Choosing Between a Medicare Supplement and Medicare Advantage Plan
Most people in the US will enroll in Medicare when they reach age 65 or a little later if they haven't retired yet. Medicare covers 80% of healthcare costs, so the big question is: How do you cover the remaining 20%?
Your two main choices are a Medicare Supplement plan or a Medicare Advantage plan. Let's compare and contrast the two types of plan to help you figure out which works best for your individual situation.
Hospital and Doctor Networks
The majority of people initially enrolling in Medicare will be switching from their employer plan. Employers plans are typically network plans, either an HMO or PPO. You'll find Medicare Advantage plans to be similar. With most Medicare Advantage plans you'll be asked to choose a primary care physician within your plan's network of doctors. If you need care beyond your primary care physician, for example, by a specialist, then you'll need a referral to a specialist in-network. Non-emergency care outside of your network is often not covered or covered at a higher cost to you. While Medicare Advantage plan networks can be fairly limiting on who you can see, not everyone finds this to be much of a drawback as the style of plans are very similar to what most people are already familiar with through their employer plans.
Medicare Supplement plans, on the other hand, have no networks. These plans are accepted by any doctor that accepts Medicare. Seeing a specialist does not require a referral.
When it comes to hospital and doctor networks, Medicare Supplement plans have the clear "advantage" over Medicare Advantage plans. But your own personal situation will help you decide just how important the freedom to go to nearly any doctor really is to you. Someone living in New York with a winter home in Florida might find the lack of network restrictions to be invaluable. Whereas someone who already has a primary care physician that they love and don't mind the occasional need to get a referral to see an in-network specialist, might not mind being in an HMO with a Medicare Advantage plan.
The most comprehensive Medicare Supplement plan is Plan G. With Plan G your healthcare costs are covered after you reach the Medicare Part B deductible. The Part B deductible is set each year by the Centers for Medicare and Medicaid Services, but typically has been around $200. In other words, with Plan G you entire out-of-pocket healthcare cost will be about $200 (or less if you don't reach the deductible). There are no copays, no additional deductibles, and no coverage cost limits.
Medicare Advantage plans will usually have a copay to visit your primary care physician and a higher copay to visit a specialist. Specific services and procedures are covered as specified by your plans Summary of Benefits, which varies between plans. Plans have a maximum out-of-pocket threshold above which you'll be entirely covered. Unlike Medicare Supplement plans, Advantage plans often have add-on benefits such as dental care and prescription coverage.
Whether you have a Medicare Supplement plan or a Medicare Advantage plan, you'll have to pay your Medicare premium. For most people, that'll be in the $150/month range, but your income is taken into account.
With a Medicare Advantage plan, that Medicare premium is often your only premium expense. Medicare Supplement plans, however, have their own premiums. You can usually find a high deductible Medicare Supplement plan for under $50/month, whereas the more comprehensive Medicare Supplement plans can range from $100 to the low $200s in some states.
Medicare Supplement plans are federally standardized. That means if you have a Plan G from one carrier, the plan is identical to a Plan G from another carrier. Medicare Advantage plans are not standardized and vary wildly between counties and insurance carriers. Further, Medicare Advantage plans can change each year. Essentially each plan is a one year contract that can be revised each year. These revisions can be beneficial - maybe the plan is adding transportation as a new benefit - but there's also some risk that the plan might change it's network and your favorite doctor is no longer accepting your plan or it's changing its drug coverage and that prescription just got a lot more expensive.
With a Medicare Supplement plan, more often than not, you sign up when you turn 65 and you never have to think about your plan again. With a Medicare Advantage plan you're going to want to review your plan each Annual Enrollment Period to confirm it's still the best fit.
There is no one-size-fits-all in healthcare. For some, the flexibility, certainty and superior healthcare coverage will make a Medicare Supplement plan the obvious choice. For others, a low premium Medicare Advantage plan might make the most financial sense.