Medicare Advantage Versus Medicare Supplement

Medicare Advantage Versus Medicare Supplement

Loren Bailey

by Loren Bailey

Senior Wealth Manager

It’s here again! October 15th is the beginning of the Annual Enrollment Period (AEP) for Medicare. But what is Medicare anyway? There is much confusion around the topic, particularly between Medicare Advantage and Medicare Supplement. Generally speaking, Medicare is our national health insurance program in the United States. It began in 1966 under the Social Security Administration (SSA) and is administered by the Centers for Medicare and Medicaid Services (CMS). It provides health insurance for Americans aged 65 and older in addition to younger people with a disability status, as determined by the SSA. Understanding is essential because even if you don’t understand Medicare, it still costs you money. During your working years, money comes out of every paycheck. As a portion of your Social Security tax, a mandatory 1.45% of your yearly income is taken for Medicare. Additionally, your employer matches your contributions so that the total amount paid is 2.9% of your annual income. If your income is over a certain amount ($200,000 if you file single; $250,000 if you are married and filing joint for the year 2021), an extra 0.9% is taken.

Medicare is divided into parts A, B, C, and D. Part A covers when you need hospital care and are formally admitted. It also covers skilled nursing (after being formally admitted to a hospital for three days), and hospice services. Part B covers outpatient services, including preventative care, outpatient hospital charges, most doctor’s office visits (even if the office is “in a hospital”), and most professionally administered prescription drugs. Part D, known as the Drug Plan, is for self-administered prescription drugs. Part C is an alternative called Managed Medicare or Medicare Advantage.

Even when you retire and receive Medicare, it’s still not free for most people. The costs of Parts B and D depend on your income. The standard monthly premium for most people is currently $148.50. If you look this up in, you will see an income chart for the current year. Also included on the website is what each part covers. Upon further examination, it becomes obvious that Part B ends up taking much more of the responsibility in life issues because it addresses care payment outside of the hospital. Most of us need this just for regular health maintenance. As a result, Part B is very important! However, if you review the features and benefits, you will probably find that it is woefully inadequate. You walk away with feeling “I still need more coverage.” Luckily, there are two options to get additional coverage: the Medicare Supplement option or the Medicare Advantage option. The two choices are briefly summed up in the diagram below:

medicare supplement vs advantage

Medicare Supplement

Medicare Supplement plans are also called Medigap plans because they fill in the gaps that are lacking in Part B coverage. The plans are lettered A through N, with each plan offering varying amounts of coverage. Although they are sold by private insurers, the plans are the same no matter where they are purchased. The plans have no network of physicians and any doctor that accepts Medicare can be used. Of the plans, the more robust C and F can only be purchased by those who were eligible for Medicare before January 1, 2020. Information on them and what they offer can be accessed on, or on the AARP, Social Security, or private insurer websites. A chart offering a brief overview is shown below:

A few key points of the plan are that:

  • The plans have no network of physicians and any doctor that accepts Medicare can be used.
  • Part D is not included and a separate, independent drug plan must also be purchased.
  • The plans usually do not include eyewear, vision, or dental plans.
  • Because the plans cover more in copays and deductibles, the premiums are usually more costly than Medicare plans.

Medicare Advantage

The other option is Medicare Advantage, also known as Part C. These plans are called “all-in-one” plans because they include Part B and Part D (the drug plan). These plans are also purchased through private insurers and, unlike supplement plans, there are thousands of different plans available. The private insurers create these plans, so the benefits and features of coverage vary widely. In addition, there are a few other key points to consider:

  • Physicians are usually in a network or HMO, although PPO options are available as well.
  • The premiums and cost of each plan are mostly determined by the insurance provider.
  • Because the plans are less comprehensive than most supplemental plans, they are usually the least expensive option.

When deciding on which Medicare Advantage plan would be best, your first task is to make sure that your current physician is in the HMO of the choice being considered. This will determine whether you will need an HMO or a PPO plan. (Hint: the PPO plans can be more expensive).


Part C or Medigap?

Deciding between the two options often boils down to benefits versus cost. For example, if you need more flexibility in services and physicians (working/living internationally, access to physicians with no network, etc.), the supplemental route is best. The saying “you get what you pay for” rings true here, as you will get greater and often more flexible coverage with an increased cost. If expense is more of an issue, or if your needs are a bit simpler, the Part C option may be your best bet. Because we partner with United Healthcare, we can help answer questions and clarify the intricacies of Medicare. We can guide you through the maze of information and assist with the choices. Contact us and we can help you find the right solution!