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Comparing Medicare Advantage and Supplement Plans

Medicare Advantage replaces Original Medicare, while Medicare Supplement complements your existing coverage. Here’s a look at how each works, along with a pros and cons comparison to help you find a good fit. 

Medicare Advantage vs Supplement

In general, Medicare Advantage plans provide alternatives to Original Medicare while Medicare Supplement plans complement Original Medicare.

As an alternative to Original Medicare, Medicare Advantage plans are offered by Medicare-approved private insurers and replace Original Medicare entirely, meaning that claims are handled through the MA plan insurance provider.

On the other hand, Medicare Supplement, also called Medigap, allows your Original Medicare to remain active. It complements your existing Original Medicare coverage by covering out-of-pocket costs for services under Part A and Part B that come with deductibles or coinsurance payments.

Those eligible for Original Medicare are typically eligible for Medicare Advantage and Medicare Supplement options. Basic eligibility criteria include:

  • Americans who are 65 or older
  • Those who have end-stage renal disease (ESRD)
  • Those who have medical issues such as Parkinson’s disease, multiple sclerosis, or heart disease

Medicare Advantage vs. Medicare Supplement At a Glance

Medicare Advantage and Medicare Supplement are similar in that both may provide a way to reduce out-of-pocket costs incurred by healthcare services. Where they differ is in their approach: Where Medicare Advantage replaces original Medicare, Medicare Supplement, as the name implies, supplements your existing coverage.

FeatureMedicare AdvantageMedicare Supplement
Part A: Hospital CoverageYesNo
Part B: Medical CoverageYesNo
Part D: Drug CoverageOptionalNo
Out-of-network CoverageNoYes; Medigap will cover any facility that accepts Medicare in general
PremiumsOne premiumTwo premiums: Original Medicare premium and Medigap premium
DeductiblesYou pay plan deductiblesMedigap may pay your Plan A and Plan B deductibles
CopaysYou pay coinsurance paymentsMedigap covers some or all of your copayments
Out-of-pocket CostsYou pay out-of-pocket costsMedigap may pay your out-of-pocket costs, though some plans have limits

Understanding Medicare Advantage

Medicare Advantage plans, also called MA plans or Part C coverage, provide Part A and Part B coverage, and many include Part D prescription drug coverage. They may also offer add-on coverage options such as vision, hearing, and dental services along with more general health and fitness services, such as gym memberships or discounts. However, option availability will vary by insurer.

Costs for Medicare Advantage plans include:

  • Monthly premium: The premium is the cost you pay each month to stay enrolled in the plan and varies based on the type and extent of your coverage. For example, if your Medicare Advantage plan comes with a premium of $20 per month — the average in 2021 was $21.22 — you would pay $20 every month to keep your coverage active.
  • Deductible: This is the amount you pay out-of-pocket before your insurance coverage activates for a service or procedure. For example, if your deductible is $500, you would pay $500 out of pocket before your insurance covers any cost.
  • Copay: Your copay is the amount of the cost you share with your insurance provider after your deductible has been met. For example, you may pay $10 for any prescription up front while your insurer covers the rest.
  • Coinsurance: This is a percentage that splits how much your plan will cover and how much is your responsibility. For example, if you have 20% coinsurance, you would pay 20% of the cost of a service or treatment while your insurance company pays the remaining 80%.
  • Out-of-pocket costs: These are costs for services that aren’t covered under your MA plan that you must pay on your own. For example, there may be specific medications or services that your insurance does not cover, meaning you pay the entire cost of pocket. 

Pros of Medicare Advantage

  • Part D coverage may be included. With Medicare Advantage, you often have the option to include Part D prescription drug coverage as part of your policy, meaning you pay a single premium each month for Parts A, B, and D and save money on prescription drug purchases and refills.
  • Optional coverages may be available. Medicare Advantage could allow you to add options such as dental, vision, and hearing coverage. Depending on the plan, you may also be able to add coverage for services such as gym memberships, mental health visits, and additional outpatient services. 
  • MA plans may reduce your total monthly costs. Even with the addition of prescription drug coverage, Medicare Advantage typically comes with a lower monthly premium than Medigap. As a result, you may pay less each month for coverage, and so long as you stay within your network, you can keep total costs low.

Cons of Medicare Advantage

  • You may require specialist referrals. Because Medicare Advantage requires you to use in-network providers, you may need to contact your insurance company directly for approvals for specialist referrals, and these referrals may not be covered by your policy.
  • Providers must be in your plan’s network. Where Medigap coverage lets you use any Medicare-approved provider, Medicare Advantage insurers have lists of specific providers considered in network. If you choose to go to a provider outside of this network, your insurance may only pay part of the cost, or you may not be covered at all.
  • Unexpected service denials could occur. Except for the 6-month Open Enrollment Period for Medigap, insurers can choose to deny Medicare Supplement insurance to applicants. Medicare Advantage providers, meanwhile, must offer coverage to anyone eligible for Medicare. As a result, unexpected costs and service denials are sometimes used to discourage applicants with higher-than-average medical needs from applying.

Understanding Medicare Supplement (Medigap)

Unlike Medicare Advantage, Medicare Supplement doesn’t replace Original Medicare. Instead, it supplements your current insurance by helping to cover some of the cost of the deductibles and copayments of Original Medicare. Medigap coverage may also pay for costs such as excess Part B charges or medical services while traveling outside the country, though exactly what’s covered and how much depends on your insurer.

Much like Original Medicare plans, you pay a premium each month for your Medicare Supplement insurance. There are 10 Medicare Supplement plans available: Plans A, B, C, D, F, G, K, L, M, and N. But while Medicare Supplement plans must follow core federal guidelines, states have the ability to create their own state-specific rules for the plans, which could affect coverages offered. To best understand your state’s Medigap plans, you should contact your state’s insurance department.

Like Original Medicare and Medicare Advantage, you pay a premium every month to keep your insurance active. Once your deductible is met, your Medigap policy then covers copayments and other out-of-pocket costs. In some cases, this coverage may also pay your deductible, though this varies by insurer. 

It’s worth noting that Plans C and F are no longer available to individuals who were first eligible for Medicare on or after January 1st, 2020. In addition, differing plan types pay different amounts of your Part A and B coinsurance: Plan K pays 50%, Plan L pays 75%, and Plan M pays 100%. Plan G, meanwhile, can be sold with a higher deductible — up to $2,700 in 2023. 

For example, if you have Plan G with a premium of $150 and a deductible of $2,000, you would pay $150 each month to keep your policy active. Once you have paid $2,000 over the coverage period for any combination of covered services to meet your deductible, your Plan G Medigap insurance would then cover 100% of your Part A and Part B deductible. 

Advantages of Medicare Supplement

  • You can use any Medicare-approved provider. Unlike Medicare Advantage, Medicare Supplement plans let you use any Medicare-approved provider across the country. This means that if you’re traveling out of town or moving to another state, you can still access coverage without incurring additional costs. 
  • It may cover out-of-country care costs. Medigap insurance may also cover out-of-country medical costs if you’re traveling and find yourself in need of medical care.
  • It may keep costs predictable. While the total monthly premium may be higher for Medigap insurance, the out-of-pocket coverage for Part A and B services means you can better predict your overall healthcare costs.

Disadvantages of Medicare Supplement

  • There is no prescription drug coverage. Because Medigap plans are not additional insurance, they don’t offer prescription drug coverage. While you can choose to purchase a standalone Part D policy, it comes with its own separate premium, deductible, and coverage limits. 
  • There is limited ability to switch coverage. Medigap coverage is only guaranteed during your 6-month Open Enrollment period after you turn 65 and enroll in Medicare Part B. After this period, you can be denied coverage by insurers. While you can choose to switch away from Medigap to Medicare Advantage, you may be denied coverage or face higher premiums if you decide to apply again and your health circumstances have changed.
  • There are multiple plan types to navigate. With 10 differing plan types, it may be challenging to find the combination of premium, deductible, and coverage that works for you.

What to Consider When Choosing Medicare Advantage vs. Medicare Supplement

When it comes to choosing between Medicare Advantage and Medicare Supplement insurance, it’s worth considering your current lifestyle and predicted future needs.

If your priority is cost control and you don’t mind doing the legwork to make sure that your provider is in network, Medicare Advantage could be a good choice for you. For example, if you have an established, Medicare-approved health network close to home but want to add Part D coverage, Medicare Advantage makes sense. You would get the benefit of Medicare-compliant insurance with the option to add on Part D or additional dental, vision, or preventative health options, along with the advantage of potentially lower premium costs over time.

However, if you’re looking for more flexibility in service providers and want coverage that can be extended to cover medical issues while traveling, then Medicare Supplement is worth considering. While this type of insurance may be more expensive when it comes to monthly premiums and deductibles, its help in coverage for out-of-pocket costs can help reduce your total spending over time.

Can You Have Both Medicare Advantage and Medicare Supplement?

In a word, no — you cannot have both Medicare Advantage and Medicare Supplement. Medical Supplement coverage only applies to Original Medicare coverage, not Medicare Advantage plans. Where Medicare Advantage bundles Part D and other coverages with existing Medicare, Medigap insurance provides additional coverage to minimize out-of-pocket costs incurred under Part A and Part B claims. 

Put simply, where Medicare Advantage augments your insurance with additional coverage types, Medicare Supplement provides additional support only for Original Medicare. 

How to Change Your Medicare Plans

You can change Medicare plans during the Medicare Open Enrollment Period from October 15 to December 7 each year or during Medicare Advantage Open Enrollment from January 1 to March 31 of each year. During the Medicare Open Enrollment period, you can move from Original Medicare to Medicare Advantage, but not the other way around. During the Medicare Advantage Open Enrollment Period, you can move to or from Medicare Advantage or Original Medicare.

When it comes to Medigap, meanwhile, the rules are slightly different. During your 6-month Medigap Open Enrollment Period, which starts the first month that you’re 65 or older and have Part B insurance, you may be eligible to purchase any Medigap plan offered in your state, regardless of any current or chronic health conditions. 

After the 6-month window, insurance providers are no longer obligated to offer you Medigap coverage. While you are able to apply for a Medigap policy during both the Medicare Open Enrollment and the Medicare Advantage Open Enrollment periods, you may be required to complete medical evaluations before you are approved. Insurers can choose to offer you higher premiums, lower coverage, or refuse your application if they consider your health conditions to be high risk.