When to Choose Medicare Advantage Over a Medigap Supplement Plan

When Original Medicare is Not Enough

Medicare Advantage Supplemental Health Insurance Plan
Is Original Medicare not enough to cover your needs? You can get additional coverage with a Medicare Advantage plan or a supplement plan. kristian sekulic/E+/Getty Images

What do you do when Medicare won't cover all the healthcare you need under its umbrella? Original Medicare (Parts A and B) leaves a significant gap in coverage for many services that seniors need as they age. You may want to consider a strategy to access extra services when and if you need them.

You could defer Original Medicare and choose a Medicare Advantage plan instead. Alternatively, you could keep Original Medicare and purchase a supplemental insurance plan.

You could even defer all extra coverage and just pay for those services you need out of pocket. Before you make a decision, know what the pros and cons are for each of these options.

Advantages of Picking a Medicare Advantage Plan

Medicare Advantage plans are Part C of Medicare. You have the option of choosing either Original Medicare or a Medicare Advantage plan, not both. In 2015, 16.8 million Americans, 31 percent of those on Medicare, have chosen Medicare Advantage plans. Here are the reasons why.

  • More covered services. Medicare Advantage plans at a minimum must cover everything that Original Medicare offers. This is a requirement set by the government. Depending on the plan specific Medicare Advantage plan you choose, you may also be able to access additional coverage for services not covered by Original Medicare.
  • More comprehensive plans. If you need prescription drug coverage, you would have to purchase a Part D plan in addition to Original Medicare. Many Medicare Advantage plans include Part D coverage. This makes things simpler for you by your only having to sign up for a single plan. It also decreases the number of premiums you will pay each month.

    Disadvantages of Picking a Medicare Advantage Plan

    As appealing as a Medicare Advantage plan may seem, it does have its downside. Consider these before you make your choice.

    • Run by private insurance companies. Premium costs will vary based on how extensive a plan you choose and the company from which you purchase your coverage. This will mean you will have to do research and shop around to get the best deal. The government does not regulate how much an insurance company can charge you for premiums or other out of pocket costs.

    Advantages of Supplemental Insurance Plans

    If you choose to stay with Original Medicare, you could purchase a Medical supplement insurance plan to help pay down your Medicare bills. You cannot have a supplement plan with a Medicare Advantage plan.

    These Medicare supplement plans, also known as Medigap plans, are labeled A - N. They pay toward expenses that Medicare leaves on the table, specifically deductibles, coinsurance, copayments and even costs towards foreign travel. Note that E, H, I, and J plans are no longer offered. 

    Similar to Medicare Advantage plans, Medigap plans are offered by private insurance companies but federal guidelines outline what they must cover.

    Every lettered plan will have the same exact coverage, i.e. private insurance companies cannot add any bells and whistles. An F plan is an F plan wherever you buy it. You will need to shop around for the best rates.

    Supplemental insurance plans offer you flexibility. You could choose a smaller or more extensive plan based on your needs while continuing to have access to a wide network of Medicare providers that you would not have access to under Medicare Advantage. 

    Making the Decision That is Right for You

    Everyone has different needs. Only you know how much you will be able to afford in the long run. Think carefully about what choice makes the most sense for your situation. You have to decide if you will save more money by choosing a Medicare Advantage plan which offers more services or a supplement plan which decreases Medicare's out of pocket expenses.

    Be sure not to confuse supplement insurance with secondary insurance. The terms sound similar. Secondary insurance means you have another health plan in place that will pay for health care services, for example, an employer-sponsored health plan, retirement benefits or VA benefits. A Medigap plan does not add additional health services or coverage.  

    Sources:

    The Henry J. Kaiser Family Foundation. Medicare Advantage. http://kff.org/medicare/fact-sheet/medicare-advantage/. Published June 29, 2015.

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