Medicare Supplement Vs Medicare Advantage, what are the differences? If you’re like most people who are on or will soon be on Medicare, you are on the lookout for the best way to ensure that you get reasonable health care without breaking the bank.
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You may have heard of Medicare supplements (also known as Medigap) as well as Medicare Advantage Plans (or Medicare Part C). These are two common options for Medicare recipients to maximize their benefits, but figuring them out can be a real headache. And deciding which one is best for you is even more challenging.
So in this guide, we want to offer you straightforward answers to the most important questions about Medicare Supplement vs Medicare Advantage. We’ll explain what each option is and help you decide the best choice for your needs.
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The Most Important Difference Between Medicare Advantage and Medicare Supplement
We’ll deep dive into the important distinctions later in this guide. But to get started, the most important thing you should understand is this:
A Medicare Advantage Plan is a replacement for your traditional Medicare Parts A and B. It is new insurance provided by a private company. With a Medicare Supplement, on the other hand, you are keeping your Original Medicare Parts A and B and simply adding on additional coverage.
What this means is that you cannot have both Medicare Advantage and Medicare Supplement. So you need to choose the right option for you from the start.
Important Terms to Understand
Before we compare your two options, let’s get a few difficult terms out of the way. Understanding these now will help you better grasp the difference between Medigap and Medicare Advantage.
Deductible: A deductible is the amount of out-of-pocket cash you will need to pay before your Medicare benefits kick in. For example, the Medicare Part A deductible for inpatient hospital care is around $1400. This means that if you required inpatient services, you would have to pay the first $1400 in expenses before Medicare would start paying anything.
Benefit Period: This is the period of time that must pass before your deductible resets and you have to pay it again. It can get complicated, but a simple way to understand it is that after paying your deductible, you won’t have to pay it again until 60 days have passed without you requiring the same sort of medical care.
Premium: Insurance premiums are a monthly fee that you need to pay in order to maintain coverage. For example, the standard monthly premium to stay on Medicare Part B was $144.60 in 2020.
Coinsurance: A percentage of medical costs that you are responsible for paying, even after you have met your deductible. Medicare Part B, for example, requires 20% coinsurance on most services. So if you required $1000 worth of medical care, you would pay $200.
Copayment: Like coinsurance, but it is a fixed dollar amount rather than a percentage. With Medicare, this mostly applies to prescription drugs (covered by Part D).
What Is Medicare Supplement?
As we mentioned before Medicare Supplement is also known as Medigap. And this name actually provides a very accurate description of what these plans are. In essence, they fill in the “gap” that many people find unsatisfying in Original Medicare.
For example, many Medicare recipients find that the deductibles are too high. If you were admitted to a skilled nursing facility, you would have to pay about $1400 before your benefits kicked in. That can be an enormous financial burden for someone on a very limited income.
Many Medigap plans eliminate this deductible completely, so you don’t have to worry about a single medical incident emptying your bank account or putting you into debt. Of course, Medigap plans come with an additional monthly premium. But most people find that the peace of mind they offer is more than worth the additional costs.
When you enroll in a Medicare Supplement plan, you still have Original Medicare. You are just adding on additional coverage that is provided by another company. After Medicare pays their share of the bill, any remaining charges that you have covered will be paid by your Medigap provider. Here are the most common “gaps” that people turn to Medicare Supplement plans to cover:
- Part A coinsurance for hospitalization, hospice, or skilled nursing facilities
- Part B coinsurance and copayments
- Blood costs (up to 3 pints)
- Part A deductible
- Part B deductible
- Part B excess charges (when your doctor charges more than Medicare’s limit)
- Medical expenses during foreign travel
There are a very wide range of Medicare Supplement plans that mix and match these benefits. There is a plan for everybody, and you can read our complete overview here. But if you are having trouble deciding which one is best for you, don’t hesitate to reach out to our Medigap specialists at 844-528-8688.
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What Is Medicare Advantage?
Unlike Medigap, when you choose a Medicare Advantage Plan, you are opting out of Original Medicare. Instead, you are choosing a third party insurance provider to handle all of your health care.
You will continue to pay your Part B premium, and may also have an additional monthly premium from the insurance company. However, all Medicare Advantage providers are required to offer at least the same level of coverage as Original Medicare.
A Medicare Advantage Plan is similar to shopping around for insurance before you had Medicare. You get to compare companies, plans, coverage, and costs and choose the best option for you.
At the same time, you’ll be tied to the health care providers that are in your plan’s network, a restriction that doesn’t come with Original Medicare. However, many Advantage Plans also cover prescriptions, dental, vision, and hearing—so they are appealing to many.
Medicare Supplement Vs Medicare Advantage: Which Is Right For Me?
There is no one size fits all answer to the question of Medicare Advantage vs Medicare Supplement. Instead, you have to consider your specific needs in order to find which is best for you.
So let’s compare these two Medicare options across some of the most important elements of your healthcare.
Healthcare Provider / Network
Since Medigap is simply an addition to your Original Medicare, your benefits will apply to any doctor or hospital that accepts Medicare. This means you’ll have a wide range of providers to choose from and won’t be tied down to a specific network.
With Medicare Advantage, however, you will be restricted to the hospitals and providers that are within the network of your insurance company. So if you would like more freedom to choose your doctors, Medigap is a better choice for you. If you are interested in a Medicare Advantage plan but want to keep seeing your current providers, you should make sure they are in-network before adopting a plan.
With Original Medicare (and thus Medigap), you will not need a referral for specialists. Many Advantage Plans, on the other hand, require a referral from your primary care provider in order for a specialist visit to be covered. If you see a specialist without this referral, you may have to pay all of the costs out-of-pocket.
So, if you want free-range of choosing when to see a specialist, Medigap is probably the way to go.
Here’s where it gets a little tricky to compare. The exact costs are going to vary a lot based on exactly what coverage you opt for. For both Medicare Supplement and Medicare Advantage, you’ll continue to pay the Part B monthly premium. Beyond that, here is what you can expect:
- Medigap: If you choose your plan right, you will see very few out-of-pocket expenses for services, and most plans eliminate the deductible. However, your monthly premium will increase. In essence, you are choosing a fixed monthly cost over big surprise medical bills.
- Medicare Advantage: Your monthly costs will usually be lower than with Medigap. However, you will have a copayment or coinsurance for most medical services. A deductible may apply as well.
Medicare Supplements do not include prescription drug coverage. If you choose Medigap, you would also need to enroll in Medicare Part D in order to receive coverage for prescriptions.
Most Medicare Advantage Plans do include prescription drug coverage. If you are trying to decide what is best for you, you should weigh the costs of the Advantage Plan against the cost of adding Part D on top of your Original Medicare.
Medicare Supplements do not include coverage for dental, hearing, or vision care. Many Advantage Plans do cover some or all of these services. You’ll have to shop around to find the plan that includes what you need, but if you are hoping to avoid large out-of-pocket expenses for these types of care, a Medicare Advantage Plan may be best for you.
Medigap has relatively loose rules about when you can enroll compared to Medicare Advantage. Basically, any time after you turn 65 and are enrolled in Part B, you can add a Medicare Supplement.
Medicare Advantage Plans, however, operate more like a traditional health insurance plan with an open enrollment period. This is going to vary from one insurance company to the next, so you may need to shop around a bit if you are on a strict time schedule.
2 Important Considerations to Guide Your Decision
So far, we’ve covered the basic differences between Medigap and Medicare Advantage. By this point, you might be leaning towards one over the other. Before you make your final decision, however, there are a few important points you need to keep in mind.
#1 You get what you pay for.
Just like everything in life, better Medicare coverage is going to cost more. This is why we always recommend that you choose some sort of addition to your Original Medicare, whether that’s Medigap or a Medicare Advantage Plan.
The real decision is whether you want predictable payments or not. Medigap will offer you predictable monthly payments so that you don’t have to fork up surprise cash in an emergency. Medicare Advantage may require you to plan ahead a little bit more and have some money in savings for surprise healthcare costs, but there will not be as much monthly overhead.
#2 You can’t just switch plans any time you want
Unfortunately, you can’t game the system by opting for the cheapest options now and then switching plans when your healthcare needs change.
You are allowed a 12-month trial period for Medicare Advantage. If you leave it within that time frame, you can go back to Medigap without restriction.
While there are some other exceptions, the general rule is that if you have Medigap and drop it, you may not be able to re-enroll in it again. If you do, you will be subject to medical underwriting, which means you may be denied coverage or charged higher premiums due to pre-existing health conditions.
Long story short: Your best option is to do your research and make an informed decision about the best plan for you so that you don’t have to deal with the risk of changing down the road.
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Need Help Making The Right Decision?
We hope this has been an informative guide. But we also know that even with unlimited information at your disposal, it can still be very hard to make the best decision for you.
But that’s exactly what we are here for. Our team of Medicare experts can listen to your needs, examine your budget, and compare plans to help you get healthcare that is affordable and sufficient.