Medicare Advantage vs. Medicare Supplement: Which is best?

Key takeaways:

• You have to choose either a Medicare Advantage or a Medicare Supplement plan. You can’t have both.
• Most Medicare Advantage plans include Medicare Part D and other extra benefits.
• Medicare Supplement plans can’t be used to pay your Part D prescription drug costs.
• The most popular Medicare Supplement plans pay 100% of your out-of-pocket costs with Part A and Part B, except for the Part B deductible.
• All Medicare Advantage plans cap your annual out-of-pocket costs.

Most people report being generally happy with their Original Medicare plan, except for two things: Unpredictable out-of-pocket costs and the lack of vision and dental care coverage. Private Medicare plans can solve these issues, but there are pros and cons to each type. When it comes to Medicare Advantage vs. Medicare Supplement plans, here’s what you need to know:

 

Medicare Supplement vs. Medicare Advantage: What’s covered?

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Medicare Advantage plans replace Original Medicare (Part A and Part B). When you buy a Medicare Advantage plan, the insurance company — not Medicare — provides all your health coverage. You don’t lose any benefits. In fact, most Medicare Advantage plans include extra benefits for routine vision and dental care. Nearly all include Part D prescription drug coverage.

In exchange for these extra benefits, you have to follow your plan’s rules. These guidelines often include using only approved network providers and getting prior authorization for certain tests and procedures.

 

Medicare Supplement plans complement Original Medicare. These plans cover most of your out-of-pocket costs with Part A and Part B. You still get your health insurance from Medicare, but your Medicare Supplement plan pays your deductible and coinsurance.

 

You usually don’t get any extra benefits with Medicare Supplement plans. If Medicare doesn’t cover a service, neither will your Medicare Supplement plan. Some plans do offer stand-alone vision and dental plans for an extra monthly premium. A few plans even include extra benefits at no additional cost.

 

Medicare Supplement plans don’t pay your out-of-pocket costs with Part D. If you buy a Part D plan, you’re responsible for the deductible and coinsurance.

Medicare Supplement plans don’t have restrictions such as provider networks and prior authorization. You can use your plan with any provider that accepts Medicare.

 

Medicare Advantage vs. Medicare Supplement

Medicare Advantage plans	Medicare Supplement plans
Replace Part A and Part B	Work with Part A and Part B
Pay for your health care	Pay your out-of-pocket costs with Original Medicare
Usually include Part D prescription drug coverage	Do not cover Part D prescription drug costs
Usually cover routine vision and dental care	Do not pay for services not covered by Medicare
May have coverage restrictions such as provider networks and prior authorization	Can be used with any provider that accepts Medicare

 

What are the costs of Medicare Advantage vs. Medicare Supplement plans?

No matter which type of Medicare plan you choose, you must continue to pay your Part B premium. If you’re one of the few people who pay for Part A, you’ll have to continue paying that premium as well.

Premiums

You pay a separate monthly premium for Medicare Supplement plans. The cost of your premium depends on the plan you choose, your age, location, sex, and other factors. Premiums typically range between $50 and $250 a month and often increase in price as you get older.

Some Medicare Advantage plans have a monthly premium, but most people choose a $0 premium plan. Among those who do pay a premium, the average cost is $25 a month, which usually includes Part D coverage.

Deductibles

You don’t have an annual deductible with Medicare Supplement plans unless you choose a high-deductible plan. Most Medicare Supplement plans pay your Part A deductible and coinsurance and 100% of your Part B costs after you meet the Part B deductible.

If you choose a high-deductible plan, your plan pays 100% of your costs after you pay $2,340 out-of-pocket.

Medicare Advantage plans may or may not have an annual deductible, but most people have access to a $0 deductible plan. Some plans have a separate deductible for Part D.

RELATED: Find out if there are Medicare Advantage plans in your area.

Cost sharing

There is no cost sharing with most Medicare Supplement plans. This means the plans pay 100% of your Part A inpatient and Part B coinsurance. If you choose Plan N, you pay a small copayment at the time of service. The copay is usually $20 or less for doctor visits and $50 or less for emergency room care.

You usually pay a flat copayment for health care with Medicare Advantage plans. A typical HMO plan might charge $5 for primary care visits, $25 for specialist care, and $50 for urgent care and emergency room visits.

Out-of-pocket maximum

Out-of-pocket limits only apply to two Medicare Supplement plans: Plan K and Plan L. These two plans pay between 50% and 75% of your Part A and Part B coinsurance until you reach the out-of-pocket maximum. After that, they cover 100% of your costs. In 2023, the out-of-pocket maximums for Plan K and Plan L are $6,220 and $3,110, respectively.

All Medicare Advantage plans have an out-of-pocket limit. Once you reach it, your plan pays 100% of covered costs. Medicare sets the maximum limit each year, but most plans set their maximum below Medicare’s limit. In 2023, the average Medicare Advantage out-of-pocket maximum is about $4,972.

Cost comparison: Medicare Supplement vs. Medicare Advantage

	Medicare Supplement	Medicare Advantage
Monthly premiums	$50 to $250	Most people pay $0
Deductible	$0, but you pay the $198 Part B deductible with most plans.	$0 to $500 is typical; you may have a separate deductible of up to $435 for Part D
Cost sharing	$0 except with Plan N, which has a small copayment at the time of service	Copayments are generally between $5 and $25 for office visits, $50 for urgent care, and $100 per day for the first 5 inpatient days
Out-of-pocket maximum	Not applicable, except with Plan K and Plan L	$4,900 is average, although it can be as high as $6,700

How to choose between Medicare Advantage and Medicare Supplement plans

For most people, the choice between Medicare Advantage and Medicare Supplement depends on three key factors: flexibility, predictability, and extra benefits.

Flexibility:

If you like to travel or spend part of the year in another state, you need the flexibility to get health care no matter where you are. Most Medicare Advantage plans require you to use an approved provider network. On the other hand, a Medicare Supplement plan allows you to be treated by any provider that accepts Medicare.

Predictability:

With the most popular Medicare Supplement plans, you only pay your monthly premium and your Part B deductible. Your plan covers 100% of your other out-of-pocket costs with Original Medicare. That means you know exactly how much your health care will cost every month.

With Medicare Advantage, you pay a flat copayment at the time of service. These copayments are usually between $5 and $75 for most outpatient services. Some months you may pay nothing at all if you choose a $0 premium plan and don’t need health care. You’ll never pay more than your plan’s out-of-pocket maximum.

Extra benefits:

Most Medicare Supplement plans do not include any extra benefits, although a few offer SilverSneakers or a similar fitness membership. You may be able to buy vision and dental coverage for a separate monthly premium. Very few plans include vision and dental benefits in the monthly premium.

No Medicare Supplement plans include Part D, although most companies that sell Medigap plans also sell Part D.

Most Medicare Advantage plans include Part D coverage for prescription drugs. A majority also include SilverSneakers, as well as benefits for routine vision, dental, and hearing care.

Some plans include new expanded benefits. The most common are allowances for over-the-counter medications and devices, home meal and grocery delivery, and non-medical transportation. There is no extra cost for these benefits.

 

Examples of Medicare Advantage vs. Medicare Supplement plans

Example 1: Marianne has no serious health conditions and sees her doctor twice a year on average. She visits the dentist twice a year for routine cleaning and gets an eye exam and new glasses every year. Last summer, she fell and broke her wrist. She needed inpatient surgery to fix the fracture, then a month of physical therapy after she was discharged from the hospital.

Below are her medical costs for the year with Original Medicare plus a Medicare Supplement plan vs. Medicare Advantage:

	Original Medicare plus Medicare Supplement Plan	Medicare Advantage
Part B premium	$1,735	$1,735
Part D premium	$360	$0 (included in Medicare Advantage premium)
Plan premium	$1,680	$300
Deductibles	$198 Part B   $200 Part D	$0 Medical   $200 Part D
Cost sharing	$0 Part A and Part B   $100 Part D	$1,500 Medical   $100 Part D
Dental exams	$100	$0
Eye exam and glasses	$200	$50
Total Annual Costs	$4,573	$3,885

Example 2: Charles has high cholesterol, high blood pressure, and angina. He sees his primary care doctor and cardiologist several times a year. He also takes three prescription drugs every day. Last year, he had a heart attack and needed angioplasty and a stent placement. His doctor recommended outpatient cardiac rehab after his surgery.

Below are his medical costs for the year with Original Medicare plus a Medicare Supplement plan vs. Medicare Advantage:

	Original Medicare plus Medicare Supplement plan	Medicare Advantage
Part B premium	$1,735	$1,735
Part D premium	$360	$0 (included in Medicare Advantage plan)
Plan premium	$1,800	$300
Deductibles	$198 Part B   $200 Part D	$0 Medical   $200 Part D
Cost sharing	$0 Part A and Part B   $600 Part D	$3,500 Medical   $600 Part D
Total Annual Costs	$4,893	$6,335

Final considerations

Medicare Supplement plans differ from other Medicare plans because you aren’t guaranteed coverage except in limited situations. During your Medigap Open Enrollment Period, you have guaranteed issue rights. This means you can buy any plan sold in your state, and you can’t be turned down or charged more due to a preexisting condition.

Outside that time, you can still apply for a plan, but you usually have to pass medical underwriting before you’re approved. If you have a serious or chronic condition, the insurance company can turn you down, offer you a plan with less coverage, or charge you much higher premiums.

In contrast, anyone who is eligible for Medicare can buy a Medicare Advantage plan, regardless of health status. Another plus is that if you choose a plan and decide you don’t like it, you can switch to a different one or go back to Original Medicare without penalty.

You can make changes twice a year during the fall Annual Election Period and the Medicare Advantage Open Enrollment Period. It is important to note that you don’t have Medigap guaranteed issue rights during these periods.

If you think a Medicare Supplement plan is right for you, you should buy it when you first become eligible during your Medigap OEP.

If you’re still not sure which plan is right for you, contact your State Health Insurance Assistance Program for further advice.

 

Talking to a licensed Medicare professional at 312-726-6565 will also provide you with a good source of information about local plans and provider networks. With the help of these resources, you’ll have all the details you need to help you make an informed choice.