Which Is Better: Medicare Advantage or Medicare Supplement?

Medicare is the federal health insurance program for individuals aged 65 or older, and for some younger individuals with specific disabilities. After becoming eligible, beneficiaries choose between Medicare Advantage Plans or Medicare Supplement Insurance. Both options provide additional coverage or structure benefits differently than Original Medicare. This article clarifies what each option entails to help readers make informed healthcare decisions.

Original Medicare: The Foundation

Original Medicare comprises two main parts: Part A (Hospital Insurance) and Part B (Medical Insurance). Part A generally covers inpatient hospital stays, skilled nursing facility care, hospice care, and certain home health services. Most individuals do not pay a monthly premium for Part A if they or their spouse paid Medicare taxes for a specified number of years. A deductible of $1,676 applies per benefit period in 2025, along with daily coinsurance for extended stays.

Medicare Part B covers medically necessary services and supplies, including doctor’s services, outpatient care, medical supplies, and preventive services. Beneficiaries typically pay a monthly premium for Part B, which is $185 in 2025 for most individuals, and an annual deductible of $257 in 2025. After meeting the deductible, individuals are responsible for 20% coinsurance of the Medicare-approved amount.

Original Medicare does not cover all healthcare expenses. It generally excludes most prescription drugs, routine dental care, vision care, hearing care, and long-term care. Additionally, Original Medicare does not have an annual out-of-pocket maximum, meaning there is no cap on how much an individual might pay for covered services in a year.

Medicare Advantage Plans: How They Work

Medicare Advantage Plans, also known as Medicare Part C, are offered by private companies approved by Medicare. These plans provide an alternative way to receive Medicare Part A and Part B benefits, effectively replacing Original Medicare.

Most Medicare Advantage Plans include prescription drug coverage (Part D) as part of their benefits. Many plans also offer additional benefits not covered by Original Medicare, such as routine dental, vision, hearing, and wellness programs. Common plan types include Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs), which typically involve networks of providers and may require referrals for specialists.

Costs within Medicare Advantage Plans generally include the Medicare Part B premium, which beneficiaries must continue to pay. Many plans feature low or even $0 additional monthly premiums. Members typically pay copayments or coinsurance for services as they receive care. A feature of Medicare Advantage Plans is the annual out-of-pocket maximum, which limits how much an individual will pay for covered services in a calendar year.

Medicare Supplement Insurance: How They Work

Medicare Supplement Insurance, often called Medigap, is sold by private companies and operates differently from Medicare Advantage. Medigap policies work in conjunction with Original Medicare, helping cover out-of-pocket costs such as deductibles, copayments, and coinsurance for Parts A and B.

Medigap plans are standardized across most states, meaning policies with the same letter designation (e.g., Plan G) offer the same basic benefits regardless of the insurance company. The main difference between policies of the same letter from different companies is the premium. Medigap policies generally allow beneficiaries to see any doctor or hospital nationwide that accepts Original Medicare, without network restrictions or referrals.

Medigap policies do not include prescription drug coverage; individuals need to enroll in a separate Medicare Part D plan for medication costs. These policies also do not cover extra benefits like routine dental, vision, or hearing care, which are often found in Medicare Advantage Plans. Individuals pay a monthly premium for their Medigap policy in addition to their Medicare Part B premium. Once the Medigap premium is paid, out-of-pocket costs for services covered by Original Medicare are generally lower or eliminated.

Key Differences in Coverage and Costs

The foundational distinction between Medicare Advantage and Medicare Supplement plans lies in their relationship with Original Medicare. Medicare Advantage Plans replace Original Medicare benefits, becoming the primary coverage source for Part A and Part B services. Medicare Supplement policies work alongside Original Medicare, providing secondary coverage for out-of-pocket expenses. You cannot have both a Medicare Advantage Plan and a Medigap policy simultaneously.

Medicare Advantage Plans often combine Part A, Part B, Part D (prescription drug coverage), and frequently include additional benefits like dental, vision, and hearing. Medigap does not include prescription drug coverage, requiring a separate Part D plan, nor does it offer extra benefits such as routine dental or vision care. Individuals with Medigap typically manage at least two separate insurance policies.

Out-of-pocket costs also differ significantly. Medicare Advantage Plans include an annual out-of-pocket maximum, limiting how much a beneficiary will pay for covered services in a year. Medigap policies cover many of Original Medicare’s deductibles, copayments, and coinsurance, significantly reducing out-of-pocket exposure.

The premium structure and per-service costs present a trade-off. Medicare Advantage Plans often have lower or $0 monthly premiums beyond the Part B premium, but typically involve copayments or coinsurance for individual services. Medigap policies usually have higher monthly premiums, but once paid, they result in very low or no additional out-of-pocket costs for covered services. Medigap provides more predictable per-service costs, while Medicare Advantage can have lower upfront costs but variable expenses depending on healthcare utilization.

Provider networks and referrals are another area of divergence. Medicare Advantage Plans, particularly HMOs, often operate with network restrictions, meaning beneficiaries may need to use specific doctors and hospitals within the plan’s network and may require referrals. With Medigap, beneficiaries can generally see any doctor or visit any hospital in the United States that accepts Original Medicare, offering broader access and no referral requirements.

Travel coverage also varies. While Original Medicare has limited coverage outside the U.S., some Medigap plans offer coverage for foreign travel emergencies, typically covering 80% of costs up to a lifetime maximum after a deductible. Medicare Advantage Plans may also offer some emergency coverage when traveling domestically or internationally, but specifics vary greatly by plan and may be limited to urgent care or emergencies outside the plan’s service area.

Considerations for Selecting a Plan

Choosing between Medicare Advantage and Medicare Supplement involves evaluating various personal factors. An individual’s current and future health needs play a role. Those who anticipate frequent doctor visits, hospital stays, or have chronic conditions might prefer the predictable costs offered by Medigap, where higher premiums lead to minimal out-of-pocket expenses per service. Conversely, individuals with lower healthcare usage might find the lower monthly premiums of many Medicare Advantage Plans appealing, even with potential per-service copayments.

Financial situation and budget are also important considerations. Medigap plans involve a consistent monthly premium in addition to the Part B premium, which can be a significant fixed cost. Medicare Advantage Plans often have lower or $0 additional premiums but can lead to higher out-of-pocket costs through copayments and coinsurance, up to the annual out-of-pocket maximum. Individuals should assess their comfort level with higher fixed costs versus variable costs that could accumulate.

Doctor and hospital preferences can guide the choice. If maintaining access to a specific network of doctors or hospitals is a priority, or if one prefers the flexibility to see any provider accepting Medicare without referrals, a Medigap policy combined with Original Medicare may be more suitable. Medicare Advantage Plans often operate with network restrictions, which could limit provider choice, though many plans offer PPO options with more flexibility at a higher cost.

Prescription drug needs are another factor. If an individual requires comprehensive prescription drug coverage, a Medicare Advantage Plan that includes Part D might offer convenience through bundled benefits. If selecting a Medigap policy, a separate Medicare Part D plan is necessary, requiring separate enrollment and premiums.

Travel habits should also be considered. For those who travel frequently within the U.S., Medigap generally provides nationwide coverage with any Medicare-accepting provider. For international travel, some Medigap plans offer emergency coverage. Medicare Advantage Plans may have more limited coverage outside their service area or internationally, often restricted to emergency or urgent care.

Finally, the value placed on additional benefits, such as routine dental, vision, and hearing care, can influence the decision. Many Medicare Advantage Plans include these extra benefits, which are not covered by Original Medicare or Medigap. Medicare Advantage plan benefits and networks can change annually.