What’s the Difference Between Medicare Advantage and Supplement?

Medicare, the federal health insurance program for individuals aged 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease, provides healthcare coverage. While Original Medicare, consisting of Part A (Hospital Insurance) and Part B (Medical Insurance), offers substantial benefits, it does not cover all healthcare costs. Many beneficiaries face out-of-pocket expenses such as deductibles, copayments, and coinsurance. This prompts many Medicare enrollees to seek additional private insurance options to supplement or alter Original Medicare coverage.

Understanding Medicare Advantage Plans

Medicare Advantage Plans, also known as Medicare Part C, are health plans offered by private companies approved by Medicare. These plans provide an alternative way to receive Medicare benefits, bundling Part A and Part B coverage into a single plan. Many Medicare Advantage plans also include prescription drug coverage (Part D).

These plans often come with additional benefits not covered by Original Medicare, such as routine vision, dental, and hearing services. While some Medicare Advantage plans may have a $0 monthly premium beyond the Medicare Part B premium, others might charge an additional premium. All Medicare Advantage plans have an annual out-of-pocket maximum, which limits how much a beneficiary will pay for Part A and Part B covered services in a year.

Medicare Advantage plans utilize provider networks. Enrollees typically need to receive care from providers within the plan’s network, except in emergencies or urgent care situations. Health Maintenance Organizations (HMOs) generally require members to use in-network providers and often necessitate referrals for specialists. Preferred Provider Organizations (PPOs) offer more flexibility, allowing members to see out-of-network providers, though usually at a higher cost.

Understanding Medicare Supplement Plans

Medicare Supplement Insurance, also known as Medigap, is a type of private health insurance that works with Original Medicare (Part A and Part B). Its purpose is to help cover some of the out-of-pocket costs that Original Medicare does not, such as deductibles, copayments, and coinsurance. These plans do not replace Original Medicare; instead, they supplement its coverage.

Medigap policies are standardized across most states. Plans of the same letter (e.g., Plan A, Plan G, Plan N) offer the same basic benefits, regardless of the private insurance company selling them. While the benefits are standardized, the premiums for identical plans can vary significantly between different insurers.

Unlike Medicare Advantage plans, Medigap policies do not include prescription drug coverage (Part D), vision, dental, or hearing benefits. Beneficiaries with Medigap who desire drug coverage must enroll in a separate Medicare Part D Prescription Drug Plan. Medigap plans have no provider network restrictions; beneficiaries can see any doctor or visit any hospital nationwide that accepts Original Medicare. Referrals are not required to see specialists.

Medigap plans involve paying a monthly premium in addition to the Medicare Part B premium. These premiums are higher than those for many Medicare Advantage plans. In exchange for higher premiums, Medigap plans often result in predictable out-of-pocket costs and can cover a substantial portion of the remaining expenses after Original Medicare pays its share. Some Medigap plans have an annual out-of-pocket limit, after which the plan pays 100% of covered services for the remainder of the year.

Comparing Medicare Advantage and Medicare Supplement Plans

The primary difference between Medicare Advantage and Medicare Supplement plans lies in their relationship with Original Medicare. Medicare Advantage plans serve as an alternative, replacing Original Medicare benefits. Medicare Supplement plans work alongside Original Medicare to cover gaps in its coverage. You cannot have both types of plans simultaneously.

Regarding cost structure, Medicare Advantage plans often feature lower monthly premiums, with many having a $0 premium beyond the Part B premium. However, these plans involve copayments, coinsurance, and deductibles for services received, up to an annual out-of-pocket maximum. In contrast, Medicare Supplement plans have higher monthly premiums paid in addition to the Original Medicare Part B premium. While the premiums are higher, they significantly reduce or eliminate many of the out-of-pocket costs associated with Original Medicare. Most Medigap plans do not have an out-of-pocket maximum.

Provider networks represent another distinction. Medicare Advantage plans operate with networks, such as HMOs and PPOs. Referrals are often required for specialists in HMO plans. With Medicare Supplement plans, beneficiaries can see any doctor, specialist, or hospital nationwide that accepts Original Medicare, and referrals are not necessary.

Extra benefits, such as routine vision, dental, and hearing services, are included in Medicare Advantage plans. Medicare Supplement plans do not offer these additional benefits. Prescription drug coverage (Part D) is bundled into Medicare Advantage plans. For those with Medicare Supplement plans, a separate Part D plan must be purchased to obtain prescription drug coverage.

Enrollment periods differ for these plan types. The Annual Enrollment Period, from October 15 to December 7, allows changes to Medicare Advantage and Part D plans. The Medicare Advantage Open Enrollment Period, from January 1 to March 31, is for those already in an Advantage plan to switch plans or return to Original Medicare. For Medicare Supplement plans, the Medigap Open Enrollment Period is a six-month window starting the month a beneficiary turns 65 and enrolls in Part B, allowing enrollment in any plan without medical underwriting.

Regarding travel coverage, Medicare Advantage plans cover emergency and urgent care anywhere in the U.S. and include coverage for international urgent or emergency care. If a beneficiary lives outside the plan’s service area for more than six months, they may be disenrolled. Some Medicare Supplement plans provide foreign travel emergency coverage, covering 80% of costs after a deductible, up to a lifetime limit. This coverage is for emergencies that begin within the first 60 days of a trip abroad.