For most people turning 65 or older and leaving the workforce means it’s time to enroll in Medicare. In this blog we’ll take a closer look at Medicare Supplement and Medicare Advantage plans.
Medicare Supplement and Medicare Advantage
For most people turning 65, it’s time to choose a Medicare supplement (Medigap) or Medicare Advantage policy.
Both of these options are private insurance solutions that serve a very similar purpose: To help you cover the cost of healthcare in retirement.
But each of these options takes a very different approach to providing that coverage.
Each has advantages and disadvantages.
But which one is best?
The answer, as usual, depends on your individual needs, budget, and circumstances.
In this comprehensive guide, let’s break down the pros and cons of Medigap and Medicare Advantage.
We’ll also discuss a lesser known third option – a non-insurance-based health sharing alternative to Medigap coverage called Medi-Share 65+. And in the process, we’ll help you decide which of these options best fits your needs.
What Are Medicare Advantage and Medicare Supplement Plans?
Before we dive into the specifics, let’s clarify what these two types of plans are:
- Medicare Supplement (Medigap): These are standardized insurance policies offered by private insurance companies, work in conjunction with Original Medicare to help cover costs like co-payments, co-insurance, and deductibles.
If you choose Medigap, you will remain in Original Medicare, which consists of Medicare Part A (hospital insurance) and Part B (physicians’ charges, lab fees, durable medical equipment, etc.)Both of these parts of Medicare have deductibles and coinsurance. When you have a Medigap policy, your policy will help you pay some or all of your coinsurance and deductibles under Medicare Parts A and B.
- Medicare Advantage (Part C): These are all-in-one alternatives to Original Medicare, also offered by Medicare-approved private insurance carriers. They cover Parts A, Part B, , and usually Medicare Part D (Prescription Drugs).
If you choose Medicare Advantage, you are no longer directly in Original Medicare. Instead, you effectively opt to access your Medicare benefits via a managed care plan through Medicare Part C.
You Don’t Need Both
You don’t need to enroll in both Medicare Supplement and Medicare Advantage. It’s one or the other. In fact, it’s illegal for an insurance agent to try to sell you both plans at the same time.
The only time you should be enrolled in both is when you’re switching from one plan to another, and you intend to immediately drop your old plan as soon as your new one becomes effective.
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Medicare Advantage (Part C): Advantages and Disadvantages
Advantages of Medicare Advantage
- All-in-One Coverage: Most Medicare Advantage plans offer hospital, medical, and prescription drug coverage all under one roof, making it a one-stop-shop for all your healthcare needs. In contrast, Medigap plans do not include prescription drug coverage. You would have to buy a separate Medicare Part D policy to cover your prescription drugs. This would require an additional monthly premium.
- Special Needs Plans. Under Medicare Advantage, you can opt for a Special Needs Plan, or SNP. These are tailored plans designed for individuals with specific needs, such as chronic health conditions, institutional care needs, or dual eligibility for both Medicare and Medicaid. Medigap does not have Special Needs Plans or any rough equivalent.
- Broader Range of Benefits: Medicare Advantage plans often include perks not covered by Original Medicare, like vision, dental, and hearing coverage, and even gym memberships in some cases. Some Medicare Advantage plans also include supplemental benefits like personal assistance, meal assistance, non-medical transportation, home accessibility modifications, and other benefits. Medicare Advantage carriers are continuing to innovate, coming up with new benefits to differentiate themselves from competing plans. Medigap plans, in contrast, are much more standardized, with little room for innovation.
- Cost-Savings: Most Medicare Advantage plans offer lower monthly premiums compared to the combined costs of Original Medicare and a Medigap plan. Many Medicare Advantage plans are available with zero premium, depending on your location.
- Out-of-Pocket Maximum: Medicare Advantage plans have an out-of-pocket maximum, which can protect you from hefty medical bills in case of a serious health event.
- Medicare MSA plans. These are a tax-advantaged way for you to accumulate cash to pay tax-free for healthcare in retirement. MSAs are similar to health savings accounts, except they are only available via a Medicare Advantage plan, and your Medicare Advantage plan funds the accounts, not you. You can use your MSA assets with any provider. You aren’t limited to your plan’s network. An additional benefit of MSAs is that they give you a tax-advantaged way to pay premiums for long-term care insurance.
Disadvantages of Medicare Advantage
- Limited Networks: Medicare Advantage plans are managed care plans – HMOs and PPOs that often have a restricted network of healthcare providers you can visit at the in-network cost.
- Restrictions on HMOs require a referral from your primary care physician to see a specialist, which can be cumbersome.
- Geographic Limitations: Because many Medicare Advantage managed care plans rely on regional networks, coverage may be limited if you travel frequently, or have residences in multiple states.
Medigap: Advantages and Disadvantages
- Choose your own doctors and hospitals: Medigap plans allow you to visit any healthcare provider that accepts Medicare, without needing a referral. There are no limited care networks to worry about, and no regional concerns. Your Medigap plan benefits will work anywhere in the U.S.
- Predictable Costs: These plans make it easier to anticipate healthcare costs by covering many out-of-pocket expenses like copays and deductibles. With Medigap Plan G – the most popular plan currently available to new Medigap enrollees –your plan will cover all costs covered but not paid by Original Medicare, including all your copays, coinsurance, and all your Part A deductibles. With Plan G, the only thing you pay under Medicare Part A and B is your Part B annual deductible, which as of 2023 is just $216. So nearly all your variable costs are taken care of under Plan G. You pay a monthly premium, but you can make your annual healthcare expenses highly predictable.
- State-to-State Portability: Medigap plans provide the same benefits regardless of where you are in the U.S., making them ideal for frequent travelers or those with multiple residences.
- Standardized Plans: Medigap plans are standardized, making it easier to compare options.
- Overseas benefits. Some Medigap plans include coverage for medical treatment outside the United States. This is a good option if you plan on traveling abroad during your retirement years.
- Higher Monthly Premiums: Medigap plans generally have higher monthly premiums compared to Medicare Advantage plans.
- No Prescription Drug Coverage. Medigap plans don’t include prescription drug insurance. If you want this coverage, you should consider buying a separate Medicare Part D plan. If you do decide you want a Part D plan, the best time to enroll is when you are first eligible for Medicaid and you have left the workforce. If you delay, and you don’t maintain coverage of your own, you may have to pay a lifelong penalty.
- Limited Enrollment: You’re most likely to qualify for a Medigap plan during the six-month Medigap Open Enrollment Period that starts when you turn 65 and have Part B.
- No Additional Perks: Medigap plans focus on covering the gaps in Original Medicare, meaning they don’t usually offer perks like dental or vision coverage.
Who Should Join Medicare Advantage?
Medicare Advantage may suit you if:
- You prefer an all-in-one solution.
- You want or need supplemental benefits particularly suited to your medical situation, such as meal assistance and transportation.
- You don’t mind having restrictions on your ability to choose your own doctor
- You want extra benefits like vision and dental coverage.
- You want prescription drug benefits included in your plan and the drugs you need are included in your plan’s formulary.
- You’re looking for lower monthly premiums, or no premium at all.
- You do not plan to do much traveling outside the U.S.
- You don’t plan on traveling much outside your network area.
Medigap plans could be better for you if:
- You can afford the premiums
- You want the flexibility to choose your own doctors, clinics, or hospitals without having to worry about whether they are in your plan’s network.
- You frequently travel out of states.
- You plan to travel outside of the U.S.
- You don’t want to be in an HMO or PPO.
- You don’t mind buying a separate Medicare Part D policy to cover prescription drugs
- You prefer a plan that makes healthcare costs more predictable.
The Medi-Share 65+ Health Sharing Alternative.
If you are open to a Christian health sharing alternative that also provides powerful sharing benefits for Medicare beneficiaries, you should consider the Medi-Share 65+ Health Sharing Plan.
Health sharing plans are not insurance, but they do offer a way for individuals to share healthcare costs within a community of like-minded people.
Medi-Share 65+ is designed specifically for seniors and acts as a supplement to Medicare.
Like Medigap plans, Medi-Share 65+ works in conjunction with Original Medicare.
How it Works
Under Medi-Share 65+, you would be responsible for the first $500 in eligible expenses under Medicare Parts A and B each year per household, not per individual.
Your fellow Medi-Share 65+ plan members would cover all your Part A and B expenses approved but not paid by Medicare beyond that.
That includes all your deductibles, copays, and covering items that Medicare Parts A and B do not.
In effect, you pay a predictable monthly contribution. And then all your expenses under Medicare Parts A and B are limited to just $500 per household per plan year.
Medi-Share requires a monthly cost sharing contribution. But it is much less than the premium for a comparable Medigap Plan G in most markets – especially in higher-cost areas.
Currently, Medi-Share 65+ plan costs are as follows:
- Ages 65-74: $99 per month.
- Ages 75+ – $150 per month.
Click here for more details on Medi-Share 65+ and healthsharing.
Medi-Share 65+ Advantages
- Community Aspect: One of the defining features of Medi-Share is its faith-based community, where members contribute towards each other’s healthcare costs.
- Flexible Contribution: The amount you contribute monthly can often be less than traditional Medicare Supplement premiums.
- No Network Restrictions: You have the freedom to choose healthcare providers without worrying about in-network or out-of-network limitations.
- Overseas benefits. Unlike Medicare Advantage, Medi-Share 65+ helps pay for care outside the U.S., though there are caps and limits.
Medi-Share 65+ Disadvantages
- Not Insurance: Because it’s not insurance, it lacks certain protections and guarantees that come with traditional insurance plans.
- Eligibility Guidelines: Medi-Share often has lifestyle and health guidelines that members must meet, which could include restrictions based on faith practices or pre-existing conditions.
- Limited Coverage: Not all medical services may be eligible for sharing, and it’s crucial to understand what’s included and what’s not. For example, Medi-Share 65+ does not share costs related to alcoholism or drug addictions treatment. It also does not share costs related to injuries arising from drunk driving incidents – even if you were only a passenger. For full details on what is excluded or limited under Medi-Share 65+, consult the Plan Guidelines.
Who Should Consider Medi-Share 65+?
- Christians. As a non-denominational Christian health sharing ministry organization, Medi-Share may be more aligned with the beliefs and values of religious individuals. Furthermore, many people find membership in a Christian mutual benefit society like Medi-Share to be extremely personally gratifying. They enjoy being part of the health sharing community and providing much needed support to fellow members in their time of need. And in return, they receive the same benefit when they are the ones in need.
- Those who are budget-conscious but still want the freedom to choose their own doctor. Like Medigap plans, Medi-Share 65+ lets you use your benefits with any willing provider. You are not restricted to a plan’s narrow network.
- Cost-Conscious Individuals: If you’re looking for a potentially less expensive alternative to traditional Medicare Supplement plans, and you meet the eligibility guidelines, this could be an option worth exploring.
All three of these great approaches have their merits and drawbacks.
Medicare Advantage plans offer a one-stop-shop for all your healthcare needs, often with extra perks, but they do come with restrictions like limited networks.
On the other hand, Medigap plans offer greater flexibility and cost predictability but generally come with higher monthly premiums.
Medi-Share 65+ is a lower-cost non-insurance health sharing alternative to Medigap. But it comes with some exclusions, such as limited benefits for drug and alcohol coverage.
Your choice will depend on your healthcare needs, lifestyle, and financial considerations. It’s advisable to consult a healthcare advisor to help you navigate this complex but crucial decision. Your health is invaluable, so take the time to make an informed choice.Here are some additional blogs for further reading: What Kind of Medicare Plan Is Best for Me? (Quiz) | Medicare MSAs or the Medi-Share 65+ Healthsharing Plan – Which is Better for Medicare Beneficiaries?
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Medicare Supplement and Medicare Advantage FAQs
What are the different parts of Medicare, and what do they cover?
Medicare has four parts:
- Part A: Hospital insurance covering inpatient care, skilled nursing facility care, and some home healthcare services.
- Part B: Medical insurance covering outpatient services, doctor visits, preventive care, and durable medical equipment.
- Part C: Medicare Advantage plans offered by private insurers, combining Part A and Part B coverage, often with additional benefits.
- Part D: Prescription drug coverage, available as stand-alone plans or included in some Medicare Advantage plans.
Parts A and B together are sometimes referred to as Original Medicare.
Medigap plans don’t include Part D benefits. You would need to buy a separate standalone policy.
Most Medicare Advantage plans include prescription drug benefits, but not all of them do.
What is the cost of Medicare Part A, and who qualifies for premium-free Part A?
Most people do not pay a premium for Medicare Part A if they or their spouse have paid Medicare taxes for at least 10 years (40 quarters).
For those who don’t qualify for premium-free Part A, the cost depends on their work history.
When should I enroll in Medicare, and what happens if I miss my Initial Enrollment Period (IEP)?
Your Initial Enrollment Period (IEP) begins three months before your 65th birthday month and ends three months after it.
Missing your IEP may result in late enrollment penalties for Part B and Part D, and delayed coverage.
What is Medigap, and how does it work with Medicare?
Medigap, also known as Medicare Supplement insurance, helps cover out-of-pocket costs like copayments and deductibles that Original Medicare doesn’t pay. It works alongside your Medicare coverage, providing additional financial protection.
Can I switch from Medicare Advantage to Original Medicare with a Medigap plan?
You can switch from a Medicare Advantage plan to Original Medicare and enroll in a Medigap plan during specific enrollment periods.
However, you may be subject to medical underwriting or availability restrictions with your new Medigap plan. That means enrollment is not guaranteed, or you could be charged a higher premium due to your medical history.
Are preventive services covered under Medicare?
Yes, Medicare Part B covers many preventive services, including flu shots, screenings, and counseling.
Most preventive services are provided at no cost to you, provided your healthcare provider accepts assignment.
Can I have both Medicare and Medicaid coverage?
Yes, you can.
Individuals qualify for both Medicare and Medicaid. This is called “dual eligibility.”
Medicaid helps cover Medicare premiums, copayments, and other healthcare costs for those with limited income and resources.
Can I make changes to my Medicare Advantage or Part D plan during the Fall Annual Enrollment Period (AEP)?
Yes, you can.
You can make these changes during the Fall Annual Enrollment Period (AEP), you can make changes to your Medicare Advantage or Part D plan, such as switching plans or enrolling in a new one.
The AEP typically runs from October 15th to December 7th each year.
Click here to learn more about your options during Medicare Fall Open Enrollment.
Where can I find assistance and resources for understanding and navigating Medicare?
You can find assistance through various sources, including the official Medicare website (Medicare.gov), State Health Insurance Assistance Programs (SHIP), local Area Agencies on Aging, and certified insurance agents who specialize in Medicare.
These resources provide guidance on enrollment, plan selection, and understanding your Medicare options.
If you need help choosing or signing up for a Medigap plan, a Medicare Advantage Plan, or the Medi-Share 65+ Health Sharing plan, or if you need to get long-term care or life insurance in place to protect you and your family during your retirement years, click here to schedule a free consultation.
Tom Lockwood is a Personal Benefits Manager at MediGap Advisors. Tom has a passion for bringing clarity to those confused about Medicare. He is an authority on Medicare, Medicare supplement plans, Medicare Advantage plans, and Part D prescription drug plans. Read more about Tom on his Bio page.