Medicare Supplement vs Medicare Advantage

Medicare Supplement (Medigap) Plans and Medicare Advantage Plans are both very popular options for Medicare beneficiaries who are choosing which benefit structure best fits their healthcare needs and lifestyle. However, I come across many beneficiaries who are confused or do not know the difference between these very distinct types of plans. In a nutshell, these plans can be considered like this: Medicare Supplements are in ADDITION to your Original Medicare benefits, while Medicare Advantage plans REPLACE your Original Medicare Benefits. While this is a simplified explanation, as there are many further distinctions between the two, this is the main one. Let’s explore the different a little deeper so that you might decide which option is best for you.

Medicare Supplements

Medigap (or Medicare Supplement Insurance, they are one in the same) are private health insurance plans sold to supplement Original Medicare benefits. They are designed to fill in the “gaps” of co-pays, deductibles and other costs that Original Medicare does not cover. There are 11 different Medicare Supplement plans to choose from nationwide (labelled Plans A, B C, D, F, HDF, G, K, L, M, and N). Each of these plans offer different levels of coverage for the out-of-pocket expenses that Original Medicare doesn’t cover. These plans have been standardized since 1992, meaning that the Medicare Supplement Plan that you purchase from (for example) Humana will be the exact same Medicare Supplement Plan that you purchase from Cigna, United Healthcare, United American, Thrivent, etc. Each plan offers the same benefits from each insurance carrier, and it then comes down to finding the plan that you select at the lowest price from the insurance carriers that offer the plan in your area. For example, in the Tampa Bay area of Florida, a Plan F (the most comprehensive of Medicare Supplement plans) for a female turning 65 (and first eligible for Medicare) can cost $179 a month all the way up to $265 a month. If this hypothetical individual hadn’t done their research and picked the least expensive insurance carrier afforded to them, they could spend over $26,000 extra for an identical plan over 25 years. As is the case with most lines of insurance, it is always best to consult with a broker when choosing a Medicare Supplement (Medigap) plan, so that they can inform you of all of your options and show you the best prices available in your area to choose from.

Medicare Supplement plans are distinct from Medicare Advantage plans additionally because they do not offer prescription drug coverage. A separate Medicare Prescription Drug Plan (PDP) must be purchased with a Medicare Supplement. Many people view this as a negative, as it is another purchase they must make, however there are often better pricing structures for prescriptions for beneficiaries when choosing amount dozens of competing prescription drug plans versus being stuck with the one that comes bundled with your Medicare Advantage plan.

Medicare Advantage

Medicare Advantage health plans could be considered a Medicare replacement plan. They are not in addition to Original Medicare, but take the place of it. In this type of plan, a private health insurance carrier administers your health benefits. Medicare Advantage plans must offer at least the same amount of coverage as Original Medicare and often provide additional benefits that Original Medicare doesn’t provide.

How can they afford to do this? CMS pays each Medicare Advantage carrier a fixed amount of money monthly to administer health benefits to Medicare beneficiaries enrolled in their plans. Medicare Advantage plans also utilize networks with contracted physicians, which can control costs but impact access to care.

Medicare Advantage plans generally replace the 80/20 co-insurance structure of Original Medicare with set co-pays. You might pay $15 to see a Primary Care Physician or $40 to see a specialist.

HMO Medicare Advantage plans restrict all access to care to within the plans network, except for emergency treatment. PPO Medicare Advantage plans also have a network, but beneficiaries can seek care outside of the network, albeit at a higher cost. Generally, HMO plans have a lower total annual cost than PPO plans, according to CMS.

Medicare Advantage plans most often come with prescription drug coverage included without an additional premium. Furthermore, certain Medicare Advantage plans will reduce the amount of premiums paid for Medicare Part B. In the Tampa Bay area, one plan offers a reduction of $131 of the $135.50 Part B premium.