Medicare Advantage (Part C) plans are an alternative to original Medicare (Part A and Part B), while Medicare supplement insurance plans help fill gaps in original Medicare.
Both Medicare Advantage plans and Medicare supplement insurance, which is also called Medigap, are provided by private companies. However, a person cannot have both an Advantage plan and a Medigap plan.
This article examines the differences between Medicare Advantage and Medicare supplement insurance, plus coverage, enrollment options, and costs.
We may use a few terms in this piece that can be helpful to understand when selecting the best insurance plan:
- Deductible: This is an annual amount that a person must spend out of pocket within a certain time period before an insurer starts to fund their treatments.
- Coinsurance: This is a percentage of a treatment cost that a person will need to self-fund. For Medicare Part B, this comes to 20%.
- Copayment: This is a fixed dollar amount that an insured person pays when receiving certain treatments. For Medicare, this usually applies to prescription drugs.
A person has the choice of getting alternative healthcare plans through Medicare Advantage or adding coverage to their original Medicare plan through a Medigap plan.
Both types of plans are offered by private companies approved by Medicare, and a person must still pay the premium for Medicare Part B.
Medicare Advantage plans generally provide the same coverage as original Medicare, although they may have different premiums, and may cap out-of-pocket costs. Most plans include prescription drug coverage.
Medigap plans help pay some out-of-pocket costs including copays, deductibles, and coinsurance. Medigap plans do not include prescription drug coverage, which means a person may want to consider getting Medicare Part D.
A person with a Medicare Advantage plan will have the same coverage as provided through original Medicare parts A and B. They will also be covered for any sudden illness or emergency.
Generally, Medicare Advantage plans also provide coverage for services not covered by original Medicare, such as dental, hearing, and vision care. They may also provide coverage for wellness programs.
There are several Medicare Advantage plans. The four most common ones include:
- Health Maintenance Organizations (HMOs)
- Preferred Provider Organizations (PPOs)
- Private Fee-For-Service (PFFS)
- Special Needs Plans (SNPs)
A person can use this online tool to find Medicare Advantage plans in their area.
Before enrolling in a Medicare Advantage plan, a person may want to check the details of various plans in their area.
Enrollment can be done online or via a paper enrollment form. A person can also call the company offering the plan, or call Medicare at 1-800-633-4227. The company may ask for confirmation of the date when someone got original Medicare.
There are several enrollment periods when a person can get a Medicare Advantage plan.
Initial Enrollment Period
A person can get a Medicare Advantage plan during the 7-month Initial Enrollment Period for Medicare parts C and D, which is the 3 months before a person turns 65, the month of their birthday, and the following 3 months.
Advantage Open Enrollment Period
During the Medicare Advantage Open Enrollment Period from January 1 to March 31, a person with original Medicare can enroll in a Medicare (Part D) prescription drug plan. A person can also switch between Advantage plans, or drop an Advantage plan.
Medicare Open Enrollment Period
During October 15 to December 7, a person with original Medicare can change to a Medicare Advantage Plan. They can also switch between Advantage plans and join a Medicare (Part D) prescription drug plan.
Other enrollment periods
A person who has Medicare Part A and enrolled in Medicare Part B during the enrollment period of January 1 to March 31 can also enroll in a Medicare Advantage plan from April 1 to June 30.
A person may also enroll in a Medicare Advantage plan before they are 65 if they have a disability. They can enroll 24 months after getting Railroad Retirement Board (RRB) disability or Social Security benefits.
Medicare also has special enrollment periods when a person can make changes to their Medicare Advantage plan.
A person with Medicare Advantage has to pay the plan’s monthly premium and the Medicare Part B premium, which is $144.60 in 2020.
A person can check with their plan to find out the monthly premium and how much they will pay for copays, coinsurance, and deductibles.
Original Medicare pays for most, but not all the costs of health care services and supplies. A Medigap policy may help pay for the remaining gaps in costs including copays, coinsurance, and deductibles, but like Medicare Advantage insurance, Medigap has an out of pocket maximum. For 2020, the highest amount a provider can offer is $6700, but some plans may be lower.
There are 10 Medigap plans, standardized to offer the same benefits and coverage in each state in which the plans are offered. Each plan is identified by a letter: A, B, C, D, F, G K L, M, and N. For example, Plan K in New York state will offer the same coverage as Plan K in Wyoming.
The plans offer various percentages of coverage, although they all cover 100% of Part A hospital and coinsurance costs for 365 days after the end of Medicare benefits. Two plans have out-of-pocket limits for 2020: Plan K’s limit is $5880, and the limit provided by Plan L is $2940.
Medigap plans are not allowed, since January 2020, to cover the Medicare Part B deductible. Therefore, someone who is new to Medicare cannot get plans C and F, although a person who already has the plans may keep them. However, if a person is not yet enrolled in Medicare, but was eligible to do so before January 1, 2020, they may be able to get Plan C or Plan F.
This online tool can help a person find Medigap plans in their area.
Before a person can get a Medigap plan, they must be enrolled in Medicare Part B.
A person can get a Medigap plan during the Open Enrollment Period, which lasts for 6 months from the month a person turns 65. During this period, a person can get a Medigap plan at the same price as a person with good health.
However, if they wait to enroll, they may not be able to buy a policy, because a company can then use medical underwriting to decide whether or not to sell the policy, and at what premium.
Medical underwriting helps a company decide the risk involved in providing the policy. It is based on age, lifestyle, health conditions, and other factors.
Guaranteed issue rights
Guaranteed issue rights, also known as Medigap protection, means a person cannot be refused a policy if their other health coverage changes.
In some states, companies offer Medicare SELECT policies. A person with a SELECT policy must use in-network providers, but their premiums may be lower.
Medigap premiums are paid to the private company offering the plan, but a person will also pay the premiums for original Medicare.
The premiums vary because companies can set the amount. However, there are three limitations on the way the price is set, which affects how much a premium costs for as long as a person has the plan.
The limits are:
- An attained age-related policy means a person will pay more as they get older.
- When a person gets a policy based on a community-related limitation, the premium is fixed and is not affected by a person’s age. The only time a premium may change is due to inflation or similar reasons.
- The price of an issue-age-related plan is based on how old the person buying the policy is, and it cannot be increased based on a person’s age.
Some plans may offer discounts for healthful living, or for online payments. In general, all such details are decided by the company offering the plan.
In addition, Medicare SELECT policies offer reduced premiums, but people must use in-network providers.
Medigap supplement insurance plans are designed to supplement a person’s original Medicare benefits, while Medicare Advantage plans offer all-in-one alternative coverage to original Medicare.
A person can not have both plans at the same time.