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  • Writer's pictureKyle Rolek, Retirement Planning Specialist

Medicare Advantage vs. Medicare Supplement Plans: A Comparison

Updated: May 9



Once individuals reach age of 65, they become eligible for Medicare.


While Medicare Part A & Part B (also known as original Medicare) provide basic coverage, many beneficiaries opt for additional plans to enhance their benefits.


Two popular options are Medicare Advantage and Medicare Supplement (also known as Medigap) plans.


While Medicare Advantage and Medicare Supplement Plans do have some aspects in common, their are key differences that are important to understand to make an informed decision.


In this article, we'll compare Medicare Advantage and Medicare Supplement plans.


Medicare Advantage vs. Medicare Supplement Summary:



Medicare Advantage Plans:


Medicare Advantage plans, also referred to as Medicare Part C, are comprehensive health plans offered by private insurance companies approved by Medicare.


These plans replace original Medicare coverage and typically include Part A (hospital insurance) and Part B (medical insurance) benefits.


Many Medicare Advantage plans often include additional coverage such as prescription drugs (Part D), dental, vision, and hearing services.


Pros:

  1. Convenience: With Medicare Advantage, individuals typically only need to carry one card for their healthcare needs, as these plans consolidate various benefits into a single package.

  2. Additional Coverage: Medicare Advantage plans frequently offer extra benefits like prescription drug coverage, dental, vision, and hearing services, which are not covered by original Medicare.

  3. Lower premiums vs. Supplement Plans: While lower premiums can be attractive, out-of-pocket costs may be higher than comprehensive Medicare Supplement plans.


Cons:

  1. Network Restrictions: Medicare Advantage plans typically have provider networks, and beneficiaries may have to choose from a limited list of doctors and hospitals. Out-of-network care may not be covered or may come with higher costs. This is a significant downside of Medicare Advantage Plans vs. Medicare Supplement Plans.

  2. Prior Authorization: Some Medicare Advantage plans require beneficiaries to obtain prior authorization before receiving certain medical services or procedures, which can lead to delays or denials of care.

  3. Potential Cost Variability: While Medicare Advantage plans often have lower monthly premiums compared to Medicare Supplement plans, the out-of-pocket costs, such as copayments and coinsurance, can be higher and less predictable.


Medicare Supplement Plans (Medigap):


Medicare Supplement plans are private insurance policies designed to work alongside original Medicare (Part A and Part B).


These plans help fill the coverage gaps by paying for certain out-of-pocket costs not covered by Medicare, such as deductibles, copayments, and coinsurance.


Pros:

  1. Freedom to Choose Providers: Unlike Medicare Advantage plans, Medigap plans generally allow beneficiaries to see any doctor or hospital that accepts Medicare, providing more freedom and flexibility in accessing care. This is a significant advantage of Medicare Supplement (Medigap) plans vs. Advantage plans.

  2. Predictable Costs: Medicare Supplement plans provide more predictable out-of-pocket costs compared to Advantage plans.

  3. Coverage when traveling: Since these plans aren't network based, they typically provide more coverage while traveling away from home than network-based Advantage plans.


Cons:

  1. No Prescription Drug Coverage: Medigap plans do not cover prescription drugs (Part D), so beneficiaries would need to enroll in a separate Part D plan to have prescription drug coverage.

  2. Higher Premiums: Medicare Supplement plans generally have higher monthly premiums compared to Medicare Advantage plans. While the premiums may be higher, individuals may save on out-of-pocket costs in the long run.

  3. Limited Additional Benefits: Medigap plans primarily focus on filling the gaps in original Medicare coverage and do not typically include additional benefits like dental, vision, or hearing services.


Choosing Between Medicare Advantage and Medicare Supplement Plans:


Ultimately, the choice between Medicare Advantage and Medicare Supplement plans is a personal one, dependent on individual preferences and circumstances.


If you prefer more freedom to choose providers and more predictable out-of-pocket costs, a Medicare Supplement plan might be a better fit.


If you prefer the lowest premium possible, a Medicare Advantage plan may seem more attractive, at least for as long as preferred doctors remain in-network and out-of-pocket costs remain low.


An important point to consider when choosing plans is that you can't be denied entry into a Medicare Supplement if you chose one only during your initial open enrollment period.


If you choose a Medicare Advantage plan initially, you aren't guaranteed the ability to be able to upgrade to a Medicare Supplement plan later.


For example, if someone initially chooses Medicare Advantage to save money on premiums then later on wants to upgrade to a Supplement Plan, they can be denied.


A few reasons why someone may want to upgrade later include a specialist for a future medical condition being out of network, a current provider leaving the network in the future, moving, or realizing an Advantage plans isn't cheaper with out-of-pocket costs factored in.


As a result, enrolling in Medicare Advantage may have more risk than a Medicare Supplement plan.


Here's a link to an AARP site where you can view more details about specific plans available in your area (note that this list is not comprehensive): https://www.aarpmedicareplans.com/


It's advisable to compare plan options carefully, review the coverage details, and consider your healthcare needs both now and in the future.


Consult with your retirement advisor to make an informed decision that aligns with your specific needs, preferences, and overall long-term plan to maintain financial security throughout retirement.



Want To Discuss This Individually?


1 - For clients: Call or email me any time as always.


2 - For non-clients: Complete the form on the website to request a retirement planning consultation: www.rolekretirement.com


This is article is for informational purposes only and should not be considered as tax or legal advice. Advice is only provided after entering into an Advisory Agreement with the Advisor. See other disclosure here: Disclosures

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