Does trying to understand the difference between Medicare Advantage and Medicare Supplement Plans give you a headache? If so, don’t worry – you’re not alone!  Understanding the ins and outs of Medicare isn’t easy, but it’s essential if you want to get the most out of your coverage and avoid wasting money.  Unfortunately, the program’s confusing lingo, titles and other jargon, generate more fog than light.

Original Fee for Service (FFS) Medicare has two-parts: Part A for Hospital care and Part B for Outpatient medical services, and generally covers 80% of the cost. Medicare Part D covers prescription drugs.

Lots of people have trouble telling Medicare Advantage from Medicare Supplement. Mistaking one for the other can lead to big unexpected costs down the line. Hint:  Medicare Advantage (or part C) is govt. subsidized private insurance (like an HMO or PPO) that replaces original FFS Medicare.  While Medicare Supplement (or Medigap) plans are non-subsidized, secondary private insurance designed to supplement Original Medicare Part A&B and help cover out-of-pocket expenses not paid by Medicare. Medicare Supplement doesn’t replace original Medicare A&B – it supplements it.  You cannot have both Advantage and Supplement plans.

Why do some seniors choose Medicare Advantage over traditional Medicare?   Advantage plans are not FFS plans and may offer more coverage with additional benefits such as: gym membership, acupuncture, dental, hearing, vision benefits including prescription glasses, and prescription drug coverage, at seemingly low premiums and out of pocket cost. However, these benefits may come at a price:  limited flexibility regarding physician and hospital choice and drug coverage. You may be required to have a referral from your assigned primary care physician (PCP) in order to see a specialist.

So what are Medicare Supplement plans?  These plans pay for costs over the 80% FFS coverage limit and cover items that FFS Medicare doesn’t cover: e.g., emergency medical services outside US. You can’t buy a supplemental plan, though, unless you already have Medicare Parts A&B. Also, since the law was changed in 2006, Medicare Supplement plans can’t cover prescription drugs. To receive prescription coverage, you would also need to buy Part D insurance.

If it is important to you to have a transportable health plan accepted everywhere in the US, you need a Medicare Supplement plan.  You will pay a monthly premium for this plan, even if you don’t see a doctor on a regular basis.

If you are willing to have somewhat limited doctor and hospital choices, limited reason to see a specialist without referral, and only need coverage outside of your home area for an emergency, Medicare Advantage may be the right solution for you.

To summarize: Neither option is necessarily better than the other.  Your decision whether to buy an Advantage plan or a supplemental plan will depend on your own individual needs.