This article will cover the main differences between Medicare Advantage and Medicare Supplement plans. It will first give a brief description of each type of plan and then compare the two based on costs and eligibility/enrollment. Part D plans are included at the end to introduce the topic. This article intends to give you background information as you begin your research into which Medicare plan is right for you.
Medicare Advantage Plans
Medicare Advantage (MA), or Part C plans, are essentially a combination of Medicare Part A and Part B offered by private health insurance companies. These plans include coverage of Medicare approved services covered under Parts A and B and can possibly include additional value-added services such as vision, hearing, fitness, and dental. Many plans also include prescription drug coverage, which is why they are sometimes referred to as Medicare Advantage Prescription Drug (MAPD) plans.
The two most notable Medicare Advantage plan types are Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs). In an HMO plan, you must select a primary care physician and utilize health care providers and hospitals from within the plan’s provider network. HMO plans often require referrals from a primary care physician to see a network specialist. In a PPO plan, you can use any healthcare provider that accepts Medicare but are encouraged to use “preferred” providers within the plan’s network to achieve lower out of pocket costs. Referrals are not needed to see a specialist with PPO plans.
An MA plan requires a monthly premium in addition to the premium for Part B. The cost of an MA plan varies depending on the insurance company and the type of plan, but the premiums are generally lower than those associated with Medicare Supplements.
You must be enrolled in Part A and Part B to be eligible to sign up for an MA plan. You can enroll in a Medicare Advantage plan when you first enroll in Medicare during the Initial Enrollment Period (IEP) or during the Annual Enrollment Period. You can also change plans during the Annual Enrollment Period which starts on October 15th each year and ends on December 7th.
Medicare Supplement Plans
Medicare Supplement plans, sometimes referred to as Medigap plans, can be added to Medicare as a supplement that “fills in the gaps” of traditional Medicare by paying deductibles and coinsurance costs. A supplement plan cannot be purchased on its own as it is not complete medical coverage. It must be purchased in combination with Part A and Part B coverage. Medicare Supplement plans are offered by private insurance companies instead of the government.
There are 10 different Medicare Supplement plans, named by letters in the alphabet (example: Plan G). While different insurance companies offer these plans at different prices, the benefits within each plan are standardized and are identical. Medicare Supplement plans do not include prescription drug coverage. Therefore, many people also purchase a Part D Prescription Drug plan to help cover the costs of prescription drugs.
Medicare Supplement plans have a monthly premium that is usually higher than the premium for a Medicare Advantage plan. Coverage is supplemental to Medicare so the cost of medical services will be paid by Medicare first. The balance of the cost will be paid by the Medicare Supplement plan with a potentially minor cost share to the insured. With a Medicare Supplement plan, the beneficiary can go to any Medicare-approved healthcare provider and is not restricted by a health plan’s provider network.
You can sign up for a Medicare Supplement plan at any time once you are 65 and have Medicare Plan B. If you sign up in the first six months after you have enrolled in Medicare, then you cannot be turned down for coverage. However, after this period, insurance companies can subject potential beneficiaries to medical underwriting or medical eligibility.
Part D Prescription Drug Plans
Part D Prescription Drug Plans can be purchased from private insurance companies and are available to anyone who has signed up for Part A and/or eligible for Part B of Medicare, regardless of whether they have a Medicare Advantage or Medicare Supplement plan. A Prescription Drug Plan can be paired with a Medicare Supplement plan or can be purchased as part of a Medicare Advantage plan, known as a Medicare Advantage Prescription Drug plan, that covers both medical and prescription drug expenses.
Every Part D prescription drug plan has a list of approved drugs that it covers called a “formulary.” It is important to make sure the drugs you need are on the formulary of the plan you wish to purchase.
Medicare Advantage and Medicare Supplemental plans each offer different benefits and cost share that should all be considered when choosing which Medicare plan is right for you. Keep in mind that you cannot be enrolled in both a Medicare Advantage and Medicare Supplement plan at the same time. If you have more questions, we can help. Contact one of our licensed Medicare agents today.