Medicare Supplement vs. Medicare Advantage: The Pros and Cons of Each

Medicare Supplement vs. Medicare Advantage: The Pros and Cons of Each

You may have encountered these buzzwords in television commercials, email blasts, or the piles of mail you’ve likely received from insurance agencies, but what do they mean? What is the difference between a Medicare Advantage Plan and a Medicare Supplement? Which is the best option for you?


First off, it is important to address that regardless of which option you choose, you need to sign up for original Medicare (Parts A and B) first.   As long as you’ve determined that you shouldn’t delay part B (because you plan to remain actively employed after 65), you should sign up for both within the 7-month period starting 3 months before your 65th birthday month.


Medicare Supplement, or “medigap” insurance as it is aptly nicknamed, fills in some of the gaps of what original Medicare does not cover.  However, Medicare is still the primary payer of your claims.


On the other hand, Medicare Advantage is an alternative; it replaces original Medicare as the primary payer of your claims and is offered through subsidized private insurance companies that have contracted with Medicare.


This difference makes a big difference when considering the benefits and detriments of each option—in dollar signs, security, and convenience. Because of this, let’s consider the pros and cons of each carefully.


Medicare Supplement (Pros)

Minimal Out-of-Pocket Spending – Although there are differences in coverage among each of Medicare’s lettered plans (A-N), supplements cover more gaps (such as deductibles, coinsurance, and copays) than Medicare Advantage.

Predictability – Not only is your coverage guaranteed to stay the same, the price is reasonably consistent from year to year. Although we recommend re-shopping your plan every 4-5 years to avoid the slow creep in premium prices, there won’t be any shocking or unprecedented changes.

Out-of- State Coverage – Supplements cover you in all states, not just your home state.

No Networks – You are able to use any doctor or hospital that accepts Medicare, not just ones within the preferred network of a specific insurance company.


Medicare Supplement (Cons)

Higher PremiumMedicare supplement premiums can range from around $70-270 with the average Medicare supplement premium in 2020 hanging around $134 a month for people aged 65-70. This is significantly higher than the average Medicare Advantage plan premium.

No Drug Plan – You have to buy a stand-alone Part D prescription drug plan, which has an average premium cost of 32.74 in 2020.



Medicare Advantage (Pros)

Low to No Premium– The Average Medicare Advantage plan cost in 2020 is about $36 per month in 2020 and a few are offered at no cost!

Built-in Prescription Drug Plan – Almost all Advantage plans include a drug plan, which means less hassle and no extra premium.


Medicare Advantage (Cons)

High Out-of-Pocket Spending  – Medicare Advantage may appear to cover more because they offer perks like vision, dental, and hearing (which are usually not worth covering ). They may even throw in a free gym membership. However, they usually cover less, employing more of a pay-as-you-go approach. For you, this means higher copays, coinsurance, and unexpected costs.

Unpredictability – Since the government subsidizes Advantage plans, your plan’s benefits and premium costs may vary widely from year to year.

Out-of-State Coverage…Sometimes – You can only receive coverage outside of your home state in emergencies.

Networks – Different Advantage plans have various preferred hospitals and doctors. If you do not use your plan’s preferred providers, you may find yourself with less coverage or—depending on the plan—no coverage at all.


The Bottom Line

All in all, the pros and cons of these two options can be summarized quickly and concisely: A Medicare supplement is more costly but with better benefits (leading to less hassle and more peace of mind); while a Medicare Advantage plan is inexpensive, but with fewer benefits (often leading to unexpected costs and stress).


But the bottom line is that both options do their jobs. They both limit the potentially high out-of-pocket spending that is left by Medicare alone. Whatever you choose, don’t leave yourself vulnerable to coverage gaps.  There are no pros to remaining with Medicare alone!


Turning 65 soon and not sure what to do? Click here to sign up for our free Medicare workshop. No high-pressure sales pitches here, just in-depth discussion about the ins and outs of Medicare!  Click here to sign up for our next workshop.

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