The average Medicare beneficiary spends almost $5,000 out of pocket in medical costs each year. Medicare does not limit out-of-pocket expenses, however. This means some beneficiaries find themselves forced to spend far more.
These costs can be crushing for seniors on limited incomes. Supplemental and “gap” insurance policies can ease the burden.
But choosing gap coverage can be challenging. Policy choices abound, and parsing the differences between them can seem overwhelming. Here’s what you need to know about Medicare Advantage vs Medicare supplement plans and finding the one that’s right for you.
What Medicare Doesn’t Cover
Both Medicare Advantage and Medicare supplement policies are designed to help fill in the gaps left by traditional Medicare coverage. Among the things traditional or original Medicare does not cover are:
- Vision care
- Hearing care
- Dental care
- Foot care
- Long-term care facilities
- Care received outside the United States
- Deductibles and copays
Medicare beneficiaries can easily rack up crippling expenses in each of these categories of care.
Deductibles and Copays
Medicare pays for only about 80 percent of covered costs. The other 20 percent falls on beneficiaries through deductibles and copays. While this does not sound like a lot, the actual numbers can be surprising.
Take beneficiaries who are hospitalized or who spend time in skilled nursing facilities (SNF), for example. On average, each year:
- Beneficiaries hospitalized once pay $4,475 out of pocket
- Beneficiaries hospitalized more than once pay $6,216 out of pocket
- Beneficiaries discharged to SNF pay $9,508 out of pocket
- Beneficiaries moved to long-term care facilities pay $17,534 out of pocket
Between copays, deductibles, and new or specialty drugs not covered by Medicare, beneficiaries can pay up to $12,000 out of pocket each year for prescription medications.
Non-Essential Care
Classified as “non-essential care,” vision, hearing, and dental care services are not covered by Medicare. This means that beneficiaries must pay out of pocket for:
- Glasses and contacts
- Hearing aids
- Dentures
Seniors on limited incomes can be forced to go without needed services due to a lack of funds.
Other Costs
Seniors enjoying travel during their retirement who suffer a medical emergency while outside the United States can incur substantial bills. Medicare will not pay for any portion of those bills.
It is these and similar gaps in coverage that beneficiaries are typically looking to address when they purchase Medicare Advantage or Medigap plans.
Medicare Advantage Plans
Medicare Advantage plans may also be called Medicare Part C. Unlike traditional Medicare, these plans are sold and managed by private insurance providers and are not government-mediated.
By law, Advantage plans must cover all of the same services covered by Medicare Parts A and B. This includes hospital coverage and medical insurance.
In most cases, they also provide coverage for prescription drugs and a range of services not covered by traditional Medicare. These include:
- Long-term care
- Emergency care outside the United States
- Vision care
- Hearing care
- Dental care
Some Advantage plans also cover “extras” such as:
- Meal delivery services
- Transportation to and from medical appointments
- Gym memberships or weight loss programs
Beneficiaries pay more in monthly premiums for this coverage but can end up paying far less in out of pocket expenses.
Advantage Plan Structure
Advantage plans appeal to many Medicare enrollees because they are structured the same way as the private plans most Americans are familiar with. Beneficiaries can select plans that follow a variety of common models, including:
- Health Maintenance Organization (HMO)
- Private Fee-for-Service (PFFS)
- Preferred Provider Organization (PPO)
As with other private insurance plans, these models may:
- Involve copays and deductibles
- Require policyholders to use in-network providers or pay higher rates
- Have their own formularies that determine prescription drug coverage and costs
- Place limits on how much coverage is provided for out-of-country care
The primary benefits of Advantage plans for many enrollees are that they function in a familiar way and incorporate all coverage under a single policy. This can simplify billing and reduce the amount of time and energy policyholders spend dealing with medical expenses. It can also make it easier to budget and predict medical expenses from month to month.
Medigap Plans
What is a Medicare supplement plan? How does it differ from a Medicare Advantage plan?
Medicare supplement plans, also called Medigap plans, are an alternative to Medicare Advantage plans for beneficiaries who need help covering the gaps in traditional Medicare coverage. If you purchase a Medigap plan:
- You remain enrolled in traditional Medicare
- You pay monthly Medicare premiums and separate Medigap plan premiums
- Providers bill your medical care to Medicare Parts A, B, and D
- Your Medigap plan pays for some or all of your Medicare deductibles and copays
- Your Medigap plan pays for some emergency medical costs outside the United States
Medigap plans tend to cover less than Medicare Advantage plans. In most cases they do not cover:
- Skilled nursing facility or long-term care
- Dental, vision, or hearing care
- Other routine healthcare services not covered by traditional Medicare
Structure
Like Medicare Advantage plans, Medicare supplement plans are sold and managed by private insurance providers. Unlike Advantage plans, supplement plans bill beneficiaries separately.
Instead of paying a single monthly or yearly premium for all of their coverage, beneficiaries pay Medicare and Medigap premiums individually. They may need to submit claims to both programs in order to see their bills paid. This often means spending more time and energy managing their health care expenses.
Medicare Advantage VS Medicare Supplement Plans
When choosing between Medicare supplement vs Medicare Advantage plans, is it important to understand that neither type of plan is inherently better than the other. Each type of plan meets different needs. To choose the best plan, beneficiaries need to examine their personal needs and preferences.
This includes asking the following questions:
- Do you expect to travel outside the United States? If so, will you travel often?
- How many prescription medications do you take and what kind?
- Do you need hearing aids, glasses, or dentures?
- How much time and ability do you have to spend handling medical expenses and paperwork?
- What is your budget for health care?
- Have you needed or do you expect to need long-term or skilled nursing care?
Who Benefits Most From Medicare Advantage Plans?
Medicare Advantage plans tend to be most appropriate for individuals who:
- Need dental, vision, and hearing coverage
- Do not travel extensively
- Need long-term care coverage
- Prefer simplified and streamlined billing
- Are comfortable using in-network providers
- Take extensive prescription medications
Medicare supplement plans tend to be most appropriate for individuals who:
- Do not need additional coverage
- Are most concerned with getting help paying Medicare copays and deductibles
- Do not take extensive prescription medications
- Prefer to see out-of-network providers
- Travel regularly
- Are comfortable with more involved billing processes
Other Considerations
Comparing costs across policies is easier with Medigap plans than with Medicare Advantage policies. This is because Medigap plans are standardized within each state. Each category of plan is assigned to a letter between A and N.
Buyers can choose the category of plan offering the coverage they want. Then they can look at the prices for plans in that category across providers. This gives them a clean apples-to-apples view of pricing, making it easy to choose the most competitively priced plan.
Coverage across Medicare Advantage plans is not standardized. This makes it much more difficult to determine the best pricing and coverage for one’s needs. Beneficiaries need to invest much more time reviewing formularies, policies, networks, and other details to determine the best plan for their needs.
Choosing A Plan
For most buyers, the most simple and effective way to find the right plan is to use online tools such as those available at www.medicarewire.com and to speak to a qualified agent.
Online tools can help buyers quantify their needs through exact, easy-to-answer questions. Experienced agents can:
- Explain technical jargon or specialized Medicare vocabulary
- Help buyers identify the differences between plans
- Provide background information on industry and policy standards
- Help buyers find any discounts or extra benefits they may qualify for when policy shopping
- Assist buyers in making confident and informed decisions
Using professional tools and expertise can save buyers time and money. It can also take the stress out of the process for buyers and their families.
Learn More
Now that you have a solid grasp on the differences between Medicare Advantage vs Medicare supplement plans, learn more about how to make other informed decisions for your health. Check out the Health section of our blog for the latest in health news and information today.
