With Medicare Health plans, you can ‘pay me now, or pay me later’. Pay me now=Medigap/Supplement. Pay me later=Medicare Advantage. ‘Medigap’ and ‘Medicare Supplement’ are interchangeable.
(Before you read further, click here if you’d first like an over view of Medicare health plan basics: ‘Medicare Health Plans 101’.)
It’s simple. Medigap plans generally cost more than Medicare Advantage plans, but generally offer better medical coverage. For example Medicare Plan F will usually pay 100% of your medical bills. You pay no deductibles or co-pays at all. Medicare Advantage plans, on the other hand will impose copays, co-insurance and deductibles, similar to the plans you’ve had prior to turning age 65. In exchange, they generally offer lower premiums. At least, they do in my part of Oregon. Therefore many folks who are in great health when they turn age 65 will buy a Medicare Advantage plan to save money, knowing they may have to ‘pay me later’ when they seek medical care. Whereas many folks who are in poor health or willing to pay extra for full coverage, or ‘pay me now’, will buy a Medigap and Part D drug plan. They get peace of mind knowing their medical bills will generally be (at least with Plan F) covered in full.
In really broad terms, you may pay $100/month more for a Medicare Supplement/Medigap plan plus part D drug coverage, compared to a Medicare Advantage plan. But there are Advantage plans which cost as much as a Medicare Supplement plan plus drug coverage. Personally, I recommend 60%/40% to purchase a Medicare Supplement/Medigap plan versus a Medicare Advantage plan. There are times one plan or the other will look better to you when you turn 65. But you only have one chance to buy a Medigap plan ‘no questions asked’. Your one chance is when you first become eligible. If you start with Medicare Advantage and want to switch to Medigap more than 1 year later, you’ll have to fill out a complete health statement which could cause you to be denied Medigap coverage.
Next is a FAQ comparison of Medigap vs Medicare Advantage, showing some of the pluses and minuses of each. Please note that Medicare rules are extremely complex and there are exceptions to every rule. The FAQ below will only cover broad rules that apply 80% of the time.
A: Supplemental Plans. Medicare.gov describes when you can buy a Medigap plan. You can buy a plan during your 6 month Medigap open enrollment period. This period usually starts the month in which two things are true: you are 65 years old, and enrolled in Medicare part B insurance.
A: Advantage Plans. Medicare.gov describes when you can join, switch, or drop a Medicare Advantage plan. You can complete an enrollment form up to 90 days in advance of the month in which you turn 65 and your Part B coverage takes effect. Coverage starts the first of your birthday month. You have 4 more months to sign up; during your birthday month and the following three months. If you enroll during these 4 months, your coverage will start the first of the following month.
A: Supplemental Plans. Medicare.gov’s side by side Medigap comparison page. Medicare covers medical conditions on a ‘line item’ basis. Everything that Medicare covers can be found on a master list. If it’s not on the list, it’s not covered. Medigap plans are standardized, and range from ‘Plan A’ to ‘Plan N’. The plan coverage was designed by the government, but is sold by private insurance companies (which is where we come in). Most people choose Plan F or G because of the strong coverage and international coverage being included. Medigap/Supplemental policies add to the Part A&B coverage offered by original Medicare. First the doctor bills Medicare, then they bill the Medigap plan. Each pays it’s part.
A: Advantage Plans. Advantage plans must, by law, cover everything original Medicare covers. They don’t work on a ‘line item’ basis, however. They work on a ‘Medical necessity’ basis, much as plans for people who are under age 65. For example, let’s say a blood test is denied by original Medicare. A Medigap policy wouldn’t cover the blood test because Medicare didn’t cover it. But an Advantage plan might well cover the test, if it were for a service/condition covered by the underlying policy. When you purchase an Advantage plan, the Advantage plan is your sole coverage. The doctor doesn’t bill Medicare; they only bill your private insurance company. It works more like plans for people who are under age 65. In effect, you are disenrolled from the governmental claims system. This means the government is ‘off the hook’ from paying your medical bills. In turn, the government sends the funds they had set aside for your medical care, to the insurance company. This varies depending on where you live, but it can be over $700/month sent to your Advantage company each month. Some Advantage plans will add goodies like free gym memberships, dental, hearing, vision, alternative care, etc., as an enticement to buy their plans.
A: Supplemental Plans. Medicare.gov’s Part D drug coverage overview. All Part D drug coverage is Medicare Advantage coverage. Your Medigap policy doesn’t include any drug coverage (other than things like chemotherapy or infusions done in a clinical setting, which may be covered in the health plan). You can go to Medicare.gov, type your drugs into their search tool, and see which plan will pay best for your drugs, of the private insurance drug plans available in your area.
A: Advantage Plans. Generally, drug coverage is built into the Advantage plan for no extra charge. As always, there are exceptions to this rule, and there are Advantage plans which do not include drug coverage.
A: Supplemental Plans. You’ll need to see if your doctor ‘accepts original Medicare’ patients. Even if you’re an established patient, you need to ask this question. In my area, sometimes you’ll have more access to local doctors if you enroll on a PPO Advantage plan. This is because the plans sometimes cover more of the doctor’s charges, and sometimes pay the doctor better than Medicare. But if you have original Medicare plus Medigap, you can see any doctor in the country who accepts original Medicare and is accepting new patients.
A: Advantage Plans. With Advantage plans, you always need to make sure your doctor is ‘in-network’. This means they need to accept original Medicare, AND have a signed contract with your Medicare Advantage insurance company. There are two main types of networks. In an HMO network, you only have access to in-network doctors, unless you need urgent or emergency care. Worldwide coverage. A PPO plan will pay for you to see any doctor who is willing to bill the plan as long as their services are considered medically necessary. If they’ve signed a contract with your Advantage insurance company, your benefits are better than if they are not contracted. Again, similar to plans you’ve had prior to age 65.
A: Supplemental Plans. Most people pay for Part B Medicare, a Medigap Policy, and a Part D drug plan. Rates vary by age, gender, and tobacco usage. In general terms, you’ll pay about $100/month more than for a mid-range Advantage plan.
A: Advantage Plans. These plans start at $0 per month locally, and range up to over $150/month. This is far less than you pay for insurance at age 64!
A: If I knew nothing about your needs, or wants or budget, I’d recommend Medigap simply because you have a once-in-a-lifetime to buy a policy when you first turn age 65. You can usually switch over to Medicare Advantage when you’re older if you wish, but you can’t necessarily switch to Medigap if you start with an Advantage plan. Medigap policies go up with age and tobacco use, while Advantage plans cost the same for everyone who is enrolled. People buy Advantage plans if they are in good health, want the goodies, like a gym membership, and/or believe a Medigap plan is too expensive. People buy Medigap because they like the full coverage with no deductibles and co-pays as with Plan F, are in poor health, are more comfortable in the government-run system rather than fully covered by a private insurance company. Etcetera…I could go on but the bottom line is; give my office a call. We sell many different Advantage and Supplemental policies. We’re agnostic on which plan you want. We simply walk you through your needs and find the plan which suits you best.
Photo courtesy of Alex Prolmos, Creative Commons