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Medicare Advantage or Medicare Supplement Plan

Which is better, a Medicare Advantage or Medicare Supplement plan?  Medicare Supplements are also called Medigap plans.  This is a common question and the answer is “it depends”.  Medicare Advantage Plans and Medicare Supplement plans are very different.  They both have strengths and weaknesses.  The key is to know the difference between them as well as how they work with your situation.  We can start by pointing out how each plan works and how they are different.

Medicare Supplement plans

Medicare Supplement plans are private plans that insurance companies offer.  There are a number of different plans that range from A through N.  All have different benefit structures although they are standardized in most states. This means the benefits must be the same regardless of the company that offers the plan.  If 8 companies offer a plan N in a state, they must all have the same benefits. The only difference is price.

Medicare supplement plans are secondary to Original Medicare.  When someone goes to the provider, they show their Original Medicare card.  The provider bills the card and Medicare pays their portion of the benefits.  Your Medicare supplement company will receive a charge for the portion that is left over and they will then pay that portion. It is a very simply process and offers some big positives over an Advantage plan.  Below, we will list the advantages as well as disadvantages of using a Medicare Supplement.

• Advantages
  • No network. Since Original Medicare is primary, the person using a Medicare Supplement can go to any provider that accepts Medicare. The company offering the supplement makes no difference.
  • No Managed Care. This usually means you do not need to get prior authorization on services such as surgeries, major or advanced radiology, skilled nursing and other services.
  • You can determine the exact amount of Medicare coverage you want based on which supplement plan you choose.
• Disadvantages
  • Monthly premium. In addition to your monthly part B Medicare premium, you will also pay a monthly premium for the Medicare supplement.  Premiums can range from $35 a month to $270 a month depending on the plan and state you live in.
  • Medicare supplements do not include drug coverage.   Additionally, you must purchase a stand alone part D plan if you want drug coverage.

Medicare Advantage Plans

In fact, Medicare Advantage plans are also called MAPD’s, Medicare Replacement Plans and Managed Medicare Plans. Medicare Advantage plans are not secondary to Original Medicare.  The Medicare Advantage plan becomes the primary insurance.  The insured is still in the Medicare program but Original Medicare is not used for insurance. An advantage plan works in a similar manner to a group or individual health insurance plan. (they are not the same but have a similar set up.)  This means the client has set benefits which are in the form of co-pays and cost shares.  There are some major pro’s and Con’s with Advantage plans which we have listed below.

• Advantages
  • Advantage plans have little to no premium in most states.  The insured will still pay the monthly Medicare Part B premium of $134 a month, but there will be no additional charge for the advantage plan.
  • Advantage plans include a part D drug benefit.  There is no additional premium charge for the drug plan and you can use one ID card for both Medical and RX.
  • Advantage plans may have additional value added benefits that are not covered by Original Medicare such as; dental and vision benefits.
• Disadvantages
  • Advantage plans have networks.  On an HMO advantage plan you must stay in the network to have your expenses covered. (The exception to this would be emergency room visits and urgent care)
  • Advantage plans have co-pays which can lead to higher out of pocket costs.  The out of pocket max on many advantage plans is as high as $6,700.
  • Advantage plans have prior authorization requirements on some services.
  • Some advantage plans may require referrals to see a specialist.

Overall – Medicare Advantage or Medicare Supplement Plan

In general, someone with minimum health care needs may want to try an advantage plan.  They will not be laying out any premium on a monthly basis and will only pay a copay when they do see a provider.  If someone does not want to be limited by a provider network or if they utilize a lot of healthcare, they may want to consider a Medicare supplement instead. The supplement allows them to go to any provider they want (as long as they accept Medicare) and they can choose a plan that leaves them with very little out of pocket.  The negative is the premium they will pay for the supplement and Part D Rx plan regardless of if they utilize care or not.