Medicare Advantage vs Medicare Supplement

What is a Medicare Advantage Plan? What is a Medicare Supplement Plan?
When started in 1965, Medicare consisted of two parts: A and B. Part A covered hospital bills, and Part B covered outpatient medical services. Private insurance companies started Medicare Supplement plans to cover what Medicare didn’t, mostly the 20% of Part B expenses that Medicare beneficiaries had to pay themselves.

Part C, Medicare Advantage, was passed in 1997; the name was changed to Medicare Advantage in 2003. Part C is an attempt to make Medicare more flexible, more responsive to patients, and cheaper, although it has turned out to cost more. For patients, perhaps the biggest difference between Original Medicare and Medicare Advantage is that Medicare Advantage plans have an out-of-pocket limit and Original Medicare (Parts A and B) does not.

Because of the way Congress funds Medicare Advantage plans, it is possible for them to offer benefits that Original Medicare does not. If a plan is coming in below what average projected cost for a Medicare beneficiary in its service area, it can use the savings to offer additional benefits such as eyeglasses, dental services, gym memberships, hearing aids, premium reductions, extra drug benefits, and the like.

Medicare Supplement plans, in contrast, offer only extra payments towards what Medicare already covers. Medicare Supplement plans do not have out-of-pocket limits.

Cost Comparison

Both Medicare Advantage and Medicare Supplement plans vary widely in cost, depending on exactly what they cover and their service area. The average Medicare Advantage premium in 2021 is $25 per month, although some have a zero premium and others have premiums over $100. The average premium for a Medicare supplemental plan in 2021 is $134 – $205, with higher premiums for older ages.

Part B Premium Refunds

All Medicare Advantage plans require beneficiaries to have enrolled in Medicare Part B before they enroll in the plan. Some of them refund all or part of the Part B premium to their members.

Choice of Providers

Virtually all Medicare Advantage plans have “panels” of providers whom their beneficiaries are required or encouraged to use. Those that are organized on an open panel model allow members to use any provider who contracts with the plan. Those organized as a Preferred Provider Organization (PPO) let members use any provider but do not limit what non-preferred providers can charge. Those that are organized on a Health Maintenance Organization (HM) model will not pay for providers outside their panel.

If keeping your doctor is a concern to you, make sure that they are part of the panel of the Medicare Advantage plan you are considering.

Medicare Supplement plans, in contrast, never limit choice of providers.

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