Medicare Supplement vs. Medicare Advantage – The Insider’s Guide

Medicare Supplement If you are turning 65 or older, you have probably asked one of these questions without getting a good answer:

  • What is the difference between a Medicare Supplement vs. Medicare Advantage?
  • What is the difference between Medicare and Medicare Advantage?
  • How do I compare Medicare Advantage Plans?
  • Do I really need to enroll in anything besides “regular” Medicare?
  • Why is all the information I read about Medicare so confusing?

These are all good questions, especially the last one, and there is really no easy or simple way to get all this information together…until now.


…we will simply and clearly outline below the difference between Medicare and Medicare Advantage as well as compare and contrast Medicare Supplements and Medicare Advantage Plans.

First, What You Need to Know About Medicare

Medicare is the federal health insurance program for people who are 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a transplant, sometimes called ESRD).

Original Medicare consists of Part A and Part B.

When you turn 65 and if you decide to retire from your work, you will most likely be enrolled automatically in Medicare part A, and you will sign up for Part B. In general,

  • Medicare Part A Covers inpatient hospital care, skilled nursing facility care, some home health care and hospice care.
  • Medicare Part B covers doctors’ charges, outpatient services and surgeries, ambulance, and durable medical equipment.

Medicare Out-of-Pocket Costs

Medicare pays for most but not all of the benefits of Part A and B.

You will generally not pay any monthly premium for Part A, and you will pay a monthly premium of $134 (2017), or higher with higher incomes, for Part B.

You will pay a deductible of $1316 (in 2017) for each benefit period for Part A benefits (usually a hospital stay) as well as significant copays for a skilled nursing facility stay of more than 21 days.

Medicare will generally pay for about 80% of Part B approved benefits. You will be responsible for paying the remaining 20%.

Because these out-of-pocket expenses can be significant, many people opt to buy supplemental insurance, or enroll in a plan that reduces these out-of-pocket expenses.

We will explore these options below.

Medicare Supplements vs. Medicare Advantage

In most parts of the U.S., there are only two options available if you want to reduce your Medicare out-of-pocket expenses.

You may either buy a Medicare Supplement Policy (Medigap) or enroll in a Medicare Advantage Plan.

Below is a very useful chart that outlines these Medigap vs. Medicare Advantage options:


Medicare Options Chart

Medicare Supplements (Medigap) – Option 1

A Medicare supplement plan is an insurance policy designed to supplement Medicare.

With a Medigap policy, Medicare will pay its share of the Medicare-approved amount for covered health care costs. Then your Medigap policy pays its share. The Amount of the out-of-pocket expenses that it pays depends on which of the 10 standardized plans you choose.

The richest of these plans (Plan F) pays 100% of the deductibles, copays, and coinsurance associated with your Medicare Part A and Part B approved expenses.

You can choose any doctor, hospital or other health care provider that accepts Medicare.

Since Medicare A and B do not cover most prescription drugs, you would most likely enroll in a Prescription Drug Plan (Medicare Part D) as well.  Medicare Part D is a government program and the plans are offered by private insurance companies.

Acceptance is guaranteed if you apply when you turn 65.

Medicare Supplement Monthly Cost

The monthly premium of a Medigap policy  will vary with your region, plan choice, age, and sometimes tobacco usage. The monthly premium for prescription drug plans varies based on the region and plan options.

As a rough example,  the monthly premiums in the San Francisco area for a Medigap policy and Prescription Drug Plan combined ranges from a low of about $117 per month to a high of about $250 per month for someone age 65.

Medicare Advantage – Option 2

If you choose option 2, you would “leave” Medicare A and B and enroll in a Medicare Advantage Plan, also known as Medicare Part C.

A Medicare Advantage Plan is a government program offered by a private company that contracts with Medicare to provide you with all your Part A and Part B benefits.

If you’re enrolled in a Medicare Advantage Plan, Medicare services are covered through the plan and aren’t paid for under Original Medicare they are paid by the private insurance company that offers the plan.  Most Medicare Advantage Plans offer prescription drug coverage.

Many Medicare Advantage Phlans offer extra coverage such as vision, hearing, dental and /or health and wellness programs.

It is important to know that Medicare Part C is managed care option. Most plans use the HMO model

This means that you must use a doctor in the network of the company that you choose.

You must live in the service area where the plan is offered as well, and, except for emergency care, you must receive care in the coverage area.

Most of the Medicare Part C plans include prescription drug coverage (Medicare Part D) at no extra cost.

It is important to note that when you compare Medicare Advantage Plans, you must carefully examine the plan’s provider network and drug formulary (List of drugs that the plan covers).

Medicare Advantage Monthly Cost

The monthly premium for most Medicare Part C Plans ranges from a low of $0 to about $179.00 depending on your plan area, and the company you choose. Rates are not based on age or health status.

You will still have to pay some deductibles, co-pays and coinsurance.  With most plans, though, your out-of- pocket cost will be less than with Medicare Part A and Part B alone, and most plans offer a maximum out-of-pocket dollar amount, after which, the insurance company would pay any additional expenses.

Medigap vs. Medicare Advantage – The Bottom Line

So, what can you take away from this Medicare supplement vs. Medicare Advantage Plans “Insider’s Guide”?

There are several points you should take away that will make your Medicare decision (and your life) a lot easier.

  1. With a Medicare supplement plan, you can see any doctor that accepts Medicare (in an Advantage Plan you must use a doctor in the network). If you always want to keep that option open or you are seeing a doctor you really must keep that is not in the Advantage Plan network, then a Medigap is the clear choice for you.
  2. If you travel extensively, or live a significant part of the year in another state, you will probably be better off with a Medicare Supplement plan.
  3. A Medicare Advantage Plan is generally much cheaper, so if cost is your only criteria, an Advantage Plan makes more sense for you
  4. If you are healthy, don’t need to see the doctor that much, and you are ok with the doctor network, then a Medicare Advantage Plan would be just fine
  5. If you currently have significant health issues your out-of-pocket expenses, and most likely your total costs would be less with a Medicare Supplement plan.


If you would like a very effective process to compare Medicare Advantage Plans in your area, or have questions about Medicare Supplements or prescription drug plans,you can reach us at 415-999-5071 or drop us a line.






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