While Medicare covers much of your healthcare expenses, it doesn’t cover everything. Medicare beneficiaries are responsible for a number of copayments and deductibles, which can easily add up to thousands of dollars. If all you have is Original Medicare, you’ll need to pay these costs out-of-pocket.
As a result, many Americans buy additional private insurance to cover these gaps in coverage. There are two main categories of private insurance on the market: Medicare Advantage and Medicare Supplement plans. While these programs offer similar health benefits, they also have some significant differences to consider.
Medicare Advantage vs. Medicare Supplement Program Designs
Medicare Advantage and Medicare Supplement plans have different program designs. When you buy a Medicare Supplement plan, you are still enrolled in Original Medicare. Medicare pays its allowable portion of your healthcare bills while the private insurance covers the extra copayments and deductibles that are not covered.
When you enroll in a Medicare Advantage plan, you move completely into a private health insurance plan. That means your insurance company covers your healthcare bills according to the benefits outlined in the specific plan. Insurance companies must provide the same level of coverage as Original Medicare with their Medicare Advantage plans, with the exception of hospice care, which is covered under Original Medicare.
Medicare Supplement Benefits
As of 2016, there are 10 Medicare Supplement plans that are labeled by a letter, like Plan A or F. These plans are standardized across all insurance companies. This mean you’ll get the exact same benefits buying a Plan F from any company. However, the amount you’ll pay per month in premiums will be different depending on which company you choose.
These plans only cover the copayments and deductibles from Medicare. Typically you will have little to no out-of-pocket expenses for Medicare covered services; this depends on which Plan letter you choose. If you don’t already have creditable prescription drug coverage, you’ll need to buy a separate stand-alone Medicare Part D Prescription Drug Plan to cover the costs of your medications. Also, Medicare Supplement plans don’t offer extra benefits like dental, vision or hearing coverage beyond the basics already provided by Medicare.
Medicare Advantage Benefits
Private insurance companies have more flexibility in designing Medicare Advantage plans, so you’ll find more differences between plans. Plan premiums, co-pays, deductibles and coinsurance vary. This is why carefully comparing options to make sure nothing is overlooked is important.Many of these plans also include your Part D prescription drug coverage as part of your coverage, which means that you will not need to buy an additional Part D insurance policy. There are also plans that offer extra vision, hearing and dental coverage.
Medicare Supplement plans are accepted by any medical provider that accepts Medicare. Medicare Advantage plans tend to have more restricted networks. Some Medicare Advantage plans use an HMO network, meaning you can only see providers in your insurance company’s network. Other plans may use PPO networks, meaning you can see out-of-network providers if you pay an extra fee.
To make an informed decision, you should consider both your Medicare Supplement and Medicare Advantage insurance options to find the program that fits your needs.