Medicare Supplement vs. Medicare Advantage

What are the pros and cons of each?

There are two ways of receiving your Medicare benefits when you turn 65.  The first way is through “traditional Medicare” which is commonly known as Medicare.

The other method is through a partnership between Medicare and private insurance companies.  This is known as Medicare Advantage.

Medicare Advantage

Pros:

1.     Premiums. Most plans have small monthly premiums, sometimes as low as zero.  As you can imagine, that gets a lot of people to consider them.  Additionally, they might offer extra benefits like Vision, Hearing, Dental and Gym memberships.

2.     Rx.  Your prescriptions can be covered.  If you take common medications then they’ll probably be covered.  If you take a specialty brand name drug, it may not be.  You’re restricted to the formulary (list of covered drugs) of your specific Medicare Advantage plan.

Cons:

1.     Co-Pays. Common sense would suggest that if you’re not paying a premium to an insurance company, then you must be giving something up somewhere else. And that would be in the area of your out-of-pocket costs.  This would be reflected in the co-pays that you pay when you use your insurance.

Typical co-pays are $300/day when you are an inpatient at the hospital.  MRI’s can be $300 or more.  Ambulance co-pays can be several hundred dollars.

These plans have a limit on what your total out-of-pocket costs can be for the year.  It’s known as the MOOP…Maximum Out Of Pocket.  This varies from plan to plan but is generally around $6500/year.

2.     Networks. Medicare Advantage plans rely on a network of hospitals and providers that you are expected to use when you need medical care.  If your doctor is not part of the network, you’ll have to use one that is in network.  Generally, if you see a provider outside of the network, the expense is not covered, and you must pay.

Emergency services are covered if you’re out-of-network.

Suffice it to say that if you stay healthy when you’re a member of a Medicare Advantage plan, you’ll probably like it.  If you have a major illness, you probably won’t.

Medicare Supplement

Pros:

1.     No Networks.  Medicare is a federal program.  If a doctor or hospital accepts Medicare, then you can see them.

2.     Easier to budget costs.  Your monthly premium for a Medicare Supplement is around $100/mo when you turn 65.  Aside from a small deductible (Medicare Part B deductible) that is what you can expect to pay every month whether you see a doctor or not.  No surprises.

3.     Rx through Part D.  I consider this an advantage of having a Medicare Supplement.  Each year you can search the prescription plans that are available to find the lowest cost for your prescriptions.  Nothing stays the same.  As your Rx needs change you can be covered with the best plan FOR YOU, without having to change your Doctors.

There’s not a one-size-fits-all solution to the right answer for you. 

I have people tell me that the MOOP under Medicare Advantage rarely comes into play for most people.  Remember, you’re not “most people.”  If several thousand dollars out of pocket would hurt you financially, you may be better off with a more predictable approach to your healthcare by buying a Medicare Supplement.

Kevin Kaye is licensed insurance broker.  He has helped thousands of people in his 35 year insurance career. He can be reached at 800-465-3164 or at kevinkaye1@yahoo.com.