Medicare Supplement vs Medicare Advantage

What The Heck Is Medicare Advantage? I Thought There Was Just One Type of Medicare Plan?

Medicare alone is confusing enough, and to make things even more confusing, there are plans that supplement your original Medicare plan. There are two types of plans to choose from Medicare Advantage plans and Medicare supplement plans. To understand what type of plan is better for you, we will first cover the basics:

Medicare Advantage (MA)

Medicare Advantage plans also referred to as “MA” or “Part C”, are Medicare health plans offered by private insurance companies that combine all of your Part A and Part B benefits. Some plans may have prescription drug coverage as well (MAPD). The most common forms of Medicare Advantage plans are the following:

•        Health Maintenance Organization (HMO)
•        Preferred Provider Organization (PPO)
•        Private Fee for Service Organization (PFFS)

The two most popular types of MA plans are HMO’s and PPO’s. When enrolled in an HMO plan, you must choose a primary care doctor and you can only see other doctors that are within the same network as your primary care doctor. You must also get authorization from your primary doctor to see a specialist.

PPO plans offer more flexibility and freedom than an HMO plan but still have a lot more restrictions and fewer benefits than a Medigap plan. PFFS plans are less common and you must find out ahead of time if the facility you want to go to accepts the particular PFFS plan that you have.

Medicare Supplement Plans (Medigap)

Medicare supplement plans, or Medigap plans, are Medicare health plans offered by private insurance companies. A Medigap plan is meant to pay what Part A and Part B of Medicare plans do not cover in full. There are 10 standardized Medigap plans and they are offered in every state except Massachusetts, Wisconsin, and Minnesota. The ten plans range from Plan A to Plan N. Each plan is different and offers a unique combination of coverage and deductibles.

Because the plans are standardized, any given plan (e.g. Plan F) will have the same exact benefits regardless of what company is offering the plan. The only difference is the price you pay in premium. When comparing plans, make sure you compare the premium cost for the same plan from company to company.

Main Differences Between the Two

The main difference between Medicare Advantage plans and Medicare supplement plans is that with a Medicare supplement plan, you have the ability to see any provider in the country that accepts Medicare. There are no networks you are restricted to, and you never have to choose a primary care doctor. Unlike Medicare Advantage plans you have the freedom to go to any doctor you wish. Also, as mentioned above, there are 10 standardized Medicare supplement plans to choose from, so you have more choices in choosing which plan is best for you.

Because Medicare Advantage plans are heavily subsided by the US government, they are subject to budget cuts. The recent cuts in Medicare Advantage spending have caused the insurance carriers to cut benefits and increase deductibles. These deductibles are often $5,000 to $10,000. Medicare supplement plans are not subsidized by the government, therefore they are not subject to any budget cuts. As a result of the budget cuts, many doctors have stopped accepting Medicare Advantage plans.

Summary:

Medicare Advantage Plans

• Can only see doctors and hospitals that accept the specific plan you have
• Often need a referral to see a specialist
• Usually large copays and deductibles ($5,000-$10,000 per year)
• Doctors often stop accepting certain plans
• Subject to government
  budget cuts

Medicare Supplement Plans (Medigap)

• Ability to go to any doctor or hospital in the country that accepts Medicare without a referral
• Minimal to no out-of-pocket cost
• More comprehensive coverage
• Foreign travel benefit

*Underwriting

I would also like to add something that companies and agents offering Medicare Advantage plans will never tell you. That is, you never have to answer health questions when applying for a Medicare Advantage plan. You do, however, have to answer health questions to get a Medicare supplement plan; unless you are turning 65, new to Medicare, or in a Guarantee issue scenario.

Because of this, it is also a good idea to get a Medicare supplement while you are healthy or when you aren’t subject to the health questions as mentioned previously. You can always go from a Medicare supplement to a Medicare Advantage plan regardless of your health but not vice-versa.

So, What Is Better?

A Medigap plan offers much better coverage and freedom and flexibility than any Medicare Advantage plan out there. There are large deductibles and out of pocket costs associated with many Medicare Advantage plans. Medicare supplement plans such as F, G, and N have very low to zero out-of-pocket costs. If you cannot afford the premium on a Medigap plan then a Medicare Advantage plan may be a good fit, otherwise, you are much better off on a Medigap plan.

*If you are considering a Medigap Plan be sure to read my explanation of why Plan G is better here.

If you are someone who can stomach some potentially large bills, you don’t mind who your doctor is, and you want to save money on your monthly premium, then a Medicare Advantage plan may be a good fit.

On the other hand, if you don’t mind paying a little more per month and you like to have the ability to see any doctor and benefit from lower out-of-pocket costs, then a Medicare supplement plan may be a good fit for you.

We can provide unbiased advice and help you choose the right plan. Request a free quote here.