Differences between Medicare Advantage Plans and Medicare Supplement
by Susan R. Tolbert, Licensed Health Agent
Medicare Advantage Plans and Medicare Supplement policies help beneficiaries pay for out-of-pocket costs that will incur when on Medicare. One of the most frequent inquiries are how these two options differ. It is important to note that these products cannot be combined. Beneficiaries can join a Medicare Advantage plan, at select times of course, or apply for a Medicare Supplement also known as a Medigap policy, but cannot have both at the same time.
Medicare Advantage plans are also referred to as Medicare Replacement plans. This terminology can be helpful in understanding how they work. When a beneficiary joins a Medicare Advantage plan it is replacing his or her Original Medicare in the process. By joining a Medicare Advantage plan, a beneficiary leaves Original Medicare, as administered by the Federal Medicare Program, and starts receiving his or her Medicare benefits by a private insurance company. These companies have contracts with the Federal Government to administer the Medicare benefits on their behalf, and they are required to cover all Medicare Part A and Part B services, but they may cover more.
The primary benefit to a beneficiary in considering a Medicare Advantage plan over Original Medicare is that Medicare Advantage plans cap the amount a beneficiary will pay out of his or her own pocket each calendar year. Out-of-pocket maximum’s on Medicare Advantage plans can range from $3,400 to $7,550 depending on the specific plan. Original Medicare does not have a cap so Part A hospital deductibles and co-insurance as well as Part B co-insurance requirements could cost a beneficiary substantial out of pocket expenses each year especially with high utilization of services. Medicare Advantage plans are going to cap that exposure for their members. Part of the Medicare Advantage plan’s ability to do this is through managed care. Yes, Medicare Advantage plans are managed care plans. The plans contract with providers to service their members at negotiated rates. The primary type of Medicare Advantage plans are HMO or PPO plans. In either case members are receiving services from providers that contract and participate in specific Medicare Advantage plans.
When joining a Medicare Advantage plan, members are committing to that plan until it’s renewal effective date which is January 1 each year. This means that the plan can make changes each year and members can leave the plan or join another plan during the fall Medicare Annual Enrollment Period which runs from October 15 – December 7 each year.
In contrast, when a beneficiary purchases a Medicare Supplement plan, he or she remains on Original Medicare. Medicare serves as the primary payor or 1st insurance and the supplement plan is the 2nd payor or secondary insurance. There are choices among Medicare Supplement plans allowing for different coverage levels from the gaps left in Original Medicare. The Medicare Supplement policy remains in effect at the terms of the original policy inception for as long as the policy holder keeps it active by paying the policy premiums. Medicare Supplement policies can be used at any provider/facility that participates in Medicare.
The chart below may be a helpful tool to view these plans which allow for meeting different needs, preferences, and budgets among Medicare beneficiaries. As previously mentioned, Medicare Advantage plans may cover more than Original Medicare. For example, some Medicare Advantage plans will pick up cost on hearing aids, or add coverage for other non-Medicare covered services like vision or dental as well as covering more than Original Medicare on some Medicare covered services like chiropractor and acupuncture.
Generally, rates on Medicare Advantage plans remain stable with minimal rate increases. Medicare Supplement rates increase each year as the policy holder ages. The availability of plans varies by the participation and approval of carriers by location. Please feel free to contact me at susan@newbrookeinsurance.com with questions or concerns you may have on Medicare plans or understanding your Medicare options.
| Medicare Supplement Policies | Medicare Advantage Plans |
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A secondary insurance that covers the deductibles, co-insurance, and co-payments that one is responsible for on Original Medicare (Parts A & B). Offered by private insurance companies under standardized plan choices.
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A Medicare health plan, usually HMO or PPO, offered by private insurance companies that are subsidized by the Federal Government to cover Medicare beneficiaries Part A and Part B. Medicare Advantage plans are called Part C. |
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Medicare Supplement plans do not include prescription drug coverage. A stand-alone Part D plan would need to be purchased.
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Most Medicare Advantage plans include the Part D, prescription drug coverage, in the plan. |
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Offered as a guaranteed issue product when first turning 65 or signing up for Part B for the first time when previously under a group health insurance plan. Remains guaranteed renewable for life.
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Guaranteed issue at all times. |
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Accepted by all providers nationwide that participate in Medicare. An excellent choice for travelers.
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Only providers in the plan’s network can be accessed. Check your providers as there are network restrictions and they periodically change. |
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Medicare Supplement Plan coverage remains the same as when first purchased.
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Medicare Advantage plans can change annually. Beneficiaries can switch to other plans or carriers each year during the fall Medicare Annual Enrollment Period for an effective date of 1/1.
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There are Medicare Supplement plans that provide coverage when on foreign travel. |
Many Medicare Advantage plans offer additional benefits not provided by Original Medicare like dental, vision, wellness and over-the-counter wellness benefits.
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Rate increases will incur on Medicare Supplement plans. These increases generally occur annually.
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Generally, Medicare Advantage plan premiums remain stable with minimal premium increases. |