What Is the Difference Between Medicare Advantage and Medicare Supplements?

What Is the Difference Between Medicare Advantage and Medicare Supplements?

Once you turn 65, your healthcare options change pretty drastically. Before, you were used to group health insurance through your employer, marketplace health insurance plans, perhaps an HSA… but now the options have changed.

You have a choice to make. Will you choose Original Medicare with a Medicare Supplement and a Part D drug plan or will you choose a Medicare Advantage plan?

Before you decide which Medicare option is right for you, it’s helpful to understand the basics of both Medicare Supplements and Medicare Advantage plans. There has recently been another addition called a Medicare Medical Savings Account (MSA) that we will cover as well.

Complimentary Insurance Policy Review

Get a Free Policy Review

No matter what type of insurance plan you have, it should be reviewed annually. Rates change, circumstances change, and benefits can change. Do you still have the best plan?

Review My Policy

What’s a Medicare Supplement?

A Medicare Supplement is an insurance policy that’s added to Original Medicare. It provides additional coverage that fills in the gaps of your Medicare coverage. That’s why this is also sometimes called a Medigap plan.

With a Medicare Supplement, you have a variety of plans, which are named by letters A through N. For example, there is a Plan F and a Plan G (two very popular plans).

The beauty of Medicare Supplement plans is that these plans are standardized by the government. That means that no matter which carrier is selling a Plan G, all Plan Gs have the same exact benefits.

medicare supplement or medicare advantage

You can buy a Plan G from Blue Cross Blue Shield, Aetna, Americo – it doesn’t matter who you buy it from – the plan’s benefits will be exactly the same.

While each plan letter has a different set of benefits, the idea is that the plan covers the gaps in Medicare’s coverage. This includes expenses like:

  • Medicare Part A coinsurance
  • Medicare Part B coinsurance
  • Medicare Part A deductible
  • Medicare Part B deductible
  • Skilled nursing facility care coinsurance
  • Foreign travel expenses

These are some of the main things that Medicare Supplement plans cover.

Without a Medicare Supplement, Medicare alone doesn’t protect you from a financial crisis, because it does not have an out-of-pocket limit. If you had a serious hospital stay, you could be expected to pay tens of thousands of dollars.

With a Medicare Supplement, you would ultimately be responsible for either nothing at all or a few hundred dollars, depending on which plan letter you choose.

What’s a Medicare Advantage Plan?

Medicare Advantage, or Medicare Part C, is a private plan option, sold by private insurance companies, that replaces your Original Medicare coverage.

These plans are structured more like insurance plans you may have been used to. They have a deductible, and the out-of-pocket maximum is generally around $5,000-$7,000.

Unlike the insurance plans you’ve experienced your whole life, Medicare Advantage plans have very low – or even $0 – premiums.

Read more: How Can Medicare Advantage Plans Have $0 Monthly Premiums?

Most options also come with drug coverage included as well as a slew of additional benefits like free gym memberships and free dental cleanings.

what is a medicare advantage plan

One of the downsides of a Medicare Advantage plan is that they are network-based. This means you can only see specific doctors and physicians, you can only go to specific hospitals, and you can only get your prescriptions at specific pharmacies. If you travel often or are a snowbird, a Medicare Advantage plan is problematic. Additionally, if you have preferred doctors, hospitals, and pharmacies, you may not be able to find a plan that includes them in its network.

By law, Medicare Advantage plans have to provide at least the same coverage as Medicare. Additionally, even if you choose Medicare Advantage instead of Original Medicare, you still have to pay the Medicare Part B premium.

What’s a Medicare Medical Savings Account (MSA)?

A Medicare Medical Savings Account (MSA) is actually considered to be a type of Medicare Advantage plan. However, it’s structured very differently.

An MSA is a $0 premium health plan combined with high-deductible health coverage and a special medical savings account. The insurance company deposits money into your medical savings account, and you decide what healthcare services to spend it on.

There are no provider networks, and if you reach your plan’s deductible, 100% of your Medicare-covered expenses are paid for.

Ultimately, the deposit that comes with an MSA plan is yours to spend, move to your own bank, and/or invest.

what is a medicare medical savings accouny

The MSA has been around for a long time, but it just recently was released in 17 states, giving us here in Illinois access to it.

We were discussing the MSA option with a couple living in a small town. Both had a Medicare Supplement Plan F. Their total combined premium was $8,000 per year (they’re in their early 80s).

Between them both, they’d start out with over $5,000 in their medical savings account. PLUS they avoid paying $8,000 per year in premiums. That is an immediate difference of $13,000!

It’s a pretty great feeling to help a couple in their 80s experience a $13,000 difference in their budget!

What’s the Difference?

Now that we have a basic understanding of Medicare Supplements, Medicare Advantage plans, and Medicare Medical Savings Accounts, it’s helpful to stack them up to each other and see how they compare.

Medicare Supplement Medicare Advantage Medical Savings Account (MSA)
Average premium of $100-$200 per month Low or even $0 premium $0 premium
No money given to you No money given to you You’re given a special deposit every year (historically $2,520)
Plan benefits stay the same Different plans have different benefits which can change each year Plan’s deposit and deductible can change each year
Plan F covers everything after Medicare, making you responsible for $0 You have an out-of-pocket limit of between $5,000-$7,000 You have a high deductible (historically $6,700) but a special deposit to utilize towards it
No networks Must use in-network doctors, hospitals, and pharmacies No networks
Accepted everywhere Not accepted everywhere Accepted everywhere
No co-pays with most plan options Co-pays No co-pays
Limited to Medicare-approved services only Many plans include additional coverage like dental, vision, and hearing benefits Only Medicare-approved charges count toward the deductible, but you can use the money in your MSA for any qualified medical expense
Must purchase a separate drug plan Usually, drug coverage is included Must purchase separate drug plan, but you can use the money in your MSA to pay for it
No perks Lifestyle perks, like free gym memberships Cash perks, like free gift cards for seeing your provider

As you can see, each option has its pros and cons, and what’s best for your neighbor may not be best for you.

In general, we love Medicare Advantage plans for veterans and individuals who are dual eligible (eligible for both Medicare and Medicaid).

Medicare Advantage plans can also be a good option for seniors who prefer to have a higher deductible in exchange for lower premiums. Individuals who rarely see the doctor and don’t see that changing, are challenged financially, and/or would rather have low premiums in exchange for some risk are great candidates for a Medicare Advantage plan. Plus, the perks like free gym memberships don’t hurt!

Medicare Supplements are quite honestly the best fit for most of our clients. They’re easy to understand and have the best coverage. You do have a higher monthly premium than the other two options, but you don’t have any additional expenses. Our clients love the fact that they never get any bills when they need medical services, even if it means they have to pay $100-$200 per month on average.

difference between msa medicare advantage and med supp

The Medicare Medical Savings Account (MSA) is an exciting new option that’s an excellent fit for anyone 65+. Most of the agents here in our office say that this is the option they’ll choose when they turn 65, which says a lot!

In most cases, a healthy individual at age 65 that buys a Medicare Supplement is going to spend more in premium than they will on claims. You may have 8, 12, or even 15 good years where you can accumulate your medical savings account deposit with $0 premium and no networks. When you start to project forward, it puts you in a stronger position to offset medical costs.

What next?

Medicare Advantage and Medicare Supplements are very different – you have a decision to make! Both plans are great options, but it can be difficult to determine which one fits your needs and budget the best.

That’s where we come in. We will help you by matching your risk profile, health history, and budget with the product that’s right for you.

Fill out our contact form or give us a call today!

Click here to get started.

Posted on February 7, 2019

« Back to Resources


Need help with your insurance? Get a Quote Now