Key Differences Between Medicare Advantage and Medicare Supplement (Medigap)

Today, slightly more than half of all Medicare beneficiaries, more than 30 million Americans, are enrolled in Medicare Advantage plans.

Medicare Advantage plans are offered by private insurance companies.  Those big insurance companies then dictate your copays for each procedure, and which doctors you can see for those services.  

Medicare Supplements, also known as Medigap plans, are designed to pay the costs that Medicare doesn’t pay.  So, when you buy a Medicare Supplement plan, you keep the original Medicare that you have paid for all your life in your federal Medicare taxes.

The Upside of Medicare Advantage instead of Medicare Supplements:

• Medicare Advantage plans usually have lower monthly premiums.
• Medicare Advantage plans often include a prescription drug plan and extra benefits like dental and a gym membership.
• Medicare Advantage plans may reduce your Part B premium or offer a grocery benefit to people with chronic conditions like diabetes.

The Downside of Medicare Advantage instead of Medicare Supplements is:

• Medicare Advantage has a smaller network of doctors that can change even during your plan year.
• Prior authorizations are usually needed for services like surgeries, inpatient hospital stays, rehab, and imaging (MRIs).
• Medicare Advantage benefits change every year, and insurance companies may even cancel their contract with Medicare.  So, you must check your benefits every year to see what has changed.

The Upside of Medicare Supplements over Medicare Advantage:

• If you have a Medicare Supplement, you usually pay a lot less for medical care like a week at the hospital than Medicare Advantage plans.
• Medicare Supplements gives you the freedom and flexibility to go to any doctor or hospital in the country that accepts Medicare.
• Medicare usually does not have any prior authorizations or red tape.  So, you get the diagnosis and treatment you need as quickly as possible with a Medicare Supplement.
• Often people want a Medicare Supplement when they are facing costly illnesses or injuries.  If you do not select a Medicare Supplement when you are new to Medicare, you are usually asked health questions.  If your health is poor or you have procedures scheduled or recommended, even something minor like cataract surgery, you can be denied a Medicare Supplement.

The Downside of Medicare Supplements instead of Medicare Advantage:

• Medicare Supplements can increase their premiums every year.
• Medicare Supplements do not include a prescription drug plan.  So to avoid a late enrollment penalty prescription coverage must be sought when you are new to Medicare and should be reviewed each year during the Annual Election Period, October 15 – Dec 7.  The only exceptions would be if you had Veteran’s Administration, Union, Group Retiree, or other creditable Part D drug coverage.