Medicare Advantage vs. Medicare Supplement

If you’re looking for more basics, check out our article on Medicare Plan Types. If you’ve begun research into Medicare Marketplace plans, you might have come across what seems to be a plan associated with every letter of the alphabet. You might already know that Original Medicare comprises Parts A & B, but what is Medicare Part N, or G+? And if you’ve gone down the rabbit hole of trying to understand them, you may have noticed that while they’re different from one another, they can also be similar in many ways; muddying the waters, and confusing people further. This can be stressful for folks first qualifying for Original Medicare since poor decision-making when it comes to healthcare can lead to costly mistakes. But, if you understand the major differences between the plans available in the Medicare Marketplace, they become less of a mystery.

For folks who don’t expect to receive retirement health benefits or TRICARE, they typically have to go into the Medicare Marketplace in addition to Original Medicare for two reasons:

  1. The Federal Government requires people on Medicare to enroll in some kind of Prescription Drug Coverage (A.K.A. Part D) when they initially qualify, or else they may incur a late enrollment penalty making their prescription coverage costs permanently higher. And unfortunately, it is a requirement that can only be fulfilled through plans in the open marketplace.
  2. Original Medicare (Parts A & B) doesn’t cover all of the costs associated with inpatient and outpatient care. There are deductibles and copays associated with the program that many individuals, (especially on fixed incomes,) might like extra coverage for.

Now if you’re one of these people, you have a choice between two general strategies: a Medicare Part C (otherwise known as a Medicare Advantage) plan, or a Medicare Supplement (Parts G, K, L, M, N, etc) plan working in coordination with a separate Part D (Prescription Drug) plan.

Medicare Advantage (Part C) Plans are usually low to $0 monthly premium, utilize doctor networks to keep costs down, and have copays at the point of service for doctor visits and testing. They’re designed to absorb some of the costs that fall through the cracks on Original Medicare and also fulfill the Part D prescription drug coverage requirement. You just have to continue paying your Part B premium (unless you’re also on Medicaid). These plans are great if you’re generally healthy, have generic prescription medications, and mainly just need your health coverage to handle the expenses of maintaining stable medical conditions. These plans are also available in certain zip codes to people on Medicaid in the form of D-SNP plans, which often come with over-the-counter benefits and extra goodies. But if, for instance, you are not on Medicaid, and expect to have elective surgeries or extensive medical testing or treatment for a complicated diagnosis, these plans might not be appropriate for you. The reason for this is that while the copays are reasonable, what saves money on a monthly basis for someone who doesn’t need much, can become a problem for someone very ill, and those copays at the point of service may start to add up. To paint a bigger picture, the Maximum-out-of-pocket in terms of copays can be in the tens of thousands of dollars, depending on the plan. While that’s an improvement from having no Maximum-out-of-pocket costs with Original Medicare, that’s still a great deal of money you could be responsible for paying.

Medicare Supplement Plans (G, K, L, M, N) work a little differently. They have more expensive monthly premiums (anywhere from approximately $80-$400/month) depending on what state you live in, and what kind of plan you’re looking at. They also do not utilize doctor networks. That means any doctor that accepts Medicare, accepts all types of Medicare Supplement Plans. This allows patients to be able to see doctors in different states if they so choose. The biggest difference between Supplement plans is the variations in costs absorbed by the plan, vs the monthly premium. Meaning, in plain English; the higher the monthly premium, the more the Medicare Supplement Plan covers, and the less your costs are in copays. These premium costs are in addition to your Part B premium, and your Part D (Prescription Drug) premium. So, this strategy can get pricey on a monthly basis when you factor all premium costs together, but the higher premiums pay for lower, yearly, maximum costs, and little to no copays at the point of service. These plans can be a great help to people who need the security of a lower ceiling on their maximum healthcare costs for the year, which might be you if you’re living with a serious illness or condition. They are also appropriate for certain healthy people as well, depending on what they value. Maybe you travel a lot to see family around the country and you need a plan that will travel with you, or maybe you want to have access to as many healthcare providers as possible without having to deal with the hassle of finding out with an insurance company, whether or not they are in-network. Long story short, the costs come back to you in the form of more freedom and latitude. So if you can afford them, they’re definitely an option worth considering.

As stated in our other article, The Best Medicare Advantage Plan, the same applies here, the right Medicare strategy takes into account your needs, and your state’s marketplace, and accommodates your doctors and prescriptions.

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