Medicare Advantage vs. Medigap

Understand the difference between Medicare Advantage and Medigap plans, which is better for your situation, and how to choose between them.

Medicare Advantage and Medigap plans are two distinctly different forms of Medicare coverage, both with their pros and cons. Consider the differences between the two to make the right choice for you.

What’s the Difference Between Medicare Advantage and Medigap?

Medicare Advantage, also known as Medicare Part C, is an alternative to Original Medicare that can be purchased from a private health insurance company. People who choose these plans no longer receive their benefits through Original Medicare. Instead, their health coverage is provided entirely through their chosen insurance company.

Medigap plans, which are also advertised as Medicare Supplement plans, are used as a supplement along with your Medicare Part A and Medicare Part B coverage. So you’ll still have your basic coverage through Medicare, and your supplemental policy will chip in and pay for some things that Medicare doesn’t cover.

Medicare Advantage Plans

To qualify for a Medicare Advantage plan, you must currently be enrolled in Medicare Part A and Medicare Part B. Once you’ve decided to switch to one of these plans during the Open Enrollment Period, you will be covered solely by your health insurance plan.

The Costs

Many people find Medicare Advantage plans appealing because they are often budget-friendly.

  • This plan is often cheaper than paying for Medicare Part A and Part B plus a Medigap plan.
  • $0 premium plans exist, but even plans with premiums are often affordable.
  • Some plans even pay your Part B premium. You will need to pay if your plan does not cover your Part B premium.
  • In 2022, the Part B premium is $170.10.

Out of Pocket Maximums

  • The government sets your in-network out-of-pocket maximums, so you should never have to spend more than this amount out of pocket per year. In 2022, the in-network maximum is $7,550.
  • The out-of-network cap is $11,300.
  • You cannot be charged more for preexisting conditions.

Choice of Doctors

  • Most Medicare Advantage plans are either a health maintenance organization (HMO) or a preferred provider organization (PPO).
  • If your plan is an HMO, you’ll typically be limited to seeking care from health care providers in your insurance company’s network.
  • If your plan is a PPO, you will typically have more freedom.
  • You may have higher out-of-pocket costs if you use a healthcare provider outside of your regular coverage area.

Plan Options

All insurance companies selling these health plans must provide specific basic coverage to their customers. However, insurance companies can choose to add extra benefits. For example, you might not be required to purchase Part D prescription drug coverage since your plan might cover prescription medication.

Your Health

  • For people with disabilities or other special needs, there are Special Needs Plans that might be more suitable for you.
  • In some cases, you might need referrals to see specialists, even if those specialists are within your plan’s network.
  • It’s important to check the insurance company’s network to be sure that you can see the healthcare providers who help manage your health.

Benefits

  • Enjoy comfortable, dependable coverage within your insurance company’s service area.
  • Avoid paying a lot each month for monthly premiums.
  • Enjoy coverage similar to private insurance you may have had in the past.
  • Take advantage of extra benefits that aren’t available through a Medicare Supplement insurance policy or the regular Medicare program. For example, senior-friendly gym memberships, prescription drug plans, and more are often included.

Medigap Plans

There are ten different Medigap policies that you can choose from. These policies are standardized from company to company and are identified by a letter, ranging from A, B, C, D, F, G, K, L, M, or N. Medicare Plan F is the most popular Medigap policy, although Plan G and Plan N are also very popular. There is also a cost-sharing option known as Medicare Plan K.

Suppose you like having Original Medicare but are worried about paying for coinsurance, copays, deductibles (such as the Part B deductible), and more. In that case, adding a Medigap plan could be one of your best coverage options. However, be aware that these Medigap plans are not government-sponsored like Medicaid; instead, they are purchased through private insurance companies.

The Cost

  • The average cost of a Medicare Supplement plan is about $150 a month, although costs vary from plan to plan and company to company.
  • Insurance companies set their rates for supplements based on one of three rating methods: community-rated, issue-age rated, or attained-age rated.
  • Most people don’t pay Medicare Part A premiums, but if you have to pay, your costs will be either $274 or $499 a month in 2022.
  • You will have to pay your Medicare Part B premium. In 2022, the Part B premium is $170.10.
  • Before 2020, approximately 66% of people who purchased Medigap policies purchased Plan F. This plan covered the Medicare Part B deductible ($233 in 2022). However, no plans that cover the Part B deductible are available for new Medicare recipients, so you should count on paying the Part B deductible each year.
  • Since a prescription drug plan will not be included with your supplement, you will need to count on paying for your medications. Alternatively, you can purchase a Part D drug plan. On average, these plans cost approximately $35 a month, but costs do go up for those with higher income levels.

Benefits

  • No annual plan changes
  • Complete network freedom
  • Significantly lower out-of-pocket costs for medical care and treatment

When you choose your Medicare Supplemental coverage, you don’t get to choose your benefits. Benefits for each lettered plan are standard across all private insurance companies. Some plans offer more robust coverage, while others are more simplified. Dental care, prescription drug coverage, and other additional benefits are not included.

No Network Limits

One excellent benefit of a Medigap plan is that there are no network limits. You can see any healthcare provider that accepts Medicare benefits, and you’ll be covered by your Medicare Supplement plan. You also don’t need referrals to see specialists, regardless of your health conditions.

No Annual Plan Changes

With a Medigap plan, you never have to worry about unexpected annual changes to your insurance plan.

Is it Better to Have Medicare Advantage or Medigap?

Which option will be best depends on the specifics of your situation. If you want more flexibility when seeing your doctors and don’t mind not having Part D included in your plan, then a Medigap plan and Part D plan would be ideal for you.

If you don’t travel much and don’t mind being a little more restricted about which doctors and healthcare providers you can see, Medicare Advantage might be better for you. This is particularly true if you’re on a tighter budget or want an all-inclusive plan instead of multiple policies.

How Do I Choose Between Medicare Advantage and Medigap?

The types of coverage you’re looking for, the out-of-pocket costs you’re willing and able to pay, and the options available in your area are just a few things you should look into when you make your choice.

Why do I need Medigap if I already have Medicare?

Medicare is a fee-for-service plan that covers many hospital stays, doctor’s visits, and more. However, there are still some gaps in coverage for those who only have Medicare, which leaves some enrollees with extra medical expenses. Medigap helps fill in some of those gaps without paying as many private fees. Also, be aware that you cannot purchase a Medigap policy if you don’t already have Medicare.

What are the benefits of Medicare Advantage?

For those who don’t mind having to choose from certain network providers for healthcare, Medicare Advantage is sometimes the better choice. It’s often more affordable, and sometimes you don’t have to pay a premium.

For those who are used to private insurance, adjusting to Medicare Advantage is easy. Some people prefer an all-in-one plan; if this is the case, Medicare Advantage is ideal. After all, you don’t have to worry about purchasing Medicare Part D with many plans, which can simplify matters and reduce out-of-pocket costs.

How do I choose between Medicare Advantage and Medigap?

Choosing between Medicare Advantage and Medigap is not an easy decision. However, educating yourself about the differences between the two types of insurance coverage, comparing different plans and policies, and talking to a licensed insurance agent will help you make the right choice.