Medicare Advantage vs. Medicare Supplement: Which Is Right For You?

Updated for November, 2021

Key Takeaways:
  • Original Medicare (also known as Medicare Parts A and B) only pays for about 80% of approved costs. It doesn’t pay for extras, such as prescription drugs or dental care.
  • Medicare recipients have two options to help with additional coverage: Medicare Advantage and Medicare Supplement insurance.
  • Medicare Advantage replaces Original Medicare and often includes additional coverage benefits, such as covering prescription drugs, eye care, routine vision and hearing services.
  • Medicare supplemental insurance works alongside Original Medicare to fill gaps in coverage.
  • When comparing options, it is important to consider premiums, out-of-pocket costs, network and provider availability, referrals, prescription drug needs and other extra services you may require.

Original Medicare (Parts A and B) provide good basic health care coverage, paying for about 80 percent of approved hospital care, doctor visits and medical procedures. Depending on your health care needs, however, this may not be enough.

Know your budget

For this reason, both Medicare Advantage and Medicare Supplemental insurance offer tools to enhance your plan coverage. But you are only able to choose one. Deciding between the two can be one of the most difficult decisions to make regarding your Medicare coverage. Start by comparing the pros and cons of each option, which will help you figure out which one fits best fits the needs of your health and your wallet.

Extra benefits may be included in Medicare Advantage plans, such as hearing, vision, dental and prescription drug coverage.

What is Medicare Advantage?

Also known as Medicare Part C, Medicare Advantage is offered by a host of private insurance companies. Medicare Advantage plans cover everything that is covered by Original Medicare, including:

  • Inpatient hospital services
  • Outpatient care, including doctor visits, lab work, and same-day surgeries
  • Skilled nursing services

Extra benefits may be included in Medicare Advantage plans, such as hearing, vision, dental and prescription drug coverage.

Medicare Advantage plans operate similarly to private health insurance plans. Monthly premiums, copays, and coinsurance can vary depending on the insurance company and specific level of coverage.

What is Medicare Supplement?

Medicare Supplement insurance, or Medigap, allows you to receive private health insurance benefits beyond those federally regulated by Medicare plans. They also provide Medicare beneficiaries with fewer out-of-pocket costs.

Medicare Supplement policies are also offered by private insurance companies. Most states offer 10 separate plans, each designated by a different letter (A, B, C, D, F, G, K, L, M and N). All Medigap plans are required to offer standardized, basic benefits, which include some — if not all — of the following:

  • Medicare Part A hospice care copayments and coinsurance
  • Medicare Part B copayments and coinsurance
  • Costs of initial 3 pints of blood used for medical procedures

They also allow you to see any provider who accepts Medicare insurance without a referral.

Unlike Medicare Advantage, Medigap plans are not standalone policies. This means that you still need to be enrolled in Original Medicare to have proper coverage. Also, if you need prescription drugs, you will also want to enroll in a Medicare Part D plan.

Unlike Medicare Advantage, Medicare Supplement plans are not standalone policies.

Medicare Supplement vs. Medicare Advantage: A Comparison

When deciding what options are best for your needs, it can help to look at the overall, big picture. Below is a side-by-side comparison to illustrating what is offered by each type of plan:

Medicare Supplement Medicare Advantage
Premiums You pay a monthly plan premium plus Part B premiums Some plans may not charge a premium, but you still must pay a premium for Part B.
Out-of-pocket costs Plans may cover all or part of your deductibles, copayments and coinsurance. There is no annual cap for out-of-pocket costs. You will pay copayments and coinsurance, but the amount varies according to your plan. Annual out-of-pocket costs are capped after a certain amount.
Network No network restrictions. Services are available at hospitals and clinics across the United States. You may have network restrictions for care. Emergency services may be offered in the US and abroad.
Provider availability You may receive care from any doctor or provider who accepts Medicare insurance. Your choices may be limited to in-network providers, which vary according to plan.
Referrals No referral is needed to see specialists as long as they accept patients with Medicare. Referrals to specialists may be needed and they may have to be in-network, depending on your plan.
Prescription drug coverage No prescription drug coverage is offered. You do have the option to add a Part D prescription plan. Most plans include coverage for prescription drugs, but exact coverage may vary.
Extra benefits Medigap policies only include the standardized, basic benefits. Plans offer a variety of additional perks, which may include hearing, vision and dental coverage.

Next Steps In Deciding Which Plan To Enroll In

There are several other factors to consider when determining the best Medicare option for you. These include your financial situation, lifestyle, and the current and future condition of your health. The bottom line is that your Medicare choices are based on you as an individual. Once you have the proper information and resources, only you can decide what is the best option for your specific health care needs.