We all have unique health conditions that determine the type of medical insurance we need. If you are a Medicare recipient, then you have many plan options available to you. Most Medicare beneficiaries would prefer to find an insurance plan that offers the most benefits for their medical needs while lowering out-of-pocket costs. 

There are pros and cons to deciding between a Medicare Advantage Plan, or a Medicare Supplemental policy (Medigap) that complements your Original Medicare (Parts A and B) coverage. Here are some things to consider when choosing a plan that’s right for you.

The Pros and Cons of Medicare Advantage Plans

Medicare Advantage (Part C) Plans are an alternative to Original Medicare. These are regional insurance plans that are designed to provide a wide range of benefits, including various health and wellness options not offered with Original Medicare. Medicare Advantage plans are offered by private insurance providers. However, they must cover at least the same benefits covered by Medicare Parts A and B to be approved by Medicare. 

One of the best things about Medicare Advantage is the ability to personalize your insurance coverage to meet your healthcare needs. Original Medicare only offers two options – Medicare Part A (hospitalization) and Medicare Part B (physicians and services). Medicare Advantage (Part C) offers a variety of plans designed to fit a wide range of budgets. Some of the choices available are:

  • HMO: A low-cost, network-based option with coordinated care that requires a referral for out-of-network specialists.
  • PPO: These are plans that provide flexibility in choosing either in-network or out-of-network providers but have slightly higher premiums than an HMO plan.
  • SNPs: Special Needs Plans are designed for folks who have a chronic health condition who may need specifically tailored healthcare services.

Medicare Advantage Plans can be tailored to include additional services that Original Medicare does not cover. Some of the extra benefits offered with Medicare Advantage plans include:

  • Dental Care
  • Vision Care
  • Hearing screenings
  • Prescription Drug Coverage
  • Hospice Care
  • Silver Sneakers fitness plans

Additionally, some Medicare Advantage plans go as far as providing free transportation for doctor’s visits and trips to the pharmacy.

Coordinated Health Care 

Medicare Advantage Plans are regional. Meaning for most plans you are required to receive care from approved in-network providers in a specific area. Also, with an HMO Advantage Plan, you’ll need prior authorization for certain procedures and tests, and referrals for specialists. 

Other Advantage Plans, especially PPOs, allow you to see out-of-network physicians and specialists but those services are covered at a lower rate and may have higher premiums.

Pros and Cons of Medicare Supplemental Plans

If you have Original Medicare Parts A and B, your standard copay is 20% for most medical services. If you have a medical condition that requires frequent doctor visits or routine medical services, your out-of-pocket costs could be substantial and unpredictable from year to year. 

Medicare Supplemental Insurance plans (Medigap policies) are designed to fill in the “gaps” and reduce the out-of-pocket costs that Original Medicare doesn’t pay. This includes covering expenses such as copays, deductibles, and coinsurance. Similar to Medicare Advantage, these plans are also offered by private insurance providers.

Medigap policies are not “stand-alone” coverage plans. You must be enrolled in Medicare Parts A and B to be eligible for a Medigap policy. There are 10 standardized Medigap policy types available in most states. The plan types are labeled with letters A through N. There is a different level of coverage offered based on which plan type (by letter) you enroll in and these coverages are standardized.

Medicare Supplemental plans don’t include any of the extras like dental, vision, and hearing that Medicare Advantage Plans provide. Additionally, Medigap policies do not cover the cost of prescription drugs or copays for prescription medication. However, the same private insurance companies that provide Medigap policies typically offer separate Medicare Part D Prescription Drug plans. 

With Original Medicare, there are no restrictions on which doctors or medical service providers you can see. You have the freedom to choose any provider, anywhere in the country, as long as they accept Original Medicare. This is true for Medigap plans as well. There are no in-network restrictions and no referral requirements. Some Medigap policies also offer the added benefit of coverage for emergency medical care when you are traveling overseas. 

Premiums and Other Costs 

The premiums for Medigap plans tend to be more expensive than the premiums for Medicare Advantage, especially when you consider many Medicare Advantage Plans have $0 premiums. Regardless of which Medigap letter plan you choose, premium costs will vary by insurance provider and location. Also, with some Medigap Plans your premium will increase as you age. 

The copays for Medicare Advantage Plans are very reasonable and all plans have a set yearly out-of-pocket maximum. For 2021, the out-of-pocket maximum is set at $7,550. This means that your total out-of-pocket cost will never exceed this amount for the year. Medigap plans in most states do not set a yearly out-of-pocket limit. 

The Takeaway

There are many things to consider when comparing Medicare Advantage vs. Medicare Supplemental plans. If your goal is to combine all your healthcare needs – including extras like dental and vision, under one umbrella then a local Medicare Advantage Plan may be the best choice for you. Keep in mind Medicare Advantage Plans limit coverage to the area where you live, and may only cover in-network physicians and services. If your primary care physician and specialists are not in the plan’s network, you may have to change doctors. 

If your goal is to stabilize your out-of-pocket medical expenses with Original Medicare, then the benefits of Medicare’s Medigap policy might be right for you. Original Medicare and Medigap policies offer the freedom to choose any healthcare provider in the nation that accepts Original Medicare. However, premiums and out-of-pocket costs may be more expensive than opting for a Medicare Advantage Plan. Additionally, Original Medicare doesn’t cover important health benefits such as dental and vision care.