Center for a Secure Retirement
What Is the Difference Between Medicare Advantage and Medicare Supplement Insurance?

What Is the Difference Between Medicare Advantage and Medicare Supplement Insurance?

As you approach retirement age, you have a lot of choices ahead of you. Fortunately, retirement doesn't have to be daunting — it also means a new beginning full of possibilities.

Some of the most important decisions you'll make during this time relate to health care. When you turn 65, you can choose to opt into Medicare, but there are gaps in the coverage Medicare provides. Many retirees turn to other options, such as Medicare Advantage and Medicare Supplement insurance, to help cover these gaps.

Figuring out the differences between these two programs is important, especially since you can't use both options — only one or the other. It is, therefore, essential to learn the differences between them so you can decide which one is better suited to your unique needs.

Why You Might Need Additional Health Insurance

Medicare is broken down into a few different coverage sections. For example, Part A is hospital insurance and goes toward any costs you incur as a hospital inpatient, while Part B is medical insurance and helps pay for doctor visits, preventive services, lab tests and more. Together, Parts A and B are what's known as "Original Medicare."

However, Original Medicare only covers about 80% of costs associated with hospital stays, doctor's visits and routine medical procedures. Some costs, including those associated with most dental care procedures and some eye exams, aren't covered at all. That's where other insurance options, such as Medicare Advantage and Medicare Supplement insurance, come in.

Before we define and compare these two types of insurance, it's important to note that this isn't an apples to apples comparison. Original Medicare can be supplemented with Medicare Supplement insurance, whereas Medicare Advantage is a comprehensive alternative to Original Medicare. Knowing this, it can still be helpful to compare these two common methods of paying for health care costs in retirement.

What Is Medicare Advantage?

Medicare Advantage — also known as Medicare Part C — is comprehensive insurance. It includes not only both parts of Original Medicare, but also prescription drug coverage (known as Medicare Part D) and additional health services, such as dental, vision, hearing and more. However, it's important to keep in mind that these extra benefits depend on the plan you choose.

Unlike Original Medicare, which is administered through the government, Medicare Advantage plans are provided through private insurance companies approved by the government.

What Is Medicare Supplement Insurance?

Medicare Supplement insurance plans also operate through private insurance companies to help fill in gaps not covered by Original Medicare — hence why this type of insurance is commonly referred to as Medigap insurance. These gaps typically include expenses tied to co-pays, deductibles or co-insurance, but can also include additional costs such as preventative services or hospice care, among others.

Providers typically offer a number of Medigap insurance plans from which to choose, with each providing different levels of coverage.

Understanding the Key Differences Between the Two

Knowing the differences between Medicare Advantage and Medicare Supplement insurance can help you make the best decision for your health care needs in retirement. Here are the main areas to consider:

Cost

Medicare Advantage plans can be more affordable than comparable coverage when it comes to paying premiums — there are usually low premiums or none at all. However, depending on the plan you choose, you might have to pay more in copays, deductibles and other out-of-pocket expenses throughout the year.

Medigap plans tend to have higher premiums than Medicare Advantage plans, as they typically cover more. However, while you might pay more each month in premiums, your out-of-pocket costs from deductibles, coinsurance and copays are generally limited to a certain amount under these types of plans.

Coverage

With Medicare Advantage, your private insurer will typically run your policy through a health maintenance organization (HMO) or preferred provider organization (PPO) plan. Depending on your plan, you may have limited network flexibility, or you might need to get referrals from your primary care doctor to see specialists.

Individuals using Medigap insurance can visit any doctor or facility anywhere in the country that accepts Medicare. These policyholders also don't need special referrals or authorization from a primary doctor to see specialists.

Health and Lifestyle

An important consideration in deciding which plan is right for you is, of course, your health. If you are someone who suffers from a chronic disease or other illness that requires frequent doctor's visits, for instance, you'll want to check whether Medicare Advantage covers the medications you require or what the maximum out-of-pocket deductible is under certain Medigap insurance plans.

Something else to keep in mind is your lifestyle. For example, Medigap insurance can provide more flexible coverage options if you get sick while traveling internationally. If you're a frequent traveler or you enter and exit the country often, you'll need to compare that flexibility against the offerings of Medicare Advantage plans, which tend to rely on networks.

The most important part of selecting a plan is finding an option that best fits your needs. To that end, be sure to take time to explore all of your options before you make a choice so you can enjoy a secure and fulfilling retirement.

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