicare and Medicaid coverage.

Medicare Savings Account (MS) plans combine a high-deductible plan with a medical savings account. Your MSA plan deposits a certain amount of money into your savings account every year, which you can use towards qualifying health-care costs before you’ve reached your yearly deductible.

If you choose to receive your Medicare health coverage through a Medicare Advantage plan, you must continue paying your Part B premium because you remain enrolled in Original Medicare (Part A and Part B), even after enrolling in a Medicare Advantage plan. This is in addition to any required premium for your Medicare Advantage plan.

Comparing Medicare Supplement vs. Medicare Advantage plans

In short, Medicare Supplement insurance is a policy that works alongside Original Medicare, Part A and Part B, to provide additional coverage. Medicare Advantage is a Medicare plan that provides your Part A and Part B coverage through a Medicare-contracted private insurance company (instead of through the federal program). Medigap and Medicare Advantage plans 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 are going to switch back to Original Medicare. As mentioned above, the standardized Medigap plans offer uniform benefits in 47 of the states. A given plan type (e.g., Plan G) has the same benefits regardless of the insurance company that provides the policy or the state you reside in, although some companies may offer additional innovative benefits. This is not true of Medicare Advantage plans, however, because coverage details may vary by plan.

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 Medicare Prescription Drug Plan for this coverage. However, remember that the total cost of prescription drug coverage, as well as coverage for the specific medications 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 prescription drug coverage. In other cases, the reverse might be true. Each Medicare plan that covers prescription drugs may require different cost sharing, even when covering the same medications. Because of this, it’s important to shop around and compare plan options to find the plan that offers coverage at the lowest cost.

Medicare Supplement vs. Medicare Advantage plans: Comparing price and plan options

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 across each plan letter type, 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. Part of this is because Medigap insurance companies use different pricing methods when setting their premium costs. Some insurance companies base their Medigap plan premiums on your age when you enroll in the plan, while others have all enrollees pay the same premium amount, regardless of their age. It’s important to understand the pricing method used by the insurance company and how it could affect your Medicare Supplement premium costs.

As you compare plan options, be sure to read the benefit descriptions of every Medigap and Medicare Advantage plan you are considering. Some factors you may want to consider include:

  • Monthly premium
  • Deductibles
  • Cost-sharing expenses, including copayments and coinsurance
  • Doctor and health-care provider restrictions
  • Benefits
  • Anticipated plan costs, given your typical use of health-care and hospitalization services
  • Prescription drug coverage cost sharing as it relates to the medications you take

Medicare Supplement vs. Medicare Advantage plans: trial rights

If you’re currently enrolled in Original Medicare and have a Medicare Supplement plan, you may not realize that you have a “trial right” to try out Medicare Advantage if you’ve never had it before. If you drop your Medigap policy and enroll in a Medicare Advantage plan for the first time, you have one year to see if you prefer Medicare Part C to Original Medicare. If you change your mind and you’ve been in your Medicare Advantage plan for less than a year, you can enroll in the Medigap plan you had before you switched to Medicare Advantage if your former insurance company still offers it. If your old Medigap plan isn’t offered, you have a right to enroll in Medigap Plan A, B, C, F, K, or L offered by any insurance company in your state.

This trial right is important because under normal circumstances, it can be difficult to switch plans or enroll in a Medicare Supplement plan after your Medigap Open Enrollment Period (the six-month period that starts once you’re 65 or older and have Part B) has passed; insurance companies that offer Medigap plans can require medical underwriting or deny you coverage because of your health status.

Hopefully, you have a better idea of how Medicare Supplement and Medicare Advantage plans work. If you’d like help finding coverage that may fit your situation, you can call the phone number on this page to get personalized assistance from a licensed insurance agent. Or, if you’re ready to start browsing now, enter your zip code into the plan finder tool on this page to view plan options in your location.

 

*Out-of-network/non-contracted providers are under no obligation to treat Preferred Provider Organization (PPO) plan members, except in emergency situations. For a decision about whether we will cover an out-of-network service, we encourage you or your provider to ask us for a pre-service organization determination before you receive the service. Please call our customer service number or see your Evidence of Coverage for more information, including the cost-sharing that applies to out-of-network services.

Medicare Supplement insurance plans are not connected with or endorsed by the U.S. government or the federal Medicare program.