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Medicare Advantage vs. Medicare Supplement Plans

Oct 02, 2019 4 min read David Rodeck

Key Takeaways

  • If you are eligible for Medicare, you can enroll in Medicare Fee for Service (traditional Medicare) or Medicare Advantage.
  • If you choose traditional Medicare, it will cover much of your health care costs, but also has substantial out-of-pocket costs and gaps. These can be covered with a Medicare Supplemental policy.
  • Medicare Advantage is operated by private insurance companies. Medicare Advantage plans cover all Medicare services. Some plans also offer extra benefits, like vision, hearing and dental coverage. Most also offer prescription drug benefits.



What is a Medicare Supplement plan?

A Medicare Supplement plan is a health insurance plan offered by an insurance company that can be used to cover costs and gaps not covered by traditional Medicare. This type of plan is also known as a Medigap plan.

If you purchase a Medicare Supplement plan, you will pay a monthly premium to the insurance company. What that MediGap plan covers will depend on which type of plan you choose.

As of 2019, there are 10 types of Supplement plans Opens in new window, each labeled by a specific letter — each plan offers a different combination of benefits for a particular price. For example, Medicare Supplement A plans don't cover the hospital deductible, while Medicare Supplement B plans do, but the added coverage also comes with a higher premium.



What is a Medicare Advantage plan?

A Medicare Advantage plan, also called a Part C plan, is Medicare operated by a health insurance company. Medicare Advantage covers the mandated Medicare Part A and B (hospital and non-hospital medical services and supplies), possible supplemental benefits and often, pharmacy benefits (Medicare Part D). The supplemental benefits that are offered are determined by the insurance company and each Medicare Advantage plan will be a little different.



Most people become eligible for Medicare when they turn 65. You may enroll in either traditional Medicare or Medicare Advantage three months prior to turning 65, but you will not be able to receive benefits until you are actually 65. If you choose to enroll in traditional Medicare, you also chose to enroll in a Medicare Supplemental plan. The open enrollment period for Medicare Supplement plans Opens in new window lasts for the first six months after you turn 65 (and have enrolled in traditional Medicare).

For Medicare Advantage plans, the initial enrollment period lasts for the first three months before you turn 65 Opens in new window, the month you turn 65 and the three months afterward, for a total of seven months. If you also have Medicaid, you are known as a “dual eligible” and can enroll in Medicare Advantage at any time.

Enrollment becomes more complicated for Medicare Supplemental policies if you miss the open enrollment period. Private insurance companies aren't required to sell you Medicare Supplement plans past this point, and if you have health issues, insurers could deny selling you a policy altogether. For Medicare Advantage there is an open enrollment period each year Opens in new window, from October 15 to December 7, and you cannot be denied based on your medical history.


Comparing Medicare Supplemental Plans

It’s important to understand your medical needs when choosing which Medicare Supplemental plan is right for you. Once you do, it’s fairly simple to compare them, since they have standardized benefits packages established by the government. In other words, Medicare Supplement Plan Part A will provide the same coverage regardless of which insurance company it was purchased through.

One advantage of having a Medicare Supplemental plan is that they are stable in terms of benefits (which are mandated) and can be used through the United States in any location, with any health care provider that accepts Medicare. A disadvantage is that they can be costly, and you could be denied coverage if you miss the initial enrollment period. Medicare Supplemental plans also don’t offer any “extras” or pharmacy benefits.


Comparing Medicare Advantage Plans

Medicare Advantage plans offer the same established Medicare Part A and B benefits, but they differ in some respects: premium, out of pocket expenses, provider network, types of supplemental benefits and pharmacy benefits. You also need to determine your medical needs and choose which Medicare Advantage plan is the best fit for you.

An advantage of having a Medicare Advantage plan is that the supplemental benefits and other benefits may be more in line with your needs. Some of these supplemental benefits may be gym memberships, dental services Opens in new window and vision coverage. Disadvantages are that you may be limited in which health care provider you can see, and while the Medicare Advantage plan must offer Medicare Part A and B, it could change the supplemental benefits offered each year. Also, you must receive all non-emergency care within the Medicare Advantage plan’s service area and network. If you don’t, you may have higher out-of-pocket expenses or a complete denial of coverage.


What you can do next

To get a balanced comparison, consider meeting with a health insurance agent or broker who sells both types of plans. You can also meet with a financial advisor to review your entire financial situation, including Medicare.

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