Medicare Advantage vs Medicare Supplements

More than ever, Medicare beneficiaries are comparing the pros and cons of Medicare Advantage vs Medicare Supplements.

If you’re newer to Medicare, you may not be aware that Medicare by itself leaves you with many out of pocket costs.

Without secondary insurance to fill in the gaps in coverage, you’re left responsible for the $1,400+ deductible under Part A, as well as the nearly $200 deductible & 20% coinsurance under Part B.

If you end up in the emergency room for any reason, you will have to pay the inpatient deductible, which is $1,408 in 2020.

If you need to visit your doctor for any reason, you will for sure have an outpatient deductible to pay upfront as well as 20% of any medical services received.

The only exception is for annual exams & preventive services.

So, many beneficiaries end up comparing Medicare Advantage vs Medicare Supplements to see which will reduce their out of pockets costs the most.

It’s crucial to understand the difference between Medicare Advantage and Medicare Supplements since they both work very differently.

Medicare Advantage vs Medicare Supplements

Having some form of secondary coverage to supplement your Medicare is better than none. However, Medigap & Medicare Advantage both work very differently.

Let’s get into it.

Differences Between Them & How Each Type of Coverage Works

To be eligible for a Medicare Advantage plan, you must be enrolled in both Parts A & B, live within the plans service area, & answer no to one health question. That health question is, “do you have end-stage renal disease?”

So, if you’re undergoing dialysis treatment, you won’t qualify for a Medicare Advantage plan.

You Still Have to Pay the Part B Premium When Enrolled in Medicare Advantage

One huge misconception among beneficiaries is they won’t have to pay the Part B premium if they join a Medicare Advantage plan.

This is not true.

As stated above, you must be enrolled in Part B to be eligible for a Medicare Advantage plan. That means you must continue paying both your Part B premium, as well as the premium for your Medicare Advantage plan.

Even if your Medicare Advantage plan premium is zero, you will still have to pay the Part B premium.

Medicare Advantage Has a Smaller Network of Providers Compared to Medicare

A Medicare Advantage plan may only contract with a thousand providers across a few counties in your local area. While Medicare contracts with more than 800,000 providers nationwide.

It’s important to make sure that all of your providers are in your provider network vs. just your primary care physician.

Providers include not only your physician but any urgent care centers, hospitals, pharmacies, labs, Durable Medicare Equipment providers, etc.

Medicare Advantage Plans Come with Lots of Copays

What many people don’t realize is in exchange for a lower premium, or zero premium, you have many out of pocket expenses such as copays.

With a Medicare Advantage plan, you’ll pay a copay at your doctors’ office, at the hospital, for ambulance services, any lab work, to see a specialist, etc.

We’ll explain this further in detail below.

Original Medicare vs. Private Insurance

Medicare Advantage is private insurance. When you sign up for a Medicare Advantage plan, you’re no longer receiving benefits from Original Medicare.

Your Medicare Advantage company gets paid by Medicare to take over your healthcare coverage. That way, the company takes on your risk, and Original Medicare is no longer responsible.

Medicare Advantage becomes your primary coverage. Instead of your provider billing Medicare for your medical services, they bill the Medicare Advantage company.

If you accidentally present your provider with your red, white, and blue card vs. your Medicare Advantage card, they will submit your claims to Medicare.

Then, Medicare will deny those claims since they are no longer directly paying them. Instead, your Medicare Advantage plan is. So make sure to present the right card at the time of service.

Pros of Medicare Advantage Plans

Now, let’s go over some reasons why you may choose a Medicare Advantage plan over a Medicare Supplement plan.

Zero Dollar Premiums

Since Medicare Advantage is getting paid thousands of dollars from Medicare for every month you’re enrolled, they have the flexibility to offer you lower or zero-dollar premium plans.

In exchange for these low, or free, premium plans, you have to use their network and pay copays every time you see a provider. You pay as you go for your healthcare vs. paying a monthly premium for the care you may or may not need.

For beneficiaries living off of a fixed income, Medicare Advantage plans may be more budget-friendly.

Only Have to Answer One Health Question

As stated above, for those diagnosed with ESRD, you, unfortunately, won’t qualify for a Medicare Advantage plan. However, all other health conditions will be accepted into the plan.

For those under 65 years old on disability, depending on where you live, there may not be a Medigap plan available to you. Not all states offer Medigap plans to those under 65. Or, you may not be able to afford the premium for a Medigap plan due to income.

For those who didn’t realize they only get a once in a lifetime Medigap Open Enrollment Period that they unknowingly missed, having only one health question to answer after they develop a health condition is convenient.

A lot of times, a healthy beneficiary won’t feel it’s necessary to enroll in a supplement plan. Later, they develop a health condition. Then, they try to enroll in a Medigap plan to help cover out of pocket expenses associated with services to treat that health condition.

Low and behold, that beneficiary now has to answer health questions, and the Medigap carrier can deny you coverage. The good news is, even though they don’t qualify for a Medicare Supplement plan anymore, they still qualify for an Advantage plan.

However, you’ll have to wait until the next Annual Enrollment Period to sign up for one. The enrollment period occurs between October 14th and December 7th with a January 1st effective date.

Out of Pocket Maximum Spending Limit

Medicare Advantage plans protect you financially by putting a cap on your out of pocket expenses for inpatient & outpatient services.

Each plan sets its own Maximum Out of Pocket limit. Usually, the lower the premium, the higher the out of pocket limit.

However, Medicare does prevent the plan from setting those limits over a certain threshold. The 2020 threshold is $6,700 for in-network services.

The plans track all of your out of pocket spending for healthcare services. Once you reach that limit, you’re done paying for any services under Part A & B for the remainder of the year.

When you only have Original Medicare, without a Medicare Supplement, you’re responsible for paying the 20% coinsurance each time you visit a provider, with no cap.

With the Maximum Out of Pocket Limit, you’re protected from spending every penny you have on your healthcare if you’re diagnosed with a severe health condition or chronic illness.

Some Medicare Advantage Plans Include Extra Health Benefits

Some Medicare Advantage plans come with extra health benefits known as ancillary benefits.

They may include limited dental, hearing, and vision benefits. Some may even include a gym membership.

These benefits will vary by plan. They can also change from year to year. These extra benefits are something that Medigap plans do not have.

Cons of Medicare Advantage Plans

Medicare Advantage plans were designed for healthy people. Even though they may look free due to having a zero-dollar monthly premium, they are far from free. They also come with many limitations.

Below, we’ll go over some cons of Medicare Advantage plans.

Medicare Advantage Plans are Not Free

As stated above, there are lots of copays that come with Advantage plans. These copays are what you agree to pay in exchange for the zero or low monthly premium.

For example, you visit your doctor, and he orders some tests and lab work. A few weeks later, you end up getting a bill for those tests and lab work.

You paid your doctor copay, but that was just the first copay. Now, you have a copay for each test and lab work the doctor ordered.

Now, you went from paying a $30 copay to see your doctor to over $200 in copays for all the tests and lab work that you received a bill for later from that one visit.

If you’re healthy, you may spend very little. However, if you end up needing to use your benefits more, you’ll end up paying more out of pocket, then you would have if you had a Medicare Supplement plan.

Out-Of-Pocket Spending Risk on Medicare Advantage vs. Medigap

As you can see from the example above, you could spend a few hundred dollars in copays every time you go to visit your doctor when on a Medicare Advantage plan.

However, if you had a Medigap plan, your out of pocket costs could have been nonexistent. You have no copays when you have Medicare + Medigap. Depending on the letter plan you choose, you could have no deductibles either.

For example, if you had enrolled in a Medigap plan such as Plan F, you would’ve had to pay nothing out of pocket for that one visit. You actually would have to pay nothing out of pocket, ever. Plan F is considered first-dollar coverage. You only have to pay your monthly premium & nothing else.

If you had Plan G, you only would’ve been responsible for the Part B deductible of $198. Plan G is only one step down from Plan F. It covers everything except the annual Part B deductible.

If you had Plan N, which is one step down from Plan G, you would’ve had to pay the Part B deductible, as well as a $20 copay when visiting your doctor. However, you would not have had to pay the other copays for any tests or lab work.

Let’s compare the above out of pocket costs with a Medigap plan vs. Medicare Advantage.

• Plan F – $0 OOP max
• Plan G – $198 OOP max
• Plan N – $198 + $20 copays for each visit
• Medicare Advantage – $6,700

As you can see, there is a much higher out of pocket spending risk with Medicare Advantage plans compared to Medicare Supplements.

Even if you had Plan N and saw your doctor twice per month, you would still only end up paying $198 + $480 ([$20 per visit x 2] x 12 months) = $678.

Important note: Plan F is not available to any beneficiary who becomes eligible for Medicare after 2020.

Medicare Advantage Plans are Not Standardized

Unlike Medigap plans, Medicare Advantage plans are not standardized. Even though they must offer the same benefits as Part A and Part B, they can still set their premiums, copays, provider networks, pharmacy networks, drug formularies, & out of pocket maximum.

Medicare Advantage Plans Have HMO & PPO Networks

Unlike Medicare Supplement plans, Medicare Advantage plans have HMP & PPO networks.

Those enrolled in a Medicare Supplement have the freedom to see any doctor that accepts Medicare, which is 96% of doctors in the United States.

Those enrolled in a Medicare Advantage plan have a very limited network of doctors to choose from. If your plan is an HMO plan, you’ll most likely have to get a referral to see a specialist.

You’ll have no out of network coverage except emergency coverage. The issue with this is if you happen to be traveling and are outside the plans service area, if you see a doctor over a something minor, you’ll have to pay 100% out of pocket for that visit.

Since Medigap plans travel with you, including across county and state lines, you will always have coverage anywhere you go.

If your plan is a PPO, you’ll have a little more versatility with out of network coverage, but at a much higher out of pocket cost to you.

You also need to make sure that the provider is willing to bill your Medicare Advantage plan. If not, then you’ll need to find another provider.

Prior Authorization Delays

With Advantage plans, you’ll find there are many prior authorizations required for surgeries, tests, procedures, etc. These prior authorizations are rare with Medicare + Medigap.

The above prior authorizations cause many beneficiaries to delay those surgeries, tests, and procedures.

Providers Can Drop Their Contract At Any Time

Providers are allowed to drop their contracts with Medicare Advantage mid-year.

So what’s the point of the contract? We’re not sure.

This could be an issue since you’re stuck with that plan until the next enrollment period that allows you to make changes to your current plan.

If your doctor did participate in your Advantage plan when you joined but later dropped their contract, you’d have to find a new provider.

As you can see from above, there are many advantages and disadvantages of Medicare Advantage plans.

Why You Shouldn’t Drop Your Medigap Plan for a Medicare Advantage Plan

We’ve seen many situations where beneficiaries drop their current Medigap plan to enroll in a Medicare Advantage plan without weighing all the pros and cons.

They think if they get sick later in life, they can simply drop their Medicare Advantage plan and go back to Original Medicare + Medigap.

Well, it does NOT work that way.

Once you’re outside of your Medigap Open Enrollment Period, you’ll have to answer health questions to get back into a Medigap plan.

At that point, the carrier can deny you coverage if they don’t feel you’re healthy enough to join.

The good news is, there are two exceptions to this.

Trial Right Period

The first exception is if you’re in your trial right period. If it’s your first time trying a Medicare Advantage plan, and you’ve been on the plan for less than 12 months, then you’re in your trial right period.

Those in their right trial period can return to Original Medicare and sign back up for a Medigap plan without having to answer health questions.

On Medicare & Under 65

The second exception is for beneficiaries who are disabled and on Medicare. Everyone on Medicare who aged in at 65 only gets a once in a lifetime open enrollment window to sign up for a Medicare Supplement plan.

If you’re on disability, your first open enrollment window was 24 months after you started collecting benefits. Your 2nd open enrollment window to sign up for Medigap is when you turn 65.

If you previously enrolled in a Medicare Advantage plan because you couldn’t afford the Medigap premiums carriers charge to those under 65, you can enroll in a Medigap plan when you turn 65 without having to answer health questions.

So, is it better to have Medicare Advantage or Medigap?

This is the golden question. The answer is, that depends 100% on you.

A Medicare Advantage plan may be better for your neighbor, but a Medigap plan may be better for you.

When choosing between Medicare Advantage and Medicare Supplement, you need to ask yourself some questions.

How is your health?

If you’re healthy and not concerned about your health status changing in the future, then a Medicare Advantage plan might make sense for you.

However, if your current health is so-so, or you have a family history of health issues, or you just want to be prepared if you get sick, a Medigap plan will make more sense for you.

How many providers do you see?

If you have multiple providers, the chances of all of them being in your Medicare Advantage plan network is unlikely.

The chances of all of your providers accepting Medicare is highly likely.

How much can you spend on monthly premiums?

If you’re living on a limited income, regardless if you’re healthy or not, a Medicare Advantage plan may be your only option.

If you have to choose between paying your Medigap premium and eating, the choice is obvious.

However, if you have the budget for a Medigap plan, it could be what saves you from having to spend your entire budget and savings on unexpected healthcare expenses.

Do you have money set aside for unexpected out of pocket costs?

Everyone has a different budget. If you’re okay with the “pay as you go” type healthcare plan, then a Medicare Advantage plan may work for you.

Unfortunately, most people don’t have a healthcare fund set aside if they get chronically ill. If all a sudden you’re diagnosed with cancer, can you afford to come up with the $6,700 OOP maximum your Advantage plan has?

Worst case scenario, you get diagnosed towards the end of the year. When December comes, you finally met your OOP maximum.

Then come January, the calendar year resets, and you’re still receiving cancer treatment. Now you have to come up with that $6,700 again to cover copays and coinsurance for treatment throughout the new year.

If that OOP maximum breaks the bank, then you probably should consider a Medicare Supplement as the better alternative.

Original Medicare vs. Medicare Advantage

The main concern with only having Original Medicare, and no Medicare Advantage OR Medigap plan, is the 20% coinsurance that you’re left responsible for under Part B.

At least with a Medicare Advantage plan, your out of pocket expenses have a cap. With just Original Medicare, you have no cap on your out of pocket expenses.

When Can I Make Changes to My Coverage?

You can enroll in a Medigap plan at any time as long as your Part B is active. Even if you’re outside your Open Enrollment Period, you can still apply. You’ll just have to answer health questions.

There are two times a year you can make changes to your Medicare Advantage plan.

If you’re a current Medicare Advantage plan enrollee, you can make changes during the Annual Enrollment Period and the Medicare Advantage Open Enrollment Period.

If you’re not a current Medicare Advantage enrollee, you can enroll in one during the Annual Enrollment Period.

The exception from the above is if you have a change in circumstance and qualify for a Special Enrollment Period.

Let’s Wrap It Up

I know that was A LOT of information all at once, but this is the stuff you need to know to choose the right healthcare coverage for you.

So, to summarize the above.

Some form of supplemental coverage is better than none. For those who cannot afford Medigap premiums, then at least you’ll have some coverage if you get a zero dollar premium Medicare Advantage plan.

If your unhealthy or concerned about what your future health will be, then a Medigap plan is better.

If you don’t have money set aside for unexpected healthcare expenses, or don’t like the “pay as you go” type of healthcare plan and instead rather have a fixed monthly premium, then get a Medigap plan.

The Decision You Make Now Could Be Permanent the Rest of Your Life

Remember, the decision you make now could be permanent. If you choose a Medicare Advantage plan, you may not ever be able to get a Medigap plan.

With that said, don’t make this decision alone. We’ve helped thousands of Medicare beneficiaries make the right decision for them.

Whether you want to enroll in Medigap or Medicare Advantage, we can help. Another benefit of working with our expert licensed agents, you’ll also have access to our Client Care Team.

Our Client Care Team assists our clients with claims, appeals, rate comparisons, and much more. You’ll never have to tackle Medicare alone.

We work diligently to prepare our clients for what they can expect regarding whatever choice they make. We will stick by that choice and help you manage your coverage.

Give us a call or get help now using our rate comparison tool.