When it comes to Medicare, you often hear about Medicare Supplement Plans and Medicare Advantage Plans. But are these two types of plans synonymous? The short answer is no – Medicare Supplement insurance and Medicare Advantage Plans are very different types of coverage.
In this in-depth blog post, we’ll explain the key differences between Medicare Supplements (also called Medigap) and Medicare Advantage. We’ll look at what each type of plan covers, their costs, eligibility and how to choose between them when enrolling in Medicare.
Understanding the distinctions between these two common Medicare coverage options is crucial to finding the right supplemental coverage to pair with your Original Medicare benefits.
Original Medicare Gaps Lead Many to Seek Supplemental Coverage
Before diving into the differences between plans, it’s helpful to understand why Medicare Supplement and Medicare Advantage Plans exist in the first place.
When you first enroll in Medicare at age 65, you automatically have Original Medicare. This includes Medicare Part A (hospital coverage) and Medicare Part B (outpatient/medical coverage). However, Original Medicare comes with substantial out-of-pocket costs in the form of deductibles, copays and coinsurance.
For example, you’ll have to pay a $1,600 deductible for each hospital stay under Medicare Part A. For Part B medical services, you’ll pay a $223 deductible then 20% coinsurance for most services. Plus, Original Medicare does not cover prescription drugs.
As a result, 93% of Original Medicare beneficiaries obtain supplemental coverage through employer plans, Medicaid, Medicare Supplements or Medicare Advantage Plans. These plans help fill the gaps in Original Medicare and reduce out-of-pocket expenses.
Medicare Supplements Add to Your Original Medicare Benefits
Now that we’ve reviewed why supplemental coverage is important, let’s discuss how Medicare Supplement insurance works.
Medicare Supplements, also called Medigap Plans, are sold by private insurance companies to help pay Original Medicare out-of-pocket costs like deductibles and coinsurance. When you enroll in a Medicare Supplement Plan, you keep your Original Medicare benefits. The Medigap Plan works alongside Medicare Parts A and B to provide additional coverage.
Here are some key things to know about Medicare Supplement Plans:
- Standardized benefits – Plans are labeled with letters, and each standardized plan (A, B, C, D, etc.) must offer the same benefits, regardless of insurer. This makes comparing plans straightforward.
- Nationwide coverage – Medicare Supplements offer nationwide coverage from any provider that accepts Medicare. You aren’t limited to network providers.
- Pairs with Part D – Most enrollees add a stand-alone Part D prescription drug plan to their Medigap for full coverage.
- Higher premiums – Premiums for Medicare Supplement Plans are generally higher compared to Medicare Advantage.
- No networks – You can see any doctor or hospital that accepts Medicare, without needing referrals or pre-approvals.
Medicare Supplements help minimize out-of-pocket costs for Original Medicare services. However, they are not a replacement for Medicare. You must be enrolled in Medicare Parts A and B to qualify for a Medigap Plan.
Medicare Advantage Replaces Your Original Medicare Benefits
In contrast to Supplement Plans that work with Original Medicare, Medicare Advantage Plans replace your Medicare Parts A and B benefits. These plans are offered by private insurance companies approved by Medicare.
Here are some features of Medicare Advantage Plans:
- Part A, Part B and usually Part D included – Most Advantage Plans incorporate all your Medicare coverage, except hospice care.
- Network providers – Plans have contracted provider networks you must use to get the highest coverage. Seeing out-of-network providers will cost more.
- Low or $0 premiums – Many Advantage Plans have little to no monthly premium beyond the Part B premium.
- Extra benefits – Most plans include additional benefits like dental, vision and wellness programs not offered by Original Medicare.
- Pre-approval required – You may need referrals or pre-authorizations before getting care from specialists.
- Enrollment periods – You can only join, change or drop an Advantage Plan at certain times of the year.
While Medicare Advantage Plans often cost less than Supplements, they have more complex rules and restrictions that limit healthcare provider choices.
Key Differences: Medicare Supplement vs. Medicare Advantage
Now that we’ve provided an overview of Medicare Supplement and Medicare Advantage Plans, let’s recap the key differences:
Medicare Supplement (Medigap) | Medicare Advantage |
Supplements Original Medicare | Replaces Original Medicare |
Works with Medicare Parts A & B | Bundles Parts A, B, and usually D |
Nationwide access, no networks | Limited provider networks |
Higher premiums | Lower premiums, $0 options |
Fewer extra benefits | Includes benefits beyond Medicare |
Can see any Medicare provider | Referrals needed for specialists |
Can enroll anytime if under 65 | Enrollment periods apply |
In summary, Medicare Supplements provide basic coverage to fill gaps in Original Medicare, while Medicare Advantage offers bundled coverage with networks and extra benefits.
Choosing Between Medicare Supplement and Medicare Advantage
When first enrolling in Medicare, one of the biggest decisions is whether to get a Medicare Supplement Plan or a Medicare Advantage Plan. Here are some tips on choosing between them:
- Budget – What you can afford to pay for premiums and out-of-pocket costs? Advantage Plans tend to have lower premiums.
- Health status – If you have complex health needs, a Supplement may provide more flexibility. Pre-approvals through an Advantage Plan can be barriers to care.
- Providers – Do you want to keep seeing your current doctors or have access to any provider that takes Medicare? Supplements allow open access.
- Prescriptions – Make sure any plan you’re considering includes prescription drug coverage through Medicare Part D.
- Benefits – Do you want basic supplemental coverage or extra benefits like vision and dental? Most Advantage Plans include extra benefits.
- Convenience – If you travel often, Supplements allow healthcare access nationwide without networks.
Speaking to an insurance broker or benefits advisor can help weigh the pros and cons of each plan type. You can switch between Medicare Supplement and Medicare Advantage at certain enrollment periods, so you are not necessarily locked into one option.
The Bottom Line: Medicare Supplement vs Medicare Advantage
In summary, while both Medicare Supplements and Medicare Advantage Plans offer valuable coverage to supplement Original Medicare, they work very differently.
Medicare Supplements add coverage to fill gaps in Original Medicare. Medicare Advantage provides bundled Medicare benefits through private insurance companies with restricted networks and extra benefits.
Understanding these key differences will ensure you choose the type of supplemental Medicare coverage that best fits your needs, preferences and budget. Consult with a Medicare expert to determine if a Medicare Supplement or Medicare Advantage Plan is the right choice when looking to enroll in additional coverage beyond Original Medicare.
We’re Here to Help
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FAQs
Are Medicare Supplement Plans and Advantage Plans synonymous?
Medicare Supplement Plans, also known as Medigap Plans, are different from Medicare Advantage Plans. Medigap Plans are designed to supplement Original Medicare coverage by filling in the gaps, while Medicare Advantage Plans are an alternative way to receive Medicare benefits.
Can you explain what a Medigap Plan is?
A Medigap Plan is a supplemental insurance policy that is designed to help cover the costs that Original Medicare (Part A and Part B) doesn’t pay, such as deductibles, copayments, and coinsurance. Medigap Plans are offered by private insurance companies and can help you manage your out-of-pocket expenses.
How do I enroll in a Medigap Plan?
To enroll in a Medigap Plan, you must already be enrolled in both Medicare Part A and Part B. Once you are eligible, you have an open enrollment period where you can apply for a Medigap Plan without medical underwriting. This period lasts for six months and begins on the first day of the month in which you are both 65 or older and enrolled in Medicare Part B.
Can I compare different Medigap Plans?
Yes, you can compare different Medigap Plans to find the one that best fits your needs. Each Medigap Plan offers the same standardized benefits, but the costs and availability may vary depending on the insurance company and your location. You can use online resources or speak with an insurance agent to compare plans and make an informed decision.
What do Medigap Plans generally cover?
Medigap Plans generally cover costs such as deductibles, copayments, and coinsurance that are not covered by Medicare Part A and Part B. Some plans may also offer coverage for services like foreign travel emergency care. It’s important to review the specific benefits of each plan to understand what is covered.
How do I sign up for a Medicare Advantage Plan?
To sign up for a Medicare Advantage Plan, you must be enrolled in both Medicare Part A and Part B. You can enroll during the initial enrollment period, which is the seven-month period that starts three months before your 65th birthday month and ends three months after your birthday month. You can also enroll during the annual enrollment period, which occurs from October 15th to December 7th each year.
What is the difference between Original Medicare and Medicare Advantage?
Original Medicare refers to the traditional fee-for-service Medicare program, which includes Part A (hospital insurance) and Part B (medical insurance). Medicare Advantage, also known as Medicare Part C, is an alternative way to receive Medicare benefits. Medicare Advantage Plans are offered by private insurance companies approved by Medicare and often include additional benefits not offered by Original Medicare.
Do Medicare Advantage Plans include prescription drug coverage?
Many Medicare Advantage Plans include prescription drug coverage, often referred to as Medicare Part D. However, not all plans offer this coverage, so it’s important to review the details of each plan to see if prescription drugs are included. If a Medicare Advantage Plan does not include prescription drug coverage, you can enroll in a standalone Medicare Part D Plan.
What are the different types of Medicare Advantage Plans?
There are several types of Medicare Advantage Plans, including Health Maintenance Organization (HMO) plans, Preferred Provider Organization (PPO) plans, Private Fee-for-Service (PFFS) plans, Special Needs Plans (SNPs), and Medical Savings Account (MSA) plans. Each plan type has its own network of providers and coverage rules, so it’s important to choose a plan that suits your healthcare needs and preferences.
How does Medicare coverage work with Medigap Supplement Plans?
Medicare coverage works with Medigap Supplement Plans by paying its share of the approved Medicare costs, and the Medigap Plan covers the remaining costs. When you receive medical services, Medicare pays its portion first, and then the Medigap Plan pays its share. This can help reduce your out-of-pocket expenses and give you greater financial protection.