Medicare Supplements Vs Medicare Advantage: What’s the Difference

People new to Medicare often tell us they are completely overwhelmed by all their plan choices. There are four parts to Medicare itself, then 10 standardized Medicare supplement plans offered by dozens of different insurance companies. On top of that, there are Part C Medicare Advantage plan options, and then standalone Part D drug plans.

Does your head hurt yet?

It’s normal to feel confused about this stuff, but when it all shakes out, you really have two main coverage choices. Here’s how they work.

Medicare Supplement + Part D Drug Plans

Medicare supplements plans, also called Medigap plans, were created in the sixties just after Medicare became law. These plans pay after Medicare to fill in some of the gaps that normally you would pay. These gaps are things like deductibles, coinsurance and copays. 

The way it works is Medicare processes your claim and then pays its share. Then Medicare sends the remainder to your supplement company which pays its share. If there is anything leftover, that’s where you come in.

There are 10 standardized plans to choose from and one high deductible plan. Plans F and G offer the most comprehensive coverage and therefore the most popular In recent years. Plan N has also been getting some traction because it offers slightly lower premiums if you are willing to pay a few of your own items like the Part B deductible, excess charges and some copays.

Medicare supplements have no networks. You can see any provider in the nation that accepts Medicare, so they are great for people who like to travel. They are also guaranteed renewable, portable, and their benefits do not change from year to year.

Medigap plans, however, only supplement Original Medicare Parts A and B. They do not cover outpatient retail drugs, so if you want drug coverage, you’ll enroll in a standalone Part D drug card that you use at the pharmacy.

So there you have it, a high-level view of one route you could go to get supplemental coverage to get your Medicare benefits.

Medicare Advantage Plans

Medicare Advantage plans were created in the 90’s in their current form, although prior to that there were some earlier prototypes. Called Part C of Medicare, these Advantage plans package up your Part A, Part B and usually Part D benefits into one shiny health insurance card.

You present the same card anywhere you go for treatment. Medicare Advantage plans are usually cheaper than Medicare supplement plans because you agree to use a private network of providers for your care. You’ll pay copays for various services as you go along.

Generally, you’ll choose either an HMO or PPO-style plan, and in some plans, you may have to designate a primary care physician. That physician will refer you out if you need to see a specialist.

Medicare Advantage plans also have an out of pocket maximum to protect you. Unlike Medicare Part B, where you would owe 20% of all your treatment forever, Medicare Advantage plans cap your spending. Every year there is a maximum limit to what you can spend on Part A and B covered services, and this protects you from medical bankruptcy if you have an expensive year with lots of copays.

One thing to be aware of is that Medicare Advantage plans change their benefits every year. You’ll receive a notice of change letter from the insurance company in September that will tell you if any of the premiums, copays, deductibles, networks, pharmacies or medications are changing for the next year. If you are unhappy with the changes, you can use the annual election period in the fall to change to a different Advantage plan or to return to Original Medicare.

Which Plan is Right for You?

There are a lot of factors that go into choosing the right plan. A good place to start is by asking your important physicians which plans they participate in. This will help you to narrow down your plan options, and then you can contact a Medicare insurance broker like Boomer Benefits to help you with getting quotes. Your broker can educate you on the particulars of the plans you are considering, and help guide you to a choice that fits your needs and budget.