Differences Between Medicare Advantage and Medigap

There is a lot of confusion regarding Medicare Advantage and Medigap. 

A Medicare supplement plan (aka Medigap plan) builds on your Original Medicare, paying most of the deductibles and copay so that virtually all your Medicare inpatient and outpatient expenses are paid for.   A Medicare Advantage Plan (aka Medicare Part C) replaces your Original Medicare with similar coverage controlled by a for-profit insurance company.

In this guide, we take a comprehensive look at the difference between Medigap and Medicare Advantage , their key features, and how they differ.  You may also wish to explore my article on the disadvantages of Medicare Advantage Plans linked here. 

Let’s start with the basics, what is Medicare?.

What Is Medicare, and How Does it Work?

Medicare is a federal health insurance program available to eligible individuals 65 years of age or older or those under age 65 with permanent disabilities. The Center for Medicare and Medicaid Services (CMS) oversees the program’s administration. Medicare provides coverage for hospitalization, medical care, and prescription drugs. 

To be eligible for Medicare, an individual must be a U.S. citizen or legal permanent resident. . 

Original Medicare is made up of two parts: Part A and Part B. Medicare Part A is your inpatient coverage.  It covers you when you are an inpatient in a hospital, skilled nursing facility, hospice, and home healthcare if you are unable to get to a hospital. Part B covers outpatient and physician services such as doctor visits, lab tests, and preventive screenings. It also covers most medical equipment like diabetic supplies or a walker. 

There are certain things that Original Medicare (Part A and Part B) does not cover. This includes most dental care, corrective vision, and hearing care, including eye exams for glasses or contact lenses and hearing aids. Please see my blog post and video on “Does Medicare Cover Dental?” for details on when Medicare may cover dental services. It’s also important to note that Medicare is not long-term care.

While Original Medicare does not cover all your medical expenses, you can add to your Medicare coverage with a supplement plan so that your out-of-pocket obligation for medical services is near zero.   Or, you also have the option of replacing Original Medicare with a Medicare Advantage Plan.  Both limit your financial risk from medical expenses. 

You can read our comprehensive guide – Medicare Explained Here.

What Is a Medicare Advantage Plan?

Medicare Advantage is offered by private insurance companies approved by the CMS. The same benefits as Original Medicare (Part A and Part B) are provided through Medicare Advantage plans. Most Medicare plans include additional benefits, such as prescription drug coverage, routine dental and vision care, and wellness programs. 

When you enroll in a Medicare Advantage plan, you will remain enrolled in Original Medicare and must continue to pay your Medicare Part B premium.  However, your care will be covered by the private insurance company that offers the Medicare Advantage plan and not by the federal government.

There are several different types of Medicare Advantage plans, these include Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), Special Needs Plans (SNPs), and Private Fee-for-Service (PFFS). Not-so-common plans include Medicare Medical Savings Accounts (MSAs) and Home Point of Service Plans (HMOPOS). Each plan has its own unique features. More than 80% of all Medicare Advantage Plans are either an HMO or a PPO.  Also, not all types of Medicare Advantage plans are offered in every location.  

What Is Medigap (Medicare Supplement Insurance Plan)?

Medigap is a type of supplemental insurance that can help cover certain out-of-pocket expenses associated with Original Medicare, such as copayments, coinsurance, and deductibles.

Original Medicare Part B pays 80% for some covered services, but you are responsible for the other 20%. A Medigap plan can pay that 20% for you. Medicare Part A has a large per-event deductible and full coverage for only 60-days.  A Medicare supplement can pay the deductibles and coinsurance such that an inpatient stay will not cost you anything out-of-pocket.

Medigap plans are offered by private insurance companies and are standardized by the federal government. This means that all plans of the same type offer the same basic benefits, although some may also provide additional benefits.

There are 12 types of Medicare Supplement Insurance plans offered in most states, each designated by a letter – A through N. Plan A offers the most basic plan benefits.  

 Please see this https://medigapseminars.org/medigap-benefits/ table of Medigap Benefits for a description of each of the twelve plans. 

To be eligible for a Medigap policy, you must first be enrolled in Medicare Part A and Part B. If you have a Medicare Advantage Plan, you cannot have a Medigap policy. However, you can switch from a Medicare Advantage Plan to Original Medicare and get a Medigap policy.

Medicare Advantage vs. Medicare Supplement Insurance

Now that you know a little bit about Medicare Advantage and Medigap plans, let’s compare the two side-by-side.

Cost

One of the main differences between Medicare Advantage, and Medigap plans is cost. Generally speaking, Medicare Advantage plans can have lower premiums than Medigap policies. However, you may have to pay copayments, coinsurance, and deductibles with a Medicare Advantage plan, while Medigap plans can help cover these costs.

Simply put, with a Medicare supplement, your monthly premium can buy you a plan that covers virtually all of your Medicare needs.   With a Medicare Advantage plan, you pay much more when you need Medicare services.

Coverage

With a Medicare supplement Plan, Medicare is your Primary insurer, and the decisions on your healthcare are between you and your doctor.  In addition, you can visit any doctor or medical facility in the US and its territories, as long as they accept Original Medicare. Your Medicare supplement premium can increase, but the benefits never change.  

Medicare Advantage Plans have more limitations.  Your doctor must get permission from the insurance company before performing any procedure.  The doctors you see are typically limited to a network.  They must accept your specific Medicare Advantage Plan. With some Medicare Advantage Plans, you are allowed to ask an out-of-network if they will accept your insurance.  But the doctor can decline your request.  Lastly, Medicare Advantage Plan benefits change every year, as does the list of in-network doctors.     See our post on ambulance services for an example.   

Enrollment

To enroll in a Medicare Advantage plan, you must first be enrolled in Original Medicare (Part A and Part B). 

 You can enrol in a Medicare Advantage plan during your seven-month Initial Enrollment Period or during the Annual Election Period from October 15 through December 07.  In this case, your Advantage Plan will start January 01.

Provider Network

Medicare Advantage plans typically have provider networks, while Medigap plans do not. This means that you will likely only be able to see doctors and other healthcare providers who participate in your Medicare Advantage plan’s network. With a Medigap policy, you can see any doctor or other healthcare provider who accepts Original Medicare.

Prescription Drug Coverage

Most Medicare Advantage plans include a bundled Part D prescription drug plan, while Medigap plans do not. If you enroll in a Medigap plan, you can purchase a separate stand-alone Prescription Drug Plan to help cover the costs of your medications. For a better understanding of Medicare prescription drug plans, watch our video on Medicare Part D Explained.

Where You Can Get Medical Care

Medigap plans work in any US state or territory. However, while Original Medicare works in all states, Medicare Advantage plans usually only work in specific states or regions. Medicare Advantage Plans are considered local coverage.  Some Medicare Supplement Insurance Plans also provide emergency medical care coverage while traveling outside of the United States.

Referrals

If you have a Medicare Advantage plan, you may need to get a referral from your primary care doctor before you can see a specialist. You don’t need recommendations to visit specialists with a Medigap plan.

Benefits and Disadvantages of Medigap and Medicare Advantage

Both approaches to Medicare have their pros and cons. Let’s explore the advantages and disadvantages of each type of plan in more detail.

Benefits of Medigap

• Medigap plans offer the same benefits, no matter which insurance company you choose.
• Medigap can help cover the costs of care that Original Medicare does not cover.
• Your potential out-of-pocket costs for medical care is very limited.
• Medigap policies are affordable and can help reduce your out-of-pocket costs.
• Medigap does not have provider networks, so you can see any doctor or healthcare provider who accepts Medicare patients.
• Prescription drug coverage is not included in most Medigap plans, but you can purchase a separate prescription drug plan if needed without disrupting your primary health coverage.
• Medigap plans work in any US state or U.S territory.  
• Referrals are not required with Medigap plans – you can see any specialist you like without a referral from your primary care doctor.
• Emergency medical care is often covered while traveling outside of the United States with a Medigap policy.

Disadvantages of Medigap

• Medigap plans typically have higher premiums than Medicare Advantage plans.
• Medigap does not cover dental or optical care.
• Outside of your initial enrollment period, the insurance company can require that you qualify medically if you wish to purchase a Medicare supplement plan.  .
• You must purchase a separate Prescription Drug Plan to get prescription drug coverage with a Medigap policy.

Benefits of Medicare Advantage

• Compared to Medigap insurance, Medicare Advantage plans generally offer lower monthly premiums.
• Some Medicare Advantage plans cover the cost of standard dental and vision care as well as other health and wellness options.
• There is no medical underwriting to qualify for a Medicare Advantage Plan.
• Most Medicare Advantage plans offer a bundled  Part D prescription drug plan. 

Disadvantages of Medicare Advantage

• When you enrol in a Medicare Advantage plan, you may need a referral from your doctor before getting to see a specialist.
• Medicare Advantage plans often only work in specific states or regions.
• Higher out-of-pocket costs. Your maximum out-of-pocket costs are higher than with a Medicare supplement and do not include unapproved services.
• You can only change plans during the annual or special enrollment periods.  

Considerations to Make Before Choosing Medicare Advantage vs. Medigap

So, the question is, which is better for you – Medicare Advantage or Medigap?

There are a few things you’ll want to take into account before making your decision. Here are some key considerations:

Your budget. How much can you afford to pay for coverage each month? Keep in mind that with Medicare Advantage, you may have to pay premiums, copays, and coinsurance. Medicare supplement insurance plans generally require a monthly premium with almost all other medical costs covered.

The coverage you need. What kind of coverage do you need? Does Medicare Advantage offer the same coverage as Medigap? Do you have any concerns about any coverage gaps?

Your health. Our philosophy is to get now the insurance coverage you will want to have when you are sick or injured. Once you are sick or injured, you may not be able to change policies.  If you have current health problems, you’ll want to ensure that the plan you choose covers the treatments and services you need and that your doctors accept the insurance Medicare Advantage plans typically have more restrictions than Medicare Supplement Insurance when it comes to coverage, so this is something to keep in mind.

Your location. Where do you live? Some Medicare Advantage plans only operate in certain areas, so if you travel frequently or move around a lot, you’ll want to make sure that your chosen plan will be accessible to you wherever you are.

Your doctor. Do you have a doctor that you like and trust? If so, you’ll want to ensure they accept the plan you’re considering. With Medicare Advantage, you may have to switch doctors if your current one isn’t in the plan’s network.

Let’s explore a few hypothetical examples.

Bill is 65 years old and lives in Detroit. He’s in good health and takes very few medications. He has a limited fixed income and is looking for a low premium option. In this example, Medicare Advantage could be a good fit for Bill.

Mary is 67 years old, retired, and lives in San Francisco. She has several chronic conditions and takes many prescription medications. She’s looking for a plan with comprehensive coverage that will cover all of her medical needs. In this instance, Medigap could be the best plan for Mary.

John is 70 years old, retired, and lives in New York City. He’s in good health now but is worried about what might happen in the future as he ages. He wants a plan with comprehensive coverage that will protect him in case his health deteriorates as he gets older. Medigap may be a good choice for John.

Jane is 66 and often travels out of state to work and visit her grandkids. She’s in good health but wants a plan with comprehensive coverage that will be available to her no matter where she is. Medigap is probably going to be a better option for Jane.

Your initial enrollment period is a seven month window around the month you turn 65.  Unless you will continue to work and have great group coverage with a company that has at least 20-employees, this will be your best time to get a Medicare plan.

And if you haven’t yet retired, now is the time to start planning for your health care needs in retirement. Research your options and make sure you understand how Medicare works. That way, when the time comes, you can make the best decision for your needs.

The best time to purchase a Medigap policy is the six-month time frame starting on the first day of the month that you are 65 or older and have enrolled in Medicare Part B. This is known as your “initial  enrollment period.” You can buy a Medigap policy without having to answer any health questions during this time.

If you don’t enroll in a Medigap policy during your open enrollment period, you can still enroll in a Medigap policy any day of the year. However, you may have to undergo a medical underwriting. This means that the insurance company will ask you questions about your health. You can also be charged more for coverage if you have pre-existing health conditions. and even denied coverage based on your health history.

Switching Plans

You might think it’s a good idea to start with the cheaper Medicare Advantage and switch to Medigap if your health deteriorates. However, this isn’t always the best strategy.

For one thing, you might not be able to get Medigap coverage if you have pre-existing health conditions. And even if you are able to get Medicare supplemental insurance, it might be more expensive than you expect. 

If you have chosen a Medicare Advantage plan and wish to change to a Medicare supplement plan, you can do so during the annual election period (October 15 through December 07) or during open enrollment (January 01 through March 31).  The one exception to this is if you enrolled in a Medicare Advantage plan when you first turned 65 and are still in your first year of coverage.   Medicare offers a one-year Trial Right to switch to a Medigap plan, no questions asked.  

In Conclusion

Navigating the world of Medicare can be confusing. With so many different options, it can be a challenge to know which one is best for you. But, by taking some time to understand your needs and priorities, you can decide which plan is best for you – Medicare Advantage or Medigap.

You can also explore our website to find more resources about Medicare. We have a wide range of videos and articles explaining Medicare’s different parts in easy-to-understand language.

Still, have more questions? Check out our blog post discussing the Medicare Mistakes to avoid.

If you are still feeling a little overwhelmed, let us help you find a plan that fits your budget and needs. We are an Independent Medicare Insurance Agent with a proven track record with plenty of testimonials to match.

Request a free consultation today by calling us at 800-847-9680 or filling out our Quote Request form on this website. We look forward to helping you find the perfect Medicare plan for your needs!

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