Medicare health coverage is comprehensive and offers many mMedicare plans to choose from. If you require a lot of care, however, it can leave you with substantial out-of-pocket costs. One way to avoid that is to have a supplemental insurance plan. It can help offset the expenses Medicare doesn’t cover.
Choosing a plan that’s right for you may not always be easy. Here are some guidelines that will help in your decision-making process:
- Roughly one-third of those with Medicare have supplemental insurance from a former employer. If you are fortunate enough to have this type of coverage, it may be your best option. But be very careful if you do decide to drop it or switch plans, because you might not be able to get it back.
- Low income individuals may qualify for their state’s Medicaid program (and other related programs) that help cover Medicare premiums and prescription drug costs.
- Those who don’t fall into these categories might want to consider a private Medicare Supplement Insurance Plan (also known as “Medigap”) or a Medicare Advantage Plan. Both options have advantages and disadvantages so it is important to research them before choosing one or opting to change your current coverage.
Choosing between your options: Medicare Supplements vs. Medicare Advantage
Medigap Plans work with Original Medicare and pay whatever costs remain after Medicare has paid its share. Depending on the plan, some of Medicare’s deductibles and coinsurance costs may be paid for. Medigap Plans will not pay for items or services not covered by Medicare. For example, Medigap Plans don’t cover prescription drugs, so those with Original Medicare and a Medigap Plan should also enroll in a Medicare Advantage Prescription Drug Plan.
Medigap Plans are sold by private insurance companies. These plans come in several different categories, each one designated by a letter (e.g., Medigap Plan F). Plans with the same letter offer the same benefits, making it easy to compare plans from different insurers. These plans must also follow state and federal rules.
Medicare Advantage Plans differ from Medigap Plans. Advantage Plans are operated by private insurers who contract with Medicare to provide all its benefits. Many include prescription drug coverage. Some Medicare Advantage plans offer services not covered by Traditional Medicare. These plans usually have provider networks that restrict which doctors and hospitals you can use.
Medicare Advantage Plans also have different rules regarding out-of-pocket expenses compared to Traditional Medicare. For example, a Medicare Advantage Plan may have a lower copayment for office visits. There are times, however, when you may pay more for a service with a Medicare Advantage Plan versus Traditional Medicare.
Medicare Advantage vs. Medicare Supplement Chart
|Questions||Medicare Advantage||Medicare Supplement|
|How are the plans funded?||Medicare will pay your insurance company a fixed amount based on average healthcare costs for your region. You may also be required to pay a premium based on your location and insurance company.||Your monthly premium takes care of the majority of your expenses.|
|Do I continue paying for Part B?||Yes||Yes|
|What does it cost me?||Some plans offer a zero-dollar premium (because the government subsidy covers the full cost). Other plans may cost up to 0-0 monthly.||While each plan does require a monthly premium, many of them are affordably priced.|
|What does the plan cover?||Depending on your plan, it will cover at least the same benefits offered by Medicare parts A & B. Possibly other benefits; but the more benefits you sign up for, the higher your out-of-pocket expenses may be.||All eligible expenses are split between Medicare, and your Medicare Supplement plan. If you have a comprehensive plan, such as Plan F, 100% of eligible expenses not covered by Medicare will be covered by your supplement insurance.|
|Can I budget my health care expenses?||It’s challenging; the more often you require medical care, the more often you may be required to pay out-of-pocket.||Budgeting is much easier with a Medicare supplement. You have fewer out-of-pocket expenses, and one simple monthly premium.|
|Can my plan be cancelled?||Yes. Unfortunately, your health insurance company has the legal right to review their Medicare Advantage services annually and decide whether or not they wish to continue providing coverage.||No – not unless you fail to pay your monthly premium, or your insurance company goes bankrupt. Only under such extenuating circumstances could your plan be cancelled.|
|Are pre-approvals or pre-certifications required?||Unfortunately, yes. These Plans usually require pre-certification or other qualification for some specific types of care.||No pre-approvals are required. If you qualify for Medicare, you will qualify for a Medicare supplement plan.|
|Can I use any doctor or hospital?||Usually, you choose from a network of pre-approved providers. These networks can fluctuate over time.||Yes. You are free to choose any doctor and/or hospital in the U.S. which accepts Medicare.|
|Can drug, vision, or dental coverage be included in the policy?||Yes.||No. These forms of coverage must be purchased separately.|
|Who is this plan type generally best suited for?||If you are relatively young, healthy, live in an urban area, and have a limited income, a Medicare Advantage plan could work for you.||If you live in a rural area without easy access to provider networks, if you like to budget your finances, or if you want comprehensive coverage, you might prefer a Medicare supplement plan.|
No one insurance is right for everyone. Here are some factors to consider:
- Medicare Advantage premiums may be more affordable than Medigap’s.
- Medigap may offer better protection against high out-of-pocket costs (deductibles, copayments and coinsurance) than Medicare Advantage.
- Medicare Advantage Plans may offer extra services not covered by Original Medicare.
- Medicare Advantage Plans can change which services are covered annually.
- Medigap Plans typically don’t change what they cover – but they can, and do, raise premiums.
- Medicare Advantage may limit your choice of doctors to a particular network. You also may be required to get a referral from your primary care doctor to see a specialist. That is not the case with Medigap.
- In many states, Medigap premiums can increase as you age. In addition, if you decide to drop your Medigap Plan, you may have to pay a much higher premium to get it back, if you can get it back at all. So exercise caution when changing your Medigap coverage.
- Medicare Advantage eligible individuals may enroll or disenroll from a Medicare Advantage plan during Medicare’s Annual Open Enrollment Period (October 15 to December 7). Once you select a Medicare Advantage Plan, you must stay with it for one year unless you qualify for a special enrollment period.
- Sign-up periods for Medigap Plans vary from state to state.
Anyone with Medicare can get help from a local counselor through their State Health Insurance Assistance Program (SHIP). Call 1-800-MEDICARE and ask for a referral to your local SHIP or go to www.MyMedicare.gov.
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