Once You Understand Three Fundamental Differences, Your Choice Will Be Easy.
There are many differences between Medicare supplement insurance (Medigap) and Medicare Advantage plans. However, we can sum up Medicare Advantage vs. Medigap in three easy points:
- Medicare supplements fill the gaps in Original Medicare, whereas a Medicare Advantage plan completely replaces Original Medicare coverage.
- With Original Medicare and a supplement, you pay most of your costs upfront through monthly premiums. With Medicare Advantage, you pay the majority of your costs when you use healthcare services through coinsurance, copayments, and other out-of-pocket costs.
- With Original Medicare and a Medicare supplement, you do not need a referral to see a specialist, get lab work, etc. With most Medicare Advantage plans you need to see your primary care physician for a referral to use most services.
Those are the major health coverage differences. And, although it sounds like Medicare Advantage has many detractors, these health insurance plans do have their benefits. For example, many include prescription drug coverage. And many have a zero-dollar premium, but you must continue to pay your Part B premium.
In this article we’ll help you figure out if a Medicare Advantage plan is best for you and answer the following popular questions:
There is no debate when it comes to which plan offers better coverage. Original Medicare and a supplement plan offer the best coverage, but it costs more up-front. For a complete breakdown of the differences between Medicare Advantage plans and Medigap plans, read: Medicare Advantage vs Medigap: Which is Best for You?
Original Medicare is a Private Fee-for-Service (PFFS) health insurance system. Beneficiaries can use any healthcare provider that accepts Medicare. Most Medicare Advantage plans are a form of managed care health insurance, including HMOs and PPOs. As such, they have networks of doctors and hospitals that plan members use to receive care. With Original Medicare, the federal government pays about 80% of all Medicare-approved costs and the beneficiary pays the remaining 20% out-of-pocket. However, the 20% gap in coverage can be supplemented with a Medigap plan. With Medicare Advantage, members must pay all copays out-of-pocket until spending reaches the plan maximum, which can be up to $7,550. To learn more about how plans work, read How Does Medicare Advantage Work.
The primary benefit of Medicare Advantage is extra benefits. And, if you are a healthy senior, the additional benefits and cost savings really add up. But, there are some serious disadvantages as well, including network provider limitations, costly inpatient copays, and no coverage traveling away from home. To discover all of the pros and cons, read: What are the Advantages and Disadvantages of Medicare Advantage Plans?
Here's who gets to truly experience the advantage private health plans offer:
- People with retiree benefits that help with Medicare Advantage premiums, deductibles, and copays.
- People who qualify for a Medicare Advantage Special Needs Plan.
- People who are exceptionally healthy and rarely use healthcare services outside of their annual wellness visits.
- People who can't get a Medicare supplement due to one or more chronic health issue who need the maximum out-of-pocket cost safety net built into Part C plans.
Read on for important tips that will help you compare Medicare Advantage plans with Original Medicare.
Should You Choose Medicare Advantage or Use Medigap to Supplement Your Original Medicare Plan?
That’s the big question most people have when deciding what health coverage is best. The correct answer, for most people, comes down to cost and what they can afford. To explain costs, we first need to answer the question, what is Original Medicare?
Original Medicare coverage has two parts. Medicare Part A offers hospital coverage. Medicare Part B is medical coverage. When you have Medicare Parts A and B, Medicare pays about 80 percent of your major medical costs and you pay the remainder out-of-pocket. To cover some or all of the 20 percent gap, you can buy a Medigap plan.
If you don’t have Medicaid or Medicare retiree benefits from an employer, Medicare Advantage can be an expensive option. This is particularly true if you have one or more chronic health conditions that require regular care. Private insurance companies are in the business to make money, and they do so by charging you a deductible or copay when you use a service.
If you are a super healthy senior, and you rarely see your doctor for anything more than your annual wellness exam, Medicare Advantage is an excellent medical insurance option. Healthy seniors save through low monthly premiums and minimal copayments. Plus, most plans include additional benefits, including dental care and a prescription drug plan (Medicare Part D).
The converse is also true. If you have serious health conditions, and you don’t have additional benefits from Medicaid or an employer, Original Medicare benefits are generally the better option. The reason is that a Health Maintenance Organization (HMO) plan, which is the majority of Advantage plan options, requires referrals and charge copays when you use services. The end result is more cost and a big headache getting referrals.
What is the Purpose of Medicare Advantage?
When you compare Original Medicare and a Medigap plan with Medicare Advantage, it may seem like there’s no purpose. Yet, millions of Medicare beneficiaries join a Medicare Advantage plan every year and they are satisfied with their coverage.
RELATED: How Does Medicare Advantage Work?
The true purpose of Medicare Advantage is choice. Many people want more than just major medical coverage, which is what Original Medicare offers. This is where Advantage plans shine. Many plans offer prescription drug coverage, dental care, vision, hearing, telehealth, SilverSneakers, and much more.
What is the Downside to Medicare Advantage Plans?
The downside to Medicare Advantage really depends on who you are and your health condition. Cost is a potential downside if you don’t have assistance from Medicaid or an employer. Referrals are a potential downside if you need frequent care or you want a choice in the providers you use. These downsides do not exist with Original Medicare and a good Medigap policy, such as a Plan F or Plan C.
Another downside to Medicare Advantage is the annual open enrollment period every Fall. This is when you can choose a new plan, but it’s also when insurers can change their plans. It is a big task comparing Part C HMO and PPO plans to make sure you’re getting the coverage options you need with low health care costs.
Is There a Downside to Medicare Supplement Plans?
Not really. The one downside might be that Original Medicare and Medicare supplement insurance plans do not have provider networks. If you live in an area without a specialist you need that accepts Medicare, you may have to drive a distance to get the medical care you need. However, the same can be true of Medicare Part C. There’s no guarantee an insurer will have the specialist you need in the plan’s network in your home town.
NOTE: A recent change to Medicare supplement insurance by Congress prevent new Medicare beneficiaries from buying a Medigap policy that covers the Part B deductible. This takes a big step towards leveling the Medicare Advantage vs. Medicare Supplement playing field.
Citations & References:
- Find a Medicare plan
- Find a Medigap policy that works for you
- What’s Medicare Supplement Insurance (Medigap)? | Medicare
This article was written by David Bynon and was last updated on .