Medicare Advantage vs. Medigap (Medicare Supplement)
Although “better” always depends on your needs, this question is especially tricky because Medicare Advantage (MA) and Medigap aren’t direct comparisons—they’re like apples and oranges.
Still, depending on your situation, what you choose could have a significant impact on how much you spend on your health care. That's important because you can have either Medicare Advantage or Original Medicare with Medigap, but not both.
What’s the difference between Medigap and Medicare Advantage?
Here’s the short answer:
- Medigap is an optional add-on plan that supplements some of the costs of Original Medicare.
- Medicare Advantage is an all-encompassing alternative to Original Medicare.
Here’s the longer answer:
Medicare Supplement (Medigap) is a supplemental insurance plan that beneficiaries can purchase to help supplement costs Original Medicare doesn’t cover, such as copays, coinsurance, and deductibles. There are 10 plans to choose from, and each plan is standardized nationwide, regardless of which company sells them.
Medicare Advantage (MA) is the “bundling” approach to health care. All MA plans must bundle Medicare Part A and Part B into their benefits, but many also include Medicare Part D (prescription drug) benefits. Plans can also add dental, vision, and hearing coverage, or a fitness membership like SilverSneakers or Silver&Fit. There are many plans to choose from, and they are not standardized (apart from Part A and Part B benefits).
Both plans can help reduce your health care costs, but the best one depends on your situation. We’ll do a deep dive below to help you decide what might be best for you.
Want to learn more about Medigap vs Medicare Advantage? Check out the last video in our Medicare Prepared series.
What is Medigap (Medicare Supplement) insurance?
A detailed look.
Medigap is supplemental insurance sold by private insurance companies. Once you enroll in Original Medicare, you can buy Medigap insurance as an optional add-on.
Medicare Part A (hospital insurance) and Medicare Part B (medical insurance, for your primary care physician or a specialist) comprise Original Medicare. Many people enroll in Part A and Part B, then realize the many costs Medicare won’t pick up. That’s where Medigap plans can help, covering costs like copays for doctor visits or extended hospital stays, Part A or B deductibles, coverage for foreign travel, or even an out-of-pocket limit.
There are currently 10 Medigap plans to choose from: A, B, C, D, F, G, K, L, M, and N—although plans F and C are being phased out for people who become eligible for Medicare after 2020. These plans have a standardized set of benefits, no matter which company you purchase them from, so comparing quotes could save you some money. Keep in mind, the more benefits a Medigap insurance plan covers, the higher the premiums are. If you’d like to compare Medigap policies, see our guide.
Timing is critical when buying Medigap
Medigap plans come with protections called guaranteed issue rights, which ensure that you can buy any policy available in your area despite any health condition you may have. However, these rights only last for six months after you sign up for Medicare Part B. Otherwise, the health insurance company has free rein (based on your health) to charge you more, make you wait before your policy takes effect, or deny you coverage altogether.
So, if you want a Medicare Supplement plan, it’s in your best interest to get it within six months of signing up for Part B (at 65 or older).
Medigap vs. Medicare Advantage: Pros and cons
- Standardized by Medicare
- Could be cost-effective for people who regularly use their health insurance
- Not limited by a network (applies to any doctor or facility that accepts Medicare)
- Easily budgeted with predictable monthly premiums
- Short guaranteed issue rights timeframe
- Higher long-term costs for healthy people
- Only two plans (K and L) have an out-of-pocket limit
- Prescription drug (Part D) coverage not included
What is Medicare Advantage?
A detailed look.
Sold by private companies, the Medicare Advantage program takes a variety of Medicare benefits and packages them in a single plan. Every Medicare Advantage plan must provide at least the benefits of Medicare Part A and Part B. Plans often come with additional benefits, such as dental, vision, hearing, fitness memberships (like SilverSneakers), and more. Many plans even include prescription drug coverage (Part D). MA plans cover a variety of costs, but enrollees will still have to pay a percentage of those costs until they hit an out-of-pocket maximum for the year (generally in the thousands).
That said, Medicare Advantage still tends to be less expensive than Medigap plans. In a 2019 study, the Kaiser Family Foundation found that over half (56%) of Medicare Advantage plans with prescription drug coverage don’t charge a premium.1 There are typically several Medicare Advantage plans to choose from, so there’s no shortage of variety (although that could become overwhelming for some).
Finally, Medicare Advantage has an MA Open Enrollment Period from January 1 to March 31 each year. During this time, Medicare Advantage enrollees can switch plans or drop Medicare Advantage and return to Original Medicare. Enrollees who want to switch to Medicare Advantage from Original Medicare must do so during the Annual Election Period (AEP) every fall from October 15 through December 7.
Medicare Advantage vs. Medigap: Pros and cons
Medicare Advantage Pros
- Bundled health insurance packages
- Part D prescription drug coverage often included
- Options for added benefits
- Open Enrollment and Annual Election Periods provide better accessibility
- Many providers
- Competitive (some $0) premiums
- Out-of-pocket limits
Medicare Advantage Cons
- Possible annual changes to coverage and pricing
- Options could be overwhelming
- Limited networks for primary care physicians and facilities
- Limited regional coverage
- Could have higher long-term costs for people with more medical needs
Medigap vs. Medicare Advantage: Which could work for you?
If you like Original Medicare, a Medicare Supplement plan may be a great choice to help reduce your health care costs—especially if you get one within six months of signing up for Part B. Those who may benefit most from a Medigap policy are those who frequently use their health insurance or tend to have more health care costs. Medigap turns high, unpredictable out-of-pocket costs into monthly premiums that can be budgeted for and planned around.
Additionally, snowbirds may benefit from an Original Medicare plus Medigap option, as Original Medicare doesn’t restrict enrollees to a network or a region, like Medicare Advantage typically does.
Medicare Advantage, if…
Are extra perks and (generally) lower monthly costs up your alley? Then Medicare Advantage (MA) may be your best bet. Private insurance companies do all they can to make their plans attractive, and that can work to your advantage (see what I did there?). MA plans often bundle Medicare Prescription Drug coverage into their benefits, so if you have Part D needs, an MA plan is like a one-stop shop for your health insurance checklist.
Medicare Advantage also works well for people who are relatively healthy or don’t anticipate running into serious health issues—or if they do, they have money saved for that purpose. So if you’re the type who would rather have a lower monthly payment and pay for health services on occasion, Medicare Advantage could be better for you than Medigap.
Or, did you miss your guaranteed issue rights window to buy Medigap insurance? If so, companies can use medical underwriting to charge more or even deny you a Medigap plan. If so, the good news is Medicare Advantage can’t do that. If you have an enrollment period and live in the plan’s service area, you can get a Medicare Advantage plan.
I’ve made my choice. How do I sign up?
Good news: an experienced agent can help you get your plan today—Just call.
I still need to learn more before I decide what’s best.
We’ve got you covered there. Check out our guides that go even deeper into both topics.
1. Kaiser Family Foundation, “A Dozen Facts About Medicare Advantage in 2019”
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