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The Difference Between Medicare Advantage and Medicare Supplement Plans

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Have you ever gone to the grocery store to buy a product and been confused by how many brands were available for that one item? It makes what should be a simple decision confusing. Likewise, products with similar names can sometimes be hard to differentiate.

If you’re not sure of the differences between Medicare Advantage and Medicare Supplement plans, you’re not alone. The healthcare industry can be confusing with its multitude of complex terms and acronyms.

In fact, it’s fairly common for people to think they need a Medicare Advantage plan and a Medicare Supplement plan. That’s not true, though. You select one or the other. But don’t worry, we’ve broken down each Medicare plan option and explained the differences between the two, so you can make an informed choice. First, a little history.

Former president Harry Truman received the first Medicare card on July 30, 1965, the day it was signed into law by the president at the time, Lyndon Johnson. Medicare coverage took effect in 1966 with a budget of approximately $10 billion and about 19 million enrollees. Medicare Supplement plans were created in the 1980s under a piece of legislation called the Baucus Amendment. They were designed to provide Medicare recipients with coverage for gaps in the Medicare product. Fast forward 50 years later, when there are currently an estimated 57 million Medicare enrollees in the United States, and approximately 16 percent of the population is covered by Medicare.

Medicare Advantage

Medicare Advantage plans are offered by private insurance companies and must cover the same benefits as Medicare Part A and Part B, which are sometimes referred to as “Original Medicare.”

Medicare Part A and Part B are federally-run Medicare coverage programs that cover Medicare basics, like medical and hospital services. It is separated into two different parts: Part A and Part B. You must have both to move forward with additional Medicare coverage options.

The four types of Medicare Advantage plans include Preferred Provider Organizations (PPO), Private Fee-for-Service Plans (PFFS), Medicare Health Maintenance Organizations (HMO) and Medicare Special Needs Plans (SNP).

These types of plans often are comprised of benefits and services not covered by Medicare Part A and Part B, including deductibles and copayments, and may incorporate prescription drug coverage. In that case, they are called Medicare Advantage with Prescription Drug (MAPD) plans. They also may offer benefits and services such as dental, vision, or hearing care.

Some Medicare Advantage plans require enrollees to visit physicians, hospitals, and other healthcare providers that are part of the plan’s network and may necessitate a referral before seeing a specialist. Such plans have an annual out-of-pocket limit. Those eligible for Medicare Advantage plans can enroll in one of the following time periods:

  • During your Initial Enrollment Period when you first become eligible for Medicare.
  • During the Annual Enrollment Period from October 15 to December 7.
  • If you have Part A coverage and you get Part B for the first time during the General Enrollment Period.
  • During a Special Enrollment Period, in certain situations; for example, if you lose your current Medicare plan coverage.

For those who live in rural areas, there is one caveat to note about Medicare Advantage plans. You may have problems finding a plan that works with the healthcare services located in your area.

Medicare Supplement Plans

Sometimes called Medigap plans, Medicare Supplement plans also are offered by private health insurance companies. Medicare Supplement plans can provide you with additional Medicare coverage to fill in gaps from Medicare Part A and Part B. These supplemental plans help cover out-of-pocket expenses, including copays, coinsurance, and deductibles. Regulated by both state governments and the federal government, Medicare Supplement plans pay a portion of the bill not paid by Medicare.

The Open Enrollment Period for Medicare Supplement plans is generally the six months that starts on the first day of the month in which you are at least 65 years old and enrolled in Medicare Part B. The premiums for this type of plan differ based on the plan and company from which it is purchased. Those with chronic conditions often choose a Medicare Supplement Plan, even though it may be twice the cost of its Medicare Advantage counterpart.

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