Medicare Replacement Plan vs. Medicare Supplement Policy

By: Guest Contributor

Private Medicare insurance plans come in a variety of flavors. And among them are Medicare replacement plans (better known as Medicare Advantage or Medicare Part C plans) and Medicare Supplement Insurance (or “Medigap”). So what’s the difference between these two types of plans?

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The short answer is that a Medicare Advantage plan “replaces” your Original Medicare (Medicare Parts A and B) coverage – hence the term “replacement plan” – while a Medicare supplement plan supplements your Original Medicare benefits. 

To put it another way, Medicare Advantage is used in place of Original Medicare, while a Medicare Supplemental plan is used on top of Original Medicare.

This can be a complicated distinction that can have a big impact on your health care spending. Let’s further explore the differences.

Medicare Replacement Plans

Original Medicare refers to Medicare Part A and Medicare Part B. These are the public, federally-funded parts of Medicare for which most people qualify at age 65 (some people younger than 65 may qualify based on a disability or specific health condition). 

Medicare Part C, or Medicare Advantage, is an alternative way to receive your Original Medicare benefits. Medicare Advantage plans are required by law to provide all of the same basic coverage as Part A and Part B. These plans are sold by private insurance companies. 

When you enroll in a Medicare Advantage plan, you will still technically be enrolled in Original Medicare as well (Original Medicare enrollment is an eligibility requirement for Medicare Advantage). But you will receive your benefits through your Medicare Advantage plan. The “advantage” of Medicare Advantage plans is that they typically offer benefits not covered by Original Medicare such as prescription drug coverage, dental and vision care, memberships to gyms and fitness clubs, hearing aid coverage and more. 

So if you enroll in a Medicare Advantage plan, you are essentially replacing your Part A and Part B policies with your Part C policy. That’s why you might sometimes hear these plans referred to as “Medicare replacement” plans.

Medicare Supplement Plans

Original Medicare requires certain out-of-pocket costs like deductibles, copayments and coinsurance. A Medicare Supplement Insurance plan, or Medigap, covers the cost of these expenses. 

Medigap plans are accepted anywhere Original Medicare is accepted. With a Medigap plan, your Part A or Part B coverage will act first and then your Medigap plan will supplement that coverage by picking up the tab for various out-of-pocket expenses. 

Choosing Between Medicare Advantage and Medigap

Here’s a kicker for anyone considering signing up for a Medicare replacement or Medicare Supplement plan: You are not allowed to have both at the same time. You may only choose one or the other. 

Two of the biggest things to consider when choosing between these types of coverage is how you plan to pay for the things not covered by Original Medicare and how you like to utilize your care. 

Because Original Medicare does not provide coverage for prescription drugs, dental, vision or hearing aids, beneficiaries must determine how they will pay for such care. You can get coverage for all of those things bundled in a Medicare Advantage plan. Or you can piece them out and get drug coverage from a Medicare Part D plan (a third main type of private Medicare insurance that provides coverage exclusively for prescription drugs) and get your vision and dental coverage from standalone plans and rely on discounts for hearing aids if necessary. 

Then you must ask yourself how you like to use health care. Most Medicare Advantage plans will generally restrict your care to a network of participating health care providers. Should you snowbird in another state or travel frequently, you may be out of your coverage range when you need it most. Medigap plans are accepted anywhere Original Medicare is accepted, so that coverage goes with you wherever you go within the U.S. and U.S. territories. 

If you’re unsure about which type of Medicare plan is best for your needs, consult with a licensed insurance agent to explore your options and discuss the costs and coverage of each. At the end of the day, your Medicare coverage is only as good as the decisions you make behind it. 

About the Author

Christian Worstell is a senior staff writer for MedicareAdvantage.com. He is passionate about helping people navigate the complexities of Medicare and understand their coverage options. His work has been featured in outlets such as Vox, MSN and The Washington Post, and he is a frequent contributor to health care and finance blogs. Christian is a graduate of Shippensburg University with a bachelor’s degree in journalism. He currently lives in Raleigh, NC.

No compensation was received for posting this article.

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