What’s the Difference Between Medicare Supplement and Medicare Advantage?

April 30, 2021|Francis Fraine


KEY POINTS

  • Original Medicare covers a majority of basic health necessities, but not everything.
  • Medicare Supplement (also known as “Medigap”) was designed as a supplemental health insurance policy to cover additional out-of-pocket expenses that Original Medicare doesn’t cover.
  • Medicare Advantage (also known as Part C), is a private insurance alternative to Original Medicare, which can include additional benefits, such as Part D (prescription drug coverage), dental, and vision.
  • It’s important to weigh your options carefully and look into each plan’s costs, benefits, approved doctors, and also consider your lifestyle and health.  Plan for a rainy day when selecting a plan and anticipate what you may need in the future.

When you prepare to enroll in Medicare, there is a lot to consider. Will you need dental or vision coverage? What exactly does Original Medicare cover and what is Part D? You may have specific medications you take – will those be covered? Which is better: Medicare Advantage or Medicare Supplement (“Medigap”)? It can be overwhelming.

It’s important to understand that Original Medicare doesn’t cover everything and will leave you responsible for any out-of-pocket costs. In this article, we’re going to walk you through Medicare Advantage and Medicare Supplement. Both of these plans will help reduce your out-of-pocket costs and can include added benefits that you may need.

What is a Medicare Supplement Plan?

Medicare supplement plans are also known as Medigap plans. A Medigap plan is a supplemental health insurance policy to your Original Medicare plan. Keep in mind, you will have two separate premium payments, first to your Original Medicare plan and then to the private insurer for your Medicare Supplement or Medigap plan.

Original Medicare includes Part A (hospital insurance) and Part B (medical insurance), but only covers about 80% of the total cost. You will be responsible for the remaining balance and any copays or deductibles. These costs can add up quickly, leaving you with a hefty bill. When you enroll in a Medigap policy, it pays a portion, if not the total, of any out-of-pocket costs that your Original Medicare Plan doesn’t cover.

What is a Medicare Advantage Plan?

Medicare Advantage plans, also known as Medicare Part C, are another option based on your eligibility for Original Medicare. Unlike Medigap plans that work as a supplement to Medicare coverage, these plans replace Original Medicare. Offered by private insurance companies that have contracts with Medicare, these plans boast more benefits. Since they’re offered by private insurance companies, they have more flexibility in how each plan is designed and what benefits they include.  

Medicare Advantage generally operates more like traditional non-Medicare plans such as HMO, PPO, or a High Deductible Health Plan. Medicare Advantage plans typically provide certain benefits that Original Medicare doesn’t, they usually include prescription drug coverage (Part D) and sometimes offer other benefits such as dental and/or vision coverage.

Do the Benefits Differ Across Medicare Supplement and Medicare Advantage Plans?

Medicare Supplement (Medigap) plans are largely standardized by location and there will be very little difference between plans in your area. With Medicare Advantage plans, the insurance companies have much more flexibility so there are large differences between these types of plans. A lot of Medicare Advantage plans include Part D (Medicare drug coverage), but remember to check whether the plan includes specific medications you may need. 

Do Medicare Advantage or Medicare Supplement Cover Costs that Original Medicare Doesn’t?

Medicare Supplement plans do not cover dental, vision, prescription drug, or any other non-Medical costs. These plans need to be purchased separately. Some Medicare Advantage plans do cover these related costs and will be reflected in the premium.

How Much do Medicare Advantage and Medicare Supplement Plans Cost?

A big reason some choose Medicare Advantage over Medigap is due largely to pricing. Since Medicare Advantage plans are flexible with design, their pricing can vary quite a bit depending on the coverage. Some lower benefit plans have no premium beyond what you pay for Medicare Part B. When comparing Medicare Advantage plans, make sure you look closely at the coverage and benefits it provides.

Medicare Supplement plans are standardized premiums and will be similar based on your location. 

Table showing the differences between Medicare Supplement ("Medigap") and Medicare Advantage ("Part C").

Which Plan is Better: Medicare Advantage (“Part C”) or Medicare Supplement (“Medigap”)?

If you’re still wondering which plan is better, there’s no right or wrong answer. You’ll need to consider your specific medical and financial situation to determine which plan is the best fit for you and your needs. Some key factors to consider include:

  • Monthly premiums
  • If Part D is included, are your medications covered?
  • Choice of doctors
  • What are potential out-of-pocket expenses?
  • How often do you plan to use healthcare services?
  • Do you need additional coverage for items outside of Original Medicare?
  • Expected costs of services included in each plan
  • Copays and deductibles, if any
  • If you travel, are you covered if you’re away from home?
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Categories: OPEB, Retirement