How Medicare Advantage Works
Medicare Advantage is an alternative to Original Medicare that coordinates your regular healthcare to lower out-of-pocket costs and provide some extra benefits.
Advantage plans rely on a network of healthcare providers. The plan will implement your coverage with various doctor’s offices and services, with lowered costs when you receive care from them.
There are 4 different categories of Advantage plans. Because plans are offered privately, not all providers have all 4, and they will look different across the board. These plans are:
- Health Maintenance Organization (HMO)
- Preferred Provider Organization (PPO)
- Private-Fee-For-Service (PFFS)
- Special Needs Plans (SNPs, including Dual-Eligible Special Needs and Chronic Special Needs Plans)
How Medicare Supplements Work
While Medicare Advantage replaces your Original Medicare plan and restructures the way in which you receive care, Medicare supplements (Medigap) adds additional coverage to your Original Medicare plan.
There are 10 different types of supplement plans—A, B, C, D, F, G, K, L, M, and N. Each of these options provides different amounts of coverage at different price points. For example, the highest coverage plan F covers:
- Part A Coinsurance & Hospital Costs
- Part B Coinsurance or Copayment
- First 3 Pints of Blood for Transfusions
- Part A Hospice Care Coinsurance/Copayment
- Part A Deductible
- Part B Deductible
- Skilled Nursing Care Facility Coinsurance
- Part B Excess Charges
- 80% of Foreign Travel Emergency Care
On the other hand, one of the lower-coverage options, plan A, includes:
- Part A Coinsurance & Hospital Costs
- Part B Coinsurance or Copayment
- First 3 Pints of Blood for Transfusions
- Part A Hospice Care Coinsurance or Copayment
Which Plan is Better?
As you can see, these plans are structured and function very differently. The best way to understand the differences between them, then, is to look at the out-of-pocket costs they reduce.
Medicare Advantage lowers the cost of care you receive through Original Medicare. Say, for example, you go to the doctor for a regular checkup. If you go to a healthcare provider within your plan’s network, it will cover those out-of-pocket costs you would otherwise pay with Original Medicare alone.
Most Advantage plans also include prescription drug coverage, and you can add a Part D plan if not. With a supplement plan, however, you cannot have a Part D plan, making it unrealistic for many Medicare beneficiaries.
However, supplements provide a lot of beneficial coverage. You will likely have significantly less overall costs than you would with an Advantage plan.
Say that you are going to the doctor’s again, but this time with a plan A supplement. Rather than reducing the cost based on whether or not it’s in-network, your coinsurance/copayment is covered. In other words, it simply covers some or all of the cost rather than reducing or eliminating it beforehand.
The Bottom Line
Both Medicare Advantage and supplements are excellent options for Medicare beneficiaries. No matter what, with either plan, your costs will be greatly reduced. More often than not, then, your decision is based on your personal choice, but also eligibility.
You may not be eligible for a supplement plan if you did not enroll during the 6 months following your 65th birthday. You can, however, enroll in an Advantage plan during the annual General Enrollment Period (GEP).