What Is the Difference Between Supplement and Advantage Plans?

Navigating Medicare options can be complex. This article clarifies the distinctions between Medicare Supplement (Medigap) plans and Medicare Advantage (Part C) plans to help individuals make informed healthcare coverage choices.

Medicare Supplement (Medigap) Plans Explained

Medicare Supplement, or Medigap, consists of health insurance policies offered by private companies. These plans work alongside Original Medicare (Parts A and B) to help cover out-of-pocket costs like deductibles, copayments, and coinsurance. For example, Original Medicare Part B typically covers 80% of approved services, leaving a 20% coinsurance that a Medigap plan can address.

Medigap policies are standardized by the federal government. Plans of the same letter provide identical benefits, regardless of the insurance company. While benefits are standardized across most states (A through N), premiums vary significantly between providers and locations. Plans C and F are no longer available for new Medicare enrollees as of January 1, 2020, but individuals eligible before this date may still purchase them.

Medigap plans do not have provider networks. Beneficiaries can see any doctor, specialist, or hospital nationwide that accepts Original Medicare. Referrals are generally not required for specialists, offering broad access to healthcare services.

Medigap policies do not include prescription drug coverage. Individuals desiring this coverage must enroll in a separate Medicare Part D plan. Medigap plans also do not cover extra benefits like routine dental, vision, hearing care, long-term care, or private-duty nursing.

Medicare Advantage (Part C) Plans Explained

Medicare Advantage, or Medicare Part C, is an alternative way to receive Medicare Part A and Part B benefits through private insurance companies approved by Medicare. These plans bundle Original Medicare coverage and often include additional benefits. When an individual enrolls, the private plan takes the place of Original Medicare for most services, rather than supplementing it.

Most Medicare Advantage plans include prescription drug coverage (Part D). Many plans also offer extra benefits not covered by Original Medicare, such as routine dental, vision, hearing care, and fitness programs. The availability and scope of these benefits vary by plan and location.

Medicare Advantage plans typically operate with specific provider networks, such as Health Maintenance Organizations (HMOs) or Preferred Provider Organizations (PPOs). HMO plans generally require beneficiaries to choose a primary care provider within the network and obtain referrals for specialists. PPO plans offer more flexibility, allowing members to see out-of-network providers, usually at a higher cost.

These plans feature an annual out-of-pocket maximum, limiting the total amount beneficiaries pay for covered Part A and Part B services in a calendar year. For 2025, the out-of-pocket maximum for in-network services is $9,350, though individual plans may set lower limits. Once this limit is reached, the plan covers 100% of costs for covered services for the remainder of the year. Costs include premiums, deductibles, copayments, and coinsurance, which vary among plans.

Direct Comparison of Plan Features

The fundamental difference between these two Medicare options lies in their relationship with Original Medicare. Medigap plans function as supplemental insurance, working with Original Medicare to cover its out-of-pocket costs. Conversely, Medicare Advantage plans serve as an alternative, effectively replacing Original Medicare for most services by providing Part A and Part B benefits through the private plan.

Regarding coverage scope, Medigap policies focus on paying Original Medicare’s deductibles, copayments, and coinsurance. They do not expand upon the services covered by Original Medicare. In contrast, Medicare Advantage plans cover all services included in Original Medicare Part A and Part B, and most integrate prescription drug coverage (Part D). Many also include additional benefits like routine dental, vision, and hearing care, which Original Medicare and Medigap do not.

Provider networks also distinguish the two options. Medigap plans generally allow beneficiaries to use any healthcare provider nationwide that accepts Medicare, offering broad access without network restrictions. Medicare Advantage plans, however, typically operate within specific networks (e.g., HMO or PPO). While PPO plans offer some flexibility for out-of-network care, it usually comes with higher costs. HMO plans strictly limit coverage to in-network providers except for emergencies.

Cost structures present another key difference. With Medigap, individuals pay their monthly Medigap premium in addition to their Original Medicare Part B premium. Original Medicare itself does not have an annual out-of-pocket maximum, meaning there is no cap on potential expenses without supplemental coverage. Medicare Advantage plans, conversely, typically have their own premium (some with a $0 premium beyond the Part B premium), deductibles, copayments, and coinsurance for services. A significant feature of Medicare Advantage is the federally mandated annual out-of-pocket maximum, which protects beneficiaries from unlimited healthcare costs for covered services.

Prescription drug coverage is handled differently by each plan type. Medigap plans do not include Part D prescription drug coverage, requiring a separate enrollment in a standalone Part D plan. Most Medicare Advantage plans, however, integrate Part D coverage directly into their plans, offering a bundled approach to health and drug benefits.

Referrals are generally not required with Original Medicare and Medigap for seeing specialists, providing direct access to necessary care. Medicare Advantage plans, particularly HMOs, commonly require a referral from a primary care provider before seeing a specialist. This managed care approach can influence how beneficiaries access specialized medical services.