Medicare Advantage vs. Medicare Supplement: How to Choose the Right Coverage for You
If you're approaching 65, you've probably heard the terms Medicare Advantage and Medicare Supplement. You may have received mail about both, seen TV advertisements, or heard friends describe the plans they chose.
The terminology can be confusing, especially when you're making these decisions for the first time.
After more than 23 years in the Medicare insurance business, I've learned that understanding the differences between these two approaches is one of the most important steps in choosing Medicare coverage.
The right choice depends on several factors, including your healthcare needs, budget, preferred doctors, prescription medications and how you want to access care.
Let's walk through how each option works and what to consider before making your decision.
Start with the foundation: Original Medicare
Before comparing Medicare Advantage and Medicare Supplement insurance, it helps to understand Original Medicare.
Original Medicare consists of two parts:
- Part A helps cover inpatient hospital care, skilled nursing facility care, hospice care and certain home health services.
- Part B helps cover physician services, outpatient care, preventive services, durable medical equipment and other medically necessary care.
Most people receive Part A without a monthly premium because they or their spouse have sufficient Medicare-covered work history. Part B generally requires a monthly premium.
Original Medicare pays its share of covered services according to Medicare's rules. You are responsible for applicable deductibles, coinsurance and other costs.
For many people, this raises an important question: How do I want to handle the costs and coverage that come with Original Medicare?
That's where Medicare Advantage and Medicare Supplement insurance enter the picture.
What is Medicare Advantage?
Medicare Advantage, also called Medicare Part C, is an alternative way to receive your Medicare benefits through a private insurance company approved by Medicare.
These plans must cover the medically necessary services covered by Medicare Parts A and B, subject to Medicare rules. Many plans also include prescription drug coverage. Depending on the plan, additional benefits may include certain dental, vision and hearing services.
Medicare Advantage plans vary by location, insurance company and plan type. You need to examine the details of the specific plan available to you.
How Medicare Advantage provider networks work
Many Medicare Advantage plans use provider networks. Depending on the plan, you may need to use particular doctors, hospitals and other healthcare providers for routine care. Some plans require referrals to see specialists, and certain services may require prior authorization.
If you have a doctor you've seen for years, check the plan's current provider directory and confirm participation with the doctor's office. Check the hospitals and specialists you may need, too.
Provider participation can change, so it's worth verifying the information before enrolling.
How Medicare Advantage costs work
Medicare Advantage plans have their own premiums, deductibles, copayments and coinsurance arrangements. Some plans have a $0 monthly plan premium, although you generally still need to pay your Medicare Part B premium.
These plans also have an annual maximum out-of-pocket limit for covered Medicare Part A and Part B services. Once you reach that limit, the plan pays 100% of covered services for the remainder of the calendar year, subject to the plan's rules. Prescription drug costs are handled separately under Part D rules.
When comparing plans, look at the costs associated with the care you actually use. A plan's premium is only one part of that calculation.
Who might consider Medicare Advantage?
Medicare Advantage may appeal to someone who:
- Wants to explore plans with low or no additional monthly premiums.
- Is comfortable using a plan's provider network and following its coverage rules.
- Values having medical and prescription coverage coordinated through one plan.
- Wants to consider additional benefits included in certain plans.
- Is comfortable reviewing plan details each year as benefits, costs and provider networks change.
Your available choices depend on where you live and the plans offered in your area.
What is Medicare Supplement insurance?
Medicare Supplement insurance, commonly called Medigap, helps pay certain out-of-pocket costs associated with Original Medicare, such as eligible deductibles, copayments and coinsurance.
Medigap policies are sold by private insurance companies. They work alongside Original Medicare and follow standardized benefit designs identified by letters, such as Plan G and Plan N. The benefits for a given letter are standardized under federal rules, although premiums and pricing methods can differ among insurers.
Medigap is designed to supplement Original Medicare. It is not a replacement for it.
How provider access works with Medigap
With Original Medicare and a Medigap policy, you can generally see any doctor or visit any hospital in the United States that accepts Medicare. You usually don't need a referral to see a specialist.
This can be particularly appealing to people who see several specialists, travel frequently within the country, or want broad access to providers who accept Medicare.
You should still confirm that a provider accepts Medicare before receiving care.
How Medigap costs work
You pay your Medicare Part B premium and the premium for your Medigap policy. You may also need a separate Part D prescription drug plan if you want Medicare prescription coverage.
Your out-of-pocket medical costs depend on the Medigap plan you select. Some plans cover a substantial share of the cost-sharing associated with Original Medicare, while others leave you responsible for more expenses.
Medigap premiums can vary based on the insurer, policy, location, age and pricing method. Premiums may also increase over time.
An important detail: Medigap generally doesn't cover everything Medicare excludes, including most routine dental care, routine vision exams and long-term custodial care.
Who might consider Medicare Supplement insurance?
Medigap may appeal to someone who:
- Wants broad access to providers who accept Original Medicare.
- Travels frequently within the United States.
- Prefers predictable cost-sharing for services covered by the selected policy.
- Is comfortable paying a separate monthly premium for supplemental coverage.
- Wants to choose a separate Part D plan based on prescription needs.
The overall cost of this approach can be higher in monthly premiums, depending on the policies selected. In return, certain Medigap plans can substantially reduce the medical cost-sharing that would otherwise remain under Original Medicare.
The differences worth comparing
Here are the major distinctions to keep in mind.
| Consideration | Medicare Advantage | Original Medicare + Medigap |
|---|---|---|
| How coverage works | Medicare benefits are provided through a private plan | Original Medicare pays first; Medigap helps cover eligible cost-sharing |
| Provider access | Often uses networks and may have referral requirements | Generally any U.S. provider that accepts Medicare |
| Monthly costs | Part B premium, plus any plan premium | Part B premium, Medigap premium and usually a separate Part D premium |
| Out-of-pocket protection | Annual limit for covered Part A and B services | Depends on the Medigap policy and remaining Medicare cost-sharing |
| Prescription coverage | Often included in the plan | Usually requires a separate Part D plan |
| Additional benefits | Some plans offer dental, vision, hearing and other benefits | Medigap generally supplements Original Medicare benefits |
| Plan review | Review costs, benefits and networks each year | Review premiums and coverage needs over time |
These are general comparisons. The details of an individual plan or policy matter.
Five questions to ask before choosing
I encourage people approaching Medicare to think through five questions before settling on a coverage approach.
1. Which doctors and hospitals do I want to use?
Start with your current providers.
If you have established relationships with particular specialists or hospitals, make sure you understand how each coverage option would work with them.
With Medicare Advantage, check network participation and applicable referral or authorization requirements.
With Original Medicare and Medigap, verify that your providers accept Medicare.
2. What prescription medications do I take?
Make a list of your prescriptions, including dosages and preferred pharmacies.
If you're considering Medicare Advantage with drug coverage, review the plan's formulary and pharmacy arrangements.
If you're considering Original Medicare with Medigap, compare available Part D plans separately. Drug coverage can differ in premiums, formularies, pharmacy networks and cost-sharing.
What can I do if my prescription isn't on my Medicare Part D plan's list of covered drugs?
You can always submit a formulary exception with your doctor's assistance. You could also see if there is a medically equivalent generic available. If both options fail, then change to a plan during open enrollment that covers the drug.3. How do I want to manage healthcare expenses?
Think about both monthly expenses and the possibility of needing substantial medical care.
A lower monthly premium may leave you with higher costs when you receive services. A higher monthly premium may provide more predictable expenses for certain covered services.
Compare the actual plan premiums, deductibles, copayments, coinsurance and applicable out-of-pocket limits. Consider how those numbers fit your budget.
4. How often do I travel?
If you spend time in multiple states, visit family across the country or travel for extended periods, provider access deserves special attention.
Original Medicare generally provides broad access to participating providers nationwide. Medicare Advantage plans have different network and service-area rules, although emergency and urgently needed care receive special treatment.
If you travel internationally, investigate coverage carefully. Original Medicare generally doesn't cover routine medical care outside the United States, and any foreign-travel benefits depend on the coverage you select.
5. What flexibility might I need later?
Your health, finances and living arrangements may change.
It's important to understand the rules for switching coverage before enrolling, especially if you're considering Medigap.
When you're first eligible for Medicare and have Part B, federal law generally provides a six-month Medigap Open Enrollment Period if you're 65 or older. During this period, you can buy any Medigap policy sold in your state without medical underwriting.
After that period, you may face medical underwriting or have fewer opportunities to purchase a policy, unless you qualify for certain guaranteed-issue protections or other applicable rights. State-specific rules may provide additional protections.
This matters if you're considering starting with Medicare Advantage and switching to Original Medicare with Medigap later. In many circumstances, you won't automatically have the same Medigap enrollment protections you had when first eligible.
Understand your options before you enroll.
Can you switch from one option to the other?
In many cases, yes, but timing and eligibility rules apply.
Medicare has specific enrollment periods when eligible beneficiaries can join, switch or leave Medicare Advantage plans. The Annual Enrollment Period runs from October 15 through December 7 each year, with changes generally effective January 1.
There is also a Medicare Advantage Open Enrollment Period from January 1 through March 31 for people already enrolled in a Medicare Advantage plan. During this period, eligible beneficiaries can make certain changes, including switching to another Medicare Advantage plan or returning to Original Medicare and joining a standalone Part D plan.
Switching back to Original Medicare doesn't automatically guarantee that you'll be able to buy the Medigap policy you want. Your rights depend on your circumstances and applicable federal and state protections.
If you're considering a change, check both the Medicare enrollment rules and your Medigap eligibility before making the move.
How I would approach this decision
If you're approaching 65, start by gathering a few pieces of information:
- Your doctors and preferred hospitals.
- Your current prescription medications.
- Your expected healthcare needs.
- Your monthly budget for premiums and out-of-pocket expenses.
- Your travel habits.
- Your preferences about provider networks and referrals.
Then compare actual coverage options available in your area.
The bottom line
Medicare Advantage and Medicare Supplement insurance offer different ways to approach healthcare coverage after 65. Your doctors, prescriptions, budget, travel habits and preferences can help determine which option deserves a closer look.
Take time to understand the details before enrolling. Review your options carefully, ask questions and make a decision based on your own circumstances.
The goal is to choose coverage you understand and feel comfortable using.
About the Author: Drew Bismack is a licensed Medicare insurance agent in Michigan with 23 years of experience helping individuals understand their Medicare options. He focuses on making the Medicare process easier to understand so people can make informed decisions about their healthcare coverage and choose what best suits their specific needs.