When people transition into Medicare there is often a lot of confusion around Medicare plan types. Someone seeking additional Medicare coverage has to decide if they want a Medicare Supplement, a Medicare Advantage plan, or just a Stand-Alone Part D plan. But before you can make a decision you must first understand what they are and how they differ from each other. All Three plan types are different, and they are used in different ways. We won’t get into which one is better because that’s an impossible question to answer, everyone is different, and every situation is different.
Before we discuss the different plan types, we must first put them into their respective categories. There are two types of Medicare insurance policies, subsidized, and unsubsidized. Private insurance companies that offer subsidized Medicare plans receive payments from the federal government to reduce the cost for Medicare beneficiaries and to make offering these plans a little more palatable. Insurance companies get no funding for unsubsidized Medicare plans, but they do have to follow strict regulations to offer these insurance policies. Medicare Advantage and Medicare Part D (Medicare Prescription Drug Plans) are subsidized Medicare Plans; Medicare Supplements are unsubsidized Medicare plans.
Medicare Supplements (Medigap) are private insurance plans that work in concert with Medicare. There are ten different types of Medigap plans each one with a letter name. To buy a Medigap policy, you must have Medicare Part A and B and continue to pay all of your Medicare premiums. Medigap plans help to pay the portion of your health claims that Medicare does not pay. For example, when you go to the doctor you would present both your original Medicare card (the red, white, and blue one) and your Medicare Supplement card. Medicare pays first; then the Medicare Supplement will pay all or part of whatever is left depending on which plan you have. The federal government standardizes Medicare Supplement policies in almost every state. Medicare Supplements do not cover prescription drugs.
Medicare Prescription Drug Plans (Part D) are private insurance policies that are designed to cover Prescriptions. They can be built into a Medicare Advantage plan, or they can be offered as a stand-alone policy.
Medicare Advantage (Part C) plans are private insurance plans that work instead of Medicare. To enroll in a Medicare Advantage plan you must have Medicare Part A and B, and you must continue to pay all of your Medicare premiums if any. Medicare will pay the private insurance company on a monthly basis to provide you with coverage that must be at least equal to Medicare, but in most cases, they offer coverage beyond original Medicare. If you have a Medicare Advantage Plan and you go to the doctor, you must present only the Medicare Advantage plan ID card. The Part C plan will pay the claim, and you must pay the copays associated with the service if any. Some Medicare Advantage Plans include prescription drug coverage.
Medicare Advantage plans are a great way to roll all of your Medicare benefits into one plan on one insurance card. They are also a great way to save money as many Medicare Advantage plans have monthly premiums as low as $0. Medicare Part C plans may include extra benefits like Gym memberships, over the counter cards, hearing aid coverage, even dental, and vision coverage.
Many Medicare Advantage plans come with a lot of great features, but it doesn’t mean that they are the best Medicare plan option. Every situation is different so when selecting a Medicare plan make sure that you understand all of your options and pick the one that best fits your needs and your budget.