What is the Difference Between a Supplemental Plan and an Advantage Plan?

When it comes to Medicare, you have choices beyond basic Original Medicare. Two popular options are Medicare Supplement (Medigap) plans and Medicare Advantage plans. But what exactly is the difference between these supplemental coverage choices? Read on for a detailed overview comparing Medicare Supplement vs. Medicare Advantage plans.

What are Medicare Supplement and Medicare Advantage Plans?

First, let’s clearly define what we mean by Supplement and Advantage plans:

• Medicare Supplement (also called Medigap) plans are insurance policies sold by private companies. They help pay for costs and fill gaps in Original Medicare coverage.

• Medicare Advantage plans are offered by private companies as an alternative to Original Medicare. They bundle Parts A, B and usually D together in one plan.

Both add benefits beyond basic Medicare, but work very differently.

Key Differences Between Supplement and Advantage Plans

There are several key differences to understand between Supplement and Advantage plans:

Coverage Approach

• Supplement: Works alongside Original Medicare. Helps pay Medicare deductibles, coinsurance and copays.

• Advantage: Replaces Original Medicare as primary coverage. Bundles all Medicare benefits into one plan.

Costs

• Supplement: Generally has higher premiums but lower out-of-pocket costs.

• Advantage: Often has $0 premiums but has copays and out-of-pocket limits.

Providers

• Supplement: Use any provider accepting Medicare nationwide.

• Advantage: Generally must use in-network providers only.

Prescription Drugs

• Supplement: Does not cover; must buy separate Part D plan.

• Advantage: Most plans include prescription drug coverage.

Additional Benefits

• Supplement: Minimal extras like foreign travel coverage.

• Advantage: Often includes dental, vision, hearing, fitness benefits.

Underwriting

• Supplement: Limited window to enroll without underwriting when newly on Medicare.

• Advantage: Must be accepted regardless of health conditions.

Medicare Supplement (Medigap) Plans

Medicare Supplement insurance is sold by private companies to help pay healthcare costs that Original Medicare does not cover. There are 10 standardized Supplement (Medigap) plans, labeled Plan A through Plan N.

Here are some key things to know about Medicare Supplement plans:

• Works alongside Original Medicare Parts A and B
• Helps pay for Medicare deductibles, coinsurance and copayments
• Does NOT cover prescription drugs
• Lets you use any provider accepting Medicare nationwide
• Generally has higher premiums but lower out-of-pocket costs
• Limited time to enroll when newly eligible without underwriting

Supplement plans make your costs more predictable. But they are not bundled with prescription drug coverage, so you have to buy a separate Part D plan.

Medicare Advantage Plans

Medicare Advantage plans are offered by private insurers approved by Medicare. They provide an alternate way to get Medicare coverage.

Key facts about Medicare Advantage plans:

• Provides all coverage of Original Medicare Parts A and B
• Usually includes prescription drug coverage (Part D)
• Often covers extras like dental, vision, hearing, fitness benefits
• Generally must use in-network providers only
• Plans have an annual out-of-pocket maximum
• Most plans have $0 premiums but copays for services
• Must be accepted regardless of health conditions

Advantage plans bundle all your coverage together in one plan. And they offer extras Original Medicare does not cover. But provider choice is usually limited.

Comparing Medicare Supplement vs. Medicare Advantage

Here is a side-by-side comparison of some key differences between Medicare Supplement and Medicare Advantage plans:

As you can see, there are tradeoffs. Supplement plans provide flexible coverage with lower out-of-pocket costs. Advantage plans offer bundled coverage with extra benefits but less provider choice.

When to Enroll in Supplement vs. Advantage

Enrollment timing is an important difference between Supplement and Advantage plans to consider as well.

Medicare Supplement

• Apply when first eligible and <65 with limited underwriting
• Open Enrollment Period when 65 for guaranteed issue rights
• Can be underwritten after OEP with potential denials

Medicare Advantage

• Can enroll when first eligible for Medicare
• Can enroll or change plans during Annual Enrollment Period
• Can enroll during Special Enrollment Period with qualifying event

For Supplements, act quickly when newly eligible to avoid underwriting. Advantage plans must accept you regardless of health conditions.

Cost Differences Between Supplement and Advantage

There are also major cost differences to factor in when choosing between Supplement and Advantage plans.

Medicare Supplement

• Higher monthly premiums
• Low or no deductibles
• Minimal copays and coinsurance

Medicare Advantage

• Often $0 monthly premium
• Copays for services
• Out-of-pocket maximum limits costs

Supplement plans cost more upfront but have less out-of-pocket costs later when getting care. Advantage plans have low premiums but copays when accessing services.

Pros and Cons of Supplement vs. Advantage

To summarize the key pros and cons:

Medicare Supplement Pros

• Use any Medicare provider nationwide
• Lower out-of-pocket costs
• Price predictable monthly premium

Medicare Supplement Cons

• Higher monthly premiums
• No extra benefits covered
• Separate Part D plan needed

Medicare Advantage Pros

• $0 premiums on many plans
• Extra benefits like dental/vision/hearing
• Out-of-pocket max limits costs

Medicare Advantage Cons

• Generally must use in-network providers
• Copays required when getting care
• Provider network limitations

Should I Choose Supplement or Advantage Coverage?

There are good reasons to consider either Supplement or Advantage plans depending on your needs:

Pick Supplement if you want:

• Freedom to see any Medicare provider
• Lower out-of-pocket costs
• Basic coverage with fewer copays

Pick Advantage if you want:

• $0 premium plan options
• Dental/vision/hearing coverage
• All benefits bundled together

Ultimately it comes down to your personal preferences.Evaluate the pros, cons, and costs to see if Supplement or Advantage coverage best fits your healthcare needs and budget.

Can I Switch Between Supplement and Advantage?

You can switch between Medicare Supplement and Medicare Advantage plans, but your ability to do so is limited.

Here are some key limitations to understand:

• Can only have one or the other – not both at same time
• For Supplements, limited chance to enroll without underwriting
• When you drop Advantage you lose your plan and coverage
• Special Enrollment Periods and rights apply when switching

So switching is possible in many cases, but make sure you fully understand the rules and limitations before making a change. Consult with a Medicare advisor.

Get Help Comparing Plans

Whether you are looking at Supplement or Advantage plans, make sure to compare all the options available in your area. Plans and costs can vary significantly.

These tips can help you make the right Medicare plan decision:

• Talk to a licensed broker or agent in your state
• Ask about all Supplement and Advantage plan options
• Compare premiums, benefits, provider networks
• Assess total out-of-pocket costs
• Make sure prescription drugs are covered
• Look for strong financial ratings on insurers

Doing your homework will pay off in getting the optimal supplemental Medicare coverage for your personal situation.

The Bottom Line

While both Medicare Supplement and Medicare Advantage plans provide coverage beyond Original Medicare, they work very differently. Supplement plans help pay Medicare deductibles and coinsurance, while Advantage plans replace Original Medicare entirely.

Consider your budget, healthcare needs, doctor preferences, and desire for extra benefits. This will help determine if a Supplement or Advantage plan makes the most sense for you. Working