Medicare Supplement vs. Medicare Advantage: Which One Should I Choose?

Are you debating whether or not you should add Medicare Supplement or Medicare Advantage into your traditional Medicare coverage? Traditional Medicare (Part A and Part B) covers many healthcare expenses. However, it doesn’t cover everything, like vision, dental, prescription drugs and overseas emergency health coverage. Even the services Medicare does cover can add up in out-of-pocket expenses due to copayments and deductible fees. Because of this, many Medicare recipients enroll in Medicare plans to cover the gap in coverage.  

Medicare coverage can be complex and should be considered in light of your own personal healthcare needs and budget. This post seeks to outline the primary differences between Supplemental and Medicare Advantage insurance. If you are currently covered by Medicare, it’s important to participate in open enrollment every year, as plans and premiums change, and changes in your needs may lead you to another provider.

Medicare Supplement (aka Medigap) and Medicare Advantage plans are two categories of Medicare plans available on the market today. There are substantial differences between the two in relation to costs, benefits and how they work. It’s important to understand the difference between the two, so you can confidently determine which option makes the most sense for your health care needs.

Key Facts on Medicare Supplement

  • Medicare Supplement plans work in conjunction with your traditional Medicare (Part A and Part B).

You must have Medicare Part A (hospital) and Part B (medical). Medicare Supplement plans help pay for certain costs that the traditional Medicare plan doesn’t cover, like copayments, coinsurance and deductibles.

  • Medicare Supplements require a monthly premium.

You must pay your private insurance company a monthly premium for your Medicare Supplement policy. This is in addition to the monthly premium you pay for Medicare.

  • There are 10 Medicare Supplement plans available in most states.

Each plan is labeled with a different letter (A, B, C, D, F, G, K, L, M and N) that corresponds to the level of coverage provided. The plans vary in what they cover, including payment of Medicare Part A and B deductibles, foreign travel emergency, and hospice care copayments, to name a few. Private insurance companies provide these plans, so while the benefits are the same across plans of the same letter, costs may vary by company and location.

  • A Medicare Supplement plan only covers one person.  

If you and your spouse both need a Medicare Supplement policy, you will have to purchase separate policies for each of you.

  • Medicare Supplement policies provide choices.

Unlike Medicare Advantage, Medicare Supplement plans allow you to go to any doctor who accepts Medicare patients without referrals. Coverages may vary, so check your policy beforehand.

  • Medicare Supplement policies are guaranteed renewable.

Your insurance company can’t cancel your Medicare Supplement policy, even if you have health problems, as long as you pay the premiums on time.

  • Medicare Supplement policies don’t cover everything.

Medicare Supplement policies don’t cover long-term care, private nursing, prescription drugs, vision, dental, hearing aids or eyeglasses. Medicare Part D covers prescription drugs, and there are separate supplemental policies available to cover vision and dental.

Key Facts on Medicare Advantage

  • Medicare Advantage is an alternative plan to the traditional Medicare.

With Medicare Advantage, you are still in the Medicare program. However, you receive your benefits through your private insurance company’s Medicare Advantage plan instead of the federally administered program. It is comparable to an HMO or PPO plan.

  • Medicare Advantage plans provide similar coverage to traditional Medicare.

Medicare Advantage plans, also referred to as “Part C” plans, provide the same Part A (hospital) and Part B (medical) coverage that Medicare does. Plans can offer different co-payments, and extra benefits.

  • Medicare Advantage plans include prescription drug coverage.

The majority of Medicare Advantage plans provide Part D (drug) coverage. This is in contrast to Medicare Supplement plans, which do not provide prescription drug coverage.

  • Medicare Advantage plans are network based.

You will need to choose an in-network physician to avoid paying out-of-network costs. You will also need referrals to see specialists.

  • Medicare Advantage premiums are typically lower than Medicare Supplement plans.

The average monthly premiums associated with the Medicare Advantage plans are typically lower than those of the Medicare Supplement plans. However, out of pocket expenses may be higher than Medicare Supplements.

  • Medicare Advantage is available to everyone.

Medicare Advantage is available to everyone who has Medicare Part A and Part B and living within the plan’s service area, regardless of age or health conditions. The one exception is for people with end-stage renal disease (ESRD). Generally, people with ESRD cannot enroll in a Medicare Advantage plan, however some states require Medicare Supplement insurance companies to sell their plans to people with ESRD, but not all states do.


Each person's situation is different, and it's important to consider both your Medicare Supplement and Medicare Advantage plan options to find the coverage that best fits your needs. A person with significant and costly health issues may be better off with the Medicare Supplement plan. While the premiums may be higher, the out of pocket expenses are typically lower than Medicare Advantage, saving money over time. Alternatively, if you are healthy and don’t foresee high medical expenses in the near future, you may opt for the Medicare Advantage lower premiums, or the high deductible Medicare Supplement plans.

Take a look at the plans available in your area that best suit your healthcare needs. Your financial advisor can provide you advice on which option would be the most fiscally responsible based on your needs.

Wood Smith Advisors, a woman-owned Registered Investment Advisor (RIA), is a fee-only financial services firm that partners with its clients to simplify their financial lives. We focus on women, entrepreneurs and individuals with complex financial situations, providing objective and competent advice, education and services to help them develop and build their businesses and reach their financial goals. We can be reached by clicking here.

“Finance Made Simple” blog posts are intended for educational purposes and not for specific advice. Each person’s situation is different. Consult your financial advisor for advice relating to topics discussed.

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