Medicare Advantage vs. Medicare Supplement Insurance Plans

Fact Checked
Published: 11/19/2020
Contributing Expert: Ron Elledge
Reviewed by: Caren Lampitoc

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Ron Elledge
Medicare Consultant and Author
Ron Elledge
Medicare Consultant and Author

Ron Elledge is a seasoned Medicare consultant and author of “Medicare Made Easy.” As a Medicare expert, he regularly consults beneficiaries on Medicare rules, regulations, and strategies.

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Carin Lampitoc
Medicare Consultant
Carin Lampitoc
Medicare Consultant

Caren Lampitoc is an educator and Medicare consultant for Medicare Risk Adjustments and has over 25 years of experience working in the field of Medicine as a surgical coder, educator and consultant.

Original Medicare (Parts A and B) covers many of your health care needs, from doctor’s visits to hospitalization — but it does not cover all of your health care costs. In fact, you may pay a percentage, on average 20%, of the costs if you need surgery or if you have other significant health issues, and that can add up.

Two types of supplemental plans help cover the costs that Original Medicare won’t. One is Medicare Advantage, also called Medicare Part C. Medicare Advantage plans are administered by private insurance companies approved by Medicare, and they offer another way to receive your basic Medicare Part A and Part B benefits, plus some additional perks, such as prescription coverage, vision care, dental, or hearing coverage.

The other type of plan is Medicare Supplement Insurance, or Medigap. Like Medicare Advantage, these plans are administered by private insurance companies, rather than by the government. But their purpose is different: They fill in the “gaps” of Original Medicare, paying out on copays, coinsurance, and deductibles when these are not covered by Original Medicare.

You can’t sign up for both of these policies: If you have Medicare Advantage, it becomes your primary coverage and is an all-in-one policy that should cover the majority of your health care needs. Medicare Supplement Insurance, however, pays secondary to your Original Medicare, and it features a separate premium.

What’s the difference between Medicare Advantage and Medicare Supplement Insurance Plans?

Let’s take a deeper dive into the difference between these two plans. Although they are sometimes mistaken for one another, they are fundamentally different.

Medicare Advantage has the following characteristics:

  • It’s an alternative delivery system for Original Medicare, not a supplement.
  • It’s administered by private insurance companies that have been approved by the government’s Medicare agency. Each company may offer different coverages at a different price point.
  • You will continue to receive the benefits of Medicare Part A (hospital and skilled nursing care, and home health care) and Part B (many outpatient services, as well as ambulance, clinical research, and mental health costs).
  • It often includes drug coverage, as well as vision, dental, hearing, and even some gym memberships.

Medigap, meanwhile, includes the following elements:

  • It is a supplement to Original Medicare — you need to have Original Medicare in place in order to sign up for Medigap.
  • There are ten existing Medigap plans, indicated by a letter (i.e., Plan A, B, C and so on). They are administered by private insurance companies, but coverage is fairly standard within each plan.
  • You will still receive Medicare Parts A and B. Medicare Supplement Insurance will pick up some (but not all) of the costs associated with these Parts. Select plans may also feature additional coverage outside of your region and even outside of the U.S. — so it’s worth considering if you travel frequently. Part D coverage is not available with Supplemental Insurance, so you will need to purchase a stand alone drug plan if you want that coverage.

Compare Medicare Advantage and Medigap

Medicare Supplement (Medigap) Insurance Medicare Advantage
Choosing doctors and hospitals Any doctor or hospital is acceptable as long as they accept Medicare assignment (most do). You’re limited to health care professionals and hospitals within the network designated by your plan provider for many plans.
Referrals Referrals aren’t needed for specialist care. You may need a referral to see a specialist within the network.
Network restrictions There is no network: Your coverage extends across the U.S. for those providers who accept Medicare. For worldwide emergency services, you will pay up front and submit the bill for reimbursement where applicable. You are limited to healthcare within your network for many plan types. There may be exceptions if you are traveling and need emergency care.
Enrollment Apply during your Initial Enrollment Period, which is the three months before, the month of, the three months after you turn 65 or any time after that. Apply during your Initial Enrollment Period or during the Annual Enrollment Period.
Cost You’ll pay your Original Medicare Part B premium as well as a plan premium. Except for the Part B annual deductible unless you are enrolled in Plan F or C, most other out-of-pocket expenses should be covered by the plan. You’ll pay Part B premiums, but many plans don’t charge an additional premium, and some may pick up a portion the Part B premium. You will have copays, coinsurance, and deductibles, but there is an annual out-of-pocket maximum.
Prescription drug coverage Not covered. If you wish to, you can sign up for Original Medicare’s optional Plan D, which covers drugs. Many Medicare Advantage plans cover prescription drugs.
Do benefits change? Not usually Benefits may change annually
Is the plan renewable? Renewal is guaranteed, and there is no annual election period. Yes, unless you disenroll during the open enrollment period.
For whom it works best Good option for snowbirds or those who enjoy the freedom of choosing any doctor either at home or while traveling within the US. those who travel frequently. A good choice if you are healthy and don’t need frequent medical care or prescriptions; also a good choice if you like the simplicity of a single all-in-one plan.
Extras — Higher premiums, lower copays

— Requires underwriting after your Initial Enrollment Period

— Extensive coverage on many plans throughout the U.S. and abroad for those who travel

— Benefits standardized throughout the US

— Low premiums, higher co-pays

— Easy enrollment

— Often covers routine dental, vision, hearing, SilverSneakers gym memberships, and/or alternative medicine benefits.

— Most have worldwide emergency/urgent care coverage

— Benefits vary from plan to plan

Choosing the right plan for your own purposes may take a little work. You’ll want to compare benefits, estimate your health care costs, and determine where you can achieve the highest level of care for the least amount of money.

Fortunately, the government has resources to help you. The Medicare website features pages that allow you to compare and choose either a Medigap policy or a Medicare Advantage plan. Your state’s Health Insurance Assistance Program may also help you work through your options.

Enroll in Medicare

Most U.S. citizens and permanent residents are eligible for Medicare when they reach 65 years of age. You will also be eligible if you or your spouse is a government employee or retiree who has paid into Medicare payroll taxes while working.

If you are younger than 65, you are eligible if you have been entitled to Social Security disability benefits for at least 24 months, are receiving a disability pension from the RRB, or have Lou Gehrig’s disease (Amyotrophic Lateral Sclerosis) or permanent kidney failure (ESRD).

Enrolling for Medicare is automatic for most people who have been paying into the Social Security system during their working years. If you decide not to take your Social Security benefits at 65, you may need to sign up with Social Security to get Original Medicare Parts A and B. It is always advisable to check with Social Security three months before you turn 65 to make sure everything is in order for your Medicare.

Finding a policy and signing up for Medicare Supplemental Insurance or Medicare Advantage can be done at the Medicare website, although you may be directed to the website of a private insurance company once you choose the option that works best for you. Taking your time with the application is the best way to ensure that you end up with the best policy for your own circumstances.