Medicare Advantage vs Medicare Supplement (Medigap): What Medicare Plan is Best for Me?

I am a firm believer that there is a good Medicare health plan out there for everyone. Moreover, there might even be more than one good choice out there for your situation. If there is more than one good choice available to you, you might be weighing your options right now – Medicare Advantage vs Medicare Supplement.

First, Let’s review your Medicare options:

Original Medicare (no supplement)

Certainly, stand-alone Medicare coverage is an option. You would still want to get Part D Prescription coverage. (There are penalties down the road if you do not get Part D or have credible coverage already and then want to get it later.) However, you would then be left paying your deductibles and 20% coinsurance out-of-pocket.

For example, with ONLY Original Medicare and NO supplement or MA plan, if you ended up having a major health event like a surgery, the 20% left that medicare doesn’t pay could still be thousands of dollars.

You would also have to go through medical underwriting with a private insurance carrier if you later want a supplement and you have missed your Guaranteed Issue time frame. You can always join a MA plan later, but only during a special enrollment period or during the Annual Enrollment Period (Oct. 15 – Dec. 7).

Original Medicare with a Supplement

With this option, you keep Original Medicare and add on a Supplement (Medigap) Policy with a private insurance company to help you in paying the pieces that Medicare does not. These costs can become large if you have a big medical event or a chronic illness. In this instance, a Supplement would protect you from “losing the shirt off your back”! You would also have a stand-alone Part D Prescription Drug Plan (or a plan that is considered “credible coverage”).

Medicare Advantage (MA/MAPD)

Finally, with a MA/MAPD plan you would replace Original Medicare with a bundled plan offered by a private insurance company. These often include a Prescription Drug Plan. (These are called MAPD plans, which are most the common plans). You still “have Medicare” with these plans. However, they are run by private companies who put together networks of providers and health facilities.

One question we hear a lot is, “can I have both Medicare Advantage and a Medicare Supplement?” No, you have one or the other. Not both, they do not work together and it is illegal for anyone to sell you both.

What are the Differences Between having a Supplement (Medigap) and having Medicare Advantage (MA/MAPD)?

Now, let’s do a breakdown of Medicare Advantage vs. Medicare Supplements. First, let’s look at the difference in care and the differences in cost. We are assuming you either have Medicare Advantage or Original Medicare with a Supplement (aka Medigap Plans).

	Medicare w/Medigap	Medicare Advantage
Care Options	You can go to any doctor that accepts Medicare already. Specialist referrals are not needed.	You typically must visit doctors that are in the plan’s network if you do not want to pay extra. Specialist visits sometimes need a referral, depending on your plan. Click here to read more about plan structures (HMO, PPO, etc.)
Extras	NA	Some plans include extra benefits such as hearing, dental, vision and fitness/wellness programs.
Monthly Costs	Medicare Part A – usually premium free Part B – Monthly Premium (based on income level) Part D – Monthly Prescription Premium Supplement – Premium dependent on which company & plan letter you choose	MAPD plans with Drug Coverage Included pays a monthly premium to the insurance company for all services. Some plans include the Part B Premium and some plans do not. Some plans have a $0 monthly premium option.
Out of Pocket Costs	Costs can be very minimal depending on that Medigap plan you choose. There are high deductible options, and starting in 2020, the Part B deductible will have to be paid by everyone who is just aging into Medicare.	Some plans have lower out-of-pocket costs than Original Medicare and all have a yearly limit on out-of-pocket expenses that are covered by Medicare.
Domestic Travel	Emergency and urgent care are always covered in the US. You can use any doctor that takes Medicare in the US for routine visits. If you spend long periods of time traveling and need to see a doctor for routine visits whole out of town, this might be your best option.	Emergency and urgent care are always covered in the US. You will have to use doctors in network for routine visits for them to be covered. Some insurance companies have large networks that can span several states, so make sure to inquire about how large the network is before you rule out a MA plan if you travel a lot.
Foreign Travel	Some supplement plans cover part of the emergency medical fees you may use in other countries. Plans C, D, F, G, M & N have 80% foreign travel exchange limits.	Plans do not typically have any over seas coverage.

Making Your Choice between Medicare Advantage vs Medicare Supplement

Now that you understand the basics of Medicare Advantage Plans and Original Medicare plus a Medigap (Supplement) Plan and know the significant differences between the two, it’s decision time.

First, I always recommend speaking with a licensed, independent agent that can help you in assessing all the various plan types available in your area. Every county has different options for MA/MAPD plans, and insurance carriers have different prices on the supplement plans you may be considering.

Second, it’s good to have an idea of what is important to you. You should be thinking specifically in regards to money and lifestyle when choosing a path.

Consider these questions when choosing between Medigap and MA Plans:

Do you plan on living in another place for a significant period of time during the year?

If you are a “snowbird” or are planning a longer vacation where a routine doctor visit may be necessary when away from your primary residence, then a supplement may be your best choice. Remember though, emergency / urgent care visits are covered with both types of plans.

However, if your travel happens to be international, Both Original Medicare and MA plans do not cover foreign travel, but some supplement plans (plans C, D, F, G, M & N) have 80% foreign travel exchange limits that will help off-set some costs.

What is (or will be) your cash flow situation in retirement?

Some retirees have pensions, social security and other payments (like annuities) that come to them automatically each month. Other retirees have less of these automatic infusions or smaller required distributions and prefer to leave as much of their cash in investments as possible. Finally, some retirees are on a smaller, fixed income. This might require them to consider cash flow very carefully.

In each situation, you will need to review how you are paying for your health services, as each plan offers different payment options.

Cash Flow with a Supplement:

With a supplement, you will have a set amount of money (that could be a larger sum than an MA plan) come out of your bank (and/or S.S./R.R. check) each month. This can add up when you consider it includes Part B premiums, Part D Prescription premiums, and your supplement premiums. However, if you chose a plan that covers everything Original Medicare leaves out, then you would not pay any other out-of-pocket fees for Medicare covered services.

Cash Flow with a MA/MAPD Plan:

With a Medicare Advantage plan, you will most likely have a smaller amount of money coming out of your wallet each month. You will most likely have an MAPD plan that includes your drug plan, as stand alone MA plans are becoming much more rare, and some plans even include Part B premiums. So, with a MAPD plan, you would be paying a MA premium and maybe your Part B premium each month. Moreover, there are sometimes zero dollar per month ($0/month) premium MA plans available. The costs then to consider and maybe budget for with MA plans is if there are any co-pays, co-insurances and deductibles with the plans. Each plan will be set-up differently, and each plan will also have a max yearly out-of-pocket limit.

Just like in any kind of insurance, Medicare plans are set-up to allow you to choose how much out-of-pocket expenses you incur versus monthly premiums you pay.

Looking at your budget and then talking through your options with a licensed agent will allow you to make the best choice for your situation.

How interested are you in extra benefits being included?

Finally, one more consideration is the other elements that round out your health insurance plan, such as dental, vision, hearing, etc. If you have a supplement plan, you will need to decide if you need these services, and if you do, are you wanting to take on insurance plans for them. You might decide to add on a stand-alone, or a plan that includes any or all of these common services (dental, vision, hearing).

Often times, Medicare Advantage plans will include these services as a part of their plan as an additional benefit which might save you money if you were planning on getting a stand alone plan or paying cash for these services.

Moreover, many MA plans will offer fitness or wellness services that are included at no additional cost. Sometimes this means you will not have to pay for a separate gym membership. Silver Sneakers is one example of a national program that is used by many MA plans to provide fitness and wellness services.

The Next Steps for Choosing Your Medicare Plan

As you can see, developing your Medicare Health Insurance Plan can be very involved, but I am confident you can do it! Having a professional to help you through the process is important. Please reach out to an independent insurance agent to review what is available in your area. They will be able to explain plans in specifics and answer your questions about Medicare Advantage vs Medicare Supplement.

Finally, Medicare.gov is also a good tool for answering your broader questions, and we also encourage you to comment on this page or contact us directly with any questions. Thanks!

Other Topics Related to Medicare Choices:

• Medicare Supplement Basics
• Medicare Advantage Basics
• Prescription Drug Plan Basics