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Example of choosing between a Medicare Advantage plan and a Medicare Supplement

Category: Medicare Advantage Plans MAPD
Published: Oct, 06 2023 02:10:11

Choosing between a Medicare Advantage plan and a Medicare Supplement (Medigap) is a very personal decision, but the following example may help identify some of the important issues surrounding these two different types of coverage.

Example situation:
I am paying over $300 a month for my ever-increasing Medicare Supplement premium plus another $35 a month for my Medicare Part D prescription drug coverage – before even buying any prescriptions.  I originally joined a Medicare Supplement because my health was not very stable: I am an adult diabetic with several other medical conditions and I see a number of regular doctors (and specialists) in my area, most of whom I have visited for years.  Unfortunately, with inflation and economic changes, things have gotten financially tougher for me, although I am not eligible for Medicaid or the Medicare Part D Extra Help program.  So, can I save money by enrolling in a Medicare Advantage plan that has prescription drug coverage and a low or no monthly premium?

The Short Answer:
You may save on monthly premiums by enrolling into a Medicare Advantage plan over a Medicare Supplement, but the far larger cost will be the actual “costs” that you are paying for your healthcare coverage - and this cost will depend on your chosen Medicare Supplement or your Medicare Advantage plan - and the healthcare you need throughout the year.  In addition, the decision will depend on whether your chosen healthcare providers are part of your Medicare Advantage plans healthcare network - or whether you are willing to see other doctors who are network providers.

(1) Reminder:  Medicare Advantage plans are not the same as Medicare Supplements

Medicare Advantage plans administer or implement your Original Medicare Part A and Part B coverage.  Medicare Advantage plans must offer coverage at least as good as your Original Medicare and often add additional benefits like Medicare drug coverage, non-health related supplemental benefits, vision, dental, hearing and/or wellness programs (such as Silver Sneakers).  Medicare Advantage coverage benefits are not standardized and vary from company-to-company and even county-to-county (or Zip Code area) for the same company.  Medicare Advantage plan cost and coverage changes every year

Medicare Supplements (Medigap policies) are designed to work together with your Original Medicare, filling the “gaps” (deductibles and copayments) in your Medicare Part A (in-patient or hospital insurance) and Medicare Part B (out-patient or physician insurance) coverage.  Medicare Supplements are standardized across most of the country (Medigap Plans C, E, F, H, I, or J still exist, but are not available to new beneficiaries)  -  some states do not offer the same variations of Medicare Supplement plans that are not offered across the country (such as, Massachusetts, Minnesota, and Wisconsin).

(2) Medicare Advantage plan premiums are usually lower than Medicare Supplement premiums (sometimes $0 - or even less because of Part B refunds or givebacks)

Of the thousands of Medicare Advantage plans offered each year (5,377 in 2024), many of Medicare Advantage plans have a low or $0 premium and also include prescription drug coverage (depending on the area of the country) - and some Medicare Advantage plans in certain areas of the country have a $0 premium and "giveback" a portion of your Medicare Part B premium.

What Medicare Advantage plans are available in your area?
If you use our Medicare Advantage Plan Finder (MA-Finder.com), the Medicare.gov Plan Finder site, or telephone Medicare at 1-800-Medicare (1-800-633-4227) or call or visit a SHIP volunteer, you can get a complete overview of the Medicare Advantage plans available in your area.

For this example, we will use Summit County, Ohio (Zip 44319) where you would find a number of Medicare Advantage plans available (119 in 2024).  Of these plans, many have a $0 monthly premium and include Medicare Part D prescription drug coverage.  You may also find that some Medicare Advantage plans in your area are Special Needs Plans (SNPs) - especially designed for low-income people or people with specific chronic health conditions (such as Diabetes).

(3)  What are other important costs to consider with either plan?

Finding a Medicare plan with a low premium is only the first step and starts the decision process when comparing coverage options.

-- Is Medicare Part D prescription drug coverage included?

You will pay anywhere from about $10 to over $100+ to add Medicare Part D coverage to your Medicare Supplement - depending on the drug plans that are available in your area.  You can use our Medicare Part D Plan Finder (PDP-Finder.com) to see all of the stand-alone Medicare drug plans in your area.

Also be sure to check: Are all your medications covered and at what cost? Does the drug plan include additional Donut Hole coverage or a lower-cost mail order option? Are there any Usage Management restrictions for your medications such as needing prior authorization or quantity limits per month?

-- What are you paying for healthcare cost sharing: Copays and Coinsurance?

In our example, we have someone with several chronic conditions requiring visits to multiple healthcare providers (and specialists) and this person should consider the costs to visit a doctor, hospital, or specialist.  You will need to refer to the details of your Medicare Supplement as compared to a Medicare Advantage plan to see how cost-sharing differs.  The table below offers only an example of how different plans cover healthcare costs.

Examples Monthly
Cost Per
Doctor Visit
Cost Per
Specialist Visit
Out of
Healthcare Cost
Medicare Supplement $300+ $0 $0 N/A* $0 No
Medicare Advantage
local HMO
$0 $0
$40 (authorization required) $4,300
$295 per day (days 1-7) Yes
($0 Rx deductible)
Medicare Advantage
$0 $20 ($20-$50
out of network)
$50 ($50 Out of Network) $7,550 $490 per day (days 1-4) Yes
($250 Rx deductible)

*There are no “Out-of-Pocket Maximums” for Medicare Supplements A through J, however, by design, these Medicare Supplement plans provide coverage for 100% of most Medicare Cost-Sharing.  Remember:  A Medicare Advantage plan's maximum out-of-pocket limit (MOOP) may exclude some of your Part A and Part B healthcare costs.

Following our example, the Medicare Supplement may cost more per month in premium, but the Supplement also may be less expensive in the long run given the health of our example beneficiary.

Tip:  Be sure to sit down with a calculator and, based on last year’s experience, estimate your cost with either a Medicare Supplement or Medicare Advantage plan.

(4)  Are your doctors, specialists, and hospitals in the plan's network?

Probably the most important factor for many people is whether their regular doctor (or set of doctors) and local hospital accepts their chosen Medicare Advantage plan and to know what it costs (or the procedures necessary) to see a healthcare provider outside of the plan's network.  For example, some Medicare Advantage plans will not cover non-emergency, out-of-network healthcare without prior authorization - and out-of-network healthcare may be excluded from your plan's maximum out-of-pocket spending limit (MOOP) or you may have a higher out-of-network MOOP.

Tip When in doubt, call your doctors’ offices and hospital to confirm that they will accept your new Medicare health coverage or ask them which Medicare Advantage plans they do accept - and understand that a Medicare Advantage plan's healthcare network can change at any time throughout the year.

In our example, the choice of doctors is probably the most important consideration. If the person is unwilling to change doctors or specialists, then they probably do not want to move from their Medicare Supplement - or will need to confirm that their current healthcare providers are within the Medicare Advantage plan's network.

(5)  What are some other important considerations when considering plan options?

The company reputation and Medicare star rating (out of five stars) is important to review. The Medicare ratings will give you any idea of what you can expect with your newly chosen insurance provider. Also, as noted, some Medicare Advantage plans also offer additional services like vision care, dental services, non-health related supplemental benefits, and wellness programs - and these programs are usually beyond coverage usually offered by Medicare.

Bottom Line: Our example Medicare beneficiary may save money on monthly premiums by switching from their Medicare Supplement and Medicare Part D plan to a Medicare Advantage plan with a drug benefit (MAPD) – but… our example person may also sacrifice the freedom of choosing their own doctors and lose the predictability of accurately estimating their annual total healthcare costs.

Also see: Can I join a Medicare Advantage plan if I already have a Medicare Supplement?

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