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Understanding Medicare Advantage vs. Medicare Supplement Plans

Understanding Medicare Advantage vs. Medicare Supplement Plans

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When you need to supplement your Original Medicare (Parts A and B) plan with additional healthcare benefits, it’s important to know your options. The three most commonly chosen options are Medicare Part D, Medicare Advantage and Medicare Supplement plans.

In this blog, we will cover the similarities and differences between Medicare Advantage plans and Medicare supplement plans, and how one of these options can potentially be a better fit for your medical and financial needs.

How Both Plans Cover Gaps in Medicare

To cover the gaps in Medicare, individuals have two options to choose from. Assuming availability in your area, you can select either a Medicare Supplement plan or a Medicare Advantage plan. Both plans have merits, but differ fundamentally with regard to the order of payment and actual payment for services.

Under a Medicare Supplement plan, Medicare Parts A and B are billed first for services and your supplement is billed second. Supplements provide coverage for the copays, deductibles and coinsurance found in Original Medicare. Today, most plans require you to pay for the Part B deductible.

If one selects a Medicare Advantage plan, they receive the same benefits as Original Medicare, however they are administered by a private insurance company which becomes the primary and sole payer of all your benefits. Since most Medicare Advantage plans are networked-based and all care is coordinated through these providers, payments are made directly from the plan to the provider, therefore, not requiring Medicare to pay.

What is a Medicare Advantage (Part C) Plan?

A Medicare Advantage plan is an alternative to Original Medicare and provides a combination of your Medicare Part A and Part B benefits, and oftentimes Part D, through a private insurance company approved by the Center for Medicare and Medicaid Services (CMS). Medicare Advantage Plans are often referred to as “MA plans” or “Part C” plans. Many of these MA plans offer additional benefits that Original Medicare does not, such as vision, dental and hearing care, in addition to Part D prescription drug benefits. As previously stated, most Medicare Advantage plans are network-based, therefore, in order to receive care at the lowest cost, you will need to select providers from the plan’s network. Some plans may require you to get referrals to access advanced care providers, so it’s important to find this out prior to enrolling in any Medicare Advantage plan.

Another difference between Original Medicare and Medicare Advantage plans are out-of-pocket costs. Original Medicare leaves you exposed to pay approximately 20% of the cost of care and has no out-of-pocket maximum. Medicare Advantage plans are required by CMS to set a limit on your annual out-of-pocket expenses for medical care. Being informed of your plan’s maximum out of pocket limit, enables you to budget for unexpected medical costs. To truly understand the total costs of your various options, you should evaluate the cost of premiums, deductibles and coinsurance when determining the financial benefits of each plan.

Note: When researching and comparing Medicare Advantage plans, it is important to review not only costs, but added benefits to determine the true value of the plans. To learn more about the specific types of MA plans available in the greater Washington, D.C. metropolitan area, click here.

If you enroll in a Medicare Advantage plan and are unhappy, you can disenroll from your plan and make changes to your Medicare coverage annually during the Annual Enrollment Period or the Medicare Advantage Open Enrollment Period.

What is a Medicare Supplement (Medigap) Plan?

Medicare Supplement Insurance, also known as Medigap, are secondary payer plans sold by private insurance companies. As the name suggests, it helps to “fill the [coverage] gaps”left empty by Original Medicare. Many think Medicare covers everything and this is not true. For example, for services covered under Medicare Part B, Medicare covers 80% of the costs, leaving the beneficiary with the balance of 20%. With a Medicare Supplement plan or Medigap policy, these remaining costs can be significantly lowered or covered completely. Medicare Supplement plans help you reduce your out-of-pocket costs by providing benefits to cover deductibles, coinsurance, and copayment found in Medicare Parts A and B. While Medigap policies do not offer additional benefits, such as dental, vision and hearing, maintaining coverage through Original Medicare does have its own advantages. These include nationwide coverage and provider access, which allows you to see any facility or provider that accepts Original Medicare without a referral.

Note that there are many types of Medigap policies available, with each offering the same standard benefits, but at differing rates depending on the plan and insurer you choose. Click here to learn more about Medigap plans.

What are the Differences Between Medicare Advantage Plans and Medicare Supplement Plans?

Medicare Advantage Plans and Medicare Supplement Plans are quite different and each offers unique advantages. Medicare Advantage plans replace your Original Medicare coverage to instead offer additional benefits and annual out-of-pocket caps, though with constraints on when and where you can receive care. Medicare Advantage plans are location-specific and network-specific, and require referrals to see specialists. On the other hand, a Medigap plan supplements your Original Medicare plan and allows you to receive care from the doctors and hospitals you want, as long as they accept Original Medicare. Medigap plans reduce out-of-pocket expenses, but do not offer the additional benefits available in Medicare Advantage plans.

To summarize the differences, Original Medicare provides healthcare through Medicare contracted providers throughout the United States. Under this program, no referrals are needed and the cost of care is agreed upon by the provider and the Medicare program. As a result of this arrangement, Medicare becomes the primary payer of claims and a Medigap plan will become the secondary payer, assisting in covering the gaps in Medicare Parts A and B. Should you travel outside of the United States, Original Medicare provides no medical benefits, and you would instead have to rely on your supplement plan, other benefits you may have through employers or other government programs for coverage.

Medicare Advantage provides the same medical benefits as Original Medicare; however, they are administered and coordinated through a private insurance company or medical provider. Under these plans, you would have copays, deductibles and coinsurance to pay for the various services, as well as the opportunity to add benefits not found in Original Medicare, such as vision, dental and hearing. Medicare Advantage plans are a single plan that cover your Parts A, B and D benefits combined. These plans also will have an established maximum out-of-pocket limit.

Whichever option best meets your needs will be determined by how you seek out and utilize healthcare. Another determining factor is plan acceptance by your care providers. If a provider doesn’t participate in a plan, you could be responsible for 100% of the costs of care. Additionally, making sure your medications are on the plan’s formulary will impact your options. Lastly, the economics of the plans need to be considered. While some plans may have a low to zero premium, looking at deductibles, copays and out-of-pocket expenses can quickly turn a low premium option into a more expensive option. Selecting a plan solely because of premiums is not advised. Do your homework and look at all aspects and merits of the available plans.

How Can A Local Medicare Insurance Agent Help Me Compare My Medicare Plan Options?

Evaluating your Medicare plan options with a local Medicare insurance agent to discuss suitable alternatives to Original Medicare is often a great place to start. These Medicare agents are certified, knowledgeable and experienced with helping Medicare beneficiaries like you determine coverage options that suit their situation. Note that these licensed, local Medicare insurance agents who sell Medicare Supplements and Medicare Advantage plans are bound by strict rules and cannot guide or direct your plan choice, meaning they can offer you the plan information you seek without affecting your decision. With their assistance, you can learn more about the specific types of Medicare Advantage plans and Medicare Supplement plans available in your area, and weigh the pros and cons of options you’re interested in. Save time, explore your options with a trusted resource, and gain a better understanding of which plans are suited to your needs when you consult with a local Medicare insurance agent in your search for the right Medicare coverage.

Now that you have an understanding of what Medicare Supplement Insurance and Medicare Advantage plans offer, you may want to delve further into which option is right for you to receive the additional coverage you are seeking. It’s important to weigh your options carefully and sign up on time during an applicable enrollment period. Fortunately, one of our local Premier Insurance Network agents can help. If you have additional questions or want to learn more about changing your Medicare plan, contact us today for individual assistance.

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