Many seniors don't realize that Original Medicare doesn't cover 100 percent of all medical expenses. Things like deductibles and dental care are extra and add up. Some estimates say the average retired couple ages 65 and over spends $295,000 on health care.1 While numbers like that might make your head spin at first glance, you can buy supplemental insurance to alleviate those costs.
Medigap and Medicare Advantage are available to help lighten the load. Offered by private insurers, both supplements have multiple plan options, advantages, and disadvantages. So how do you decide between the two? In this article, we'll weigh the pros, cons, and purpose of both to help you make an informed decision.
Comparing Medigap vs. Medicare Advantage Plans
|Plan Features||Medigap||Medicare Advantage|
|Cost||$20 to $500 per month, depending on plan||$25 monthly average|
|Doctor and hospital visits covered||Yes||Yes, varying by plan|
|Enrollment period||First 6 months after you turn 65 and are enrolled in Medicare A and B||At 65; Oct. 15 to Dec. 7; Jan. 1 to March 31|
|Network restrictions||Medicare SELECT plans only||Yes|
|Prescription drug coverage||No||Yes|
|Travel coverage||Yes (Plans C, D, F, G, M, N)||Varies by plan|
|Copays||Varies by plan||Yes|
From the pros: Steer clear of costly penalties and late fees by following our step-by-step Medicare enrollment guide!
What is Medigap?
After paying deductibles, Medicare recipients are still responsible for roughly 20 percent of any approved expenses. Medigap policies, sold by private insurance companies, help cover those out-of-pocket “gaps,” such as copays or extra services Medicare does not provide.
With 10 different plans (eight for seniors who enrolled after Jan. 1, 2020), Medigap is relatively customizable and allows more flexibility in where you get care than Original Medicare. But monthly premiums can be higher and eligibility more restricted after the six-month open enrollment period, which begins on the first day of the month you turn 65. Some states offer Medigap to qualifying seniors under 65, but the monthly premiums might be higher.
From the experts: You must have both Medicare Parts A and B to get (and keep) Medigap. Our comprehensive guide to Medicare Supplement Insurance has the important details on Medigap plans and pricing.
Each Medigap insurance plan has a different combination of benefits. Common benefits across most plans include:
- Medicare Part A coinsurance and hospital costs
- Medicare Part B copayment or coinsurance
- Part A hospice care coinsurance or copayment
- First 3 pints of blood transfusions
Medigap does NOT cover:
- Prescription drugs
- Vision or dental care
- Hearing aids
- Private-duty nursing
- Long-term care
From the experts: Medigap enrollees have the option to add a Medicare Part D prescription drug plan. Our research team analyzed providers across the nation to find the top Medicare Part D providers for seniors.
Advantages and Disadvantages of Medigap
Because Medicare does not have an out-of-pocket maximum, chronic or critical conditions could spell financial disaster. Medigap supplemental plans can minimize that risk, but their value depends on individual circumstances. They aren't equally beneficial for everyone, so it's essential to weigh the pros and cons.
What We Like About Medigap
- It helps cover out-of-pocket Medicare expenses that can add up.
- It protects against hefty costs due to chronic illness or major health emergencies. Some plans cover services Medicare doesn't provide, such as health care while you're traveling outside the U.S.
- It auto-renews annually as long as premiums are paid; private insurance companies cannot revoke Medigap coverage if you're in good standing with Medigap and Medicare.
Things to Keep in Mind About Medigap
- It has an additional monthly premium.
- Prices can fluctuate largely by provider based on different criteria. Some Medigap plans have flat rates, while others vary by state, age, gender, overall health, and even time of year.
- Certain providers do not accept or cover preexisting conditions after the initial six-month Medigap enrollment window has passed.
- It does not cover all expenses (like prescription drugs, some medical equipment, or long-term care).
Like any private supplemental insurance, Medigap charges a monthly premium. Insurance companies can set their rates in three different ways.
- Community: There is the same set rate for all clients, regardless of age or conditions.
- Issue-age: Premiums are based on age at the time of policy enrollment. Younger people usually get lower rates. However, the rates are locked in at purchase, so they don't go up as enrollees age.
- Attained-age: Rates are set according to a person's current age, and they will increase as buyers get older.
Medigap Insurance Reviews and Ratings
It's easy to feel overwhelmed when you're searching for a Medigap plan that aligns with your health care needs and budget. Explore our detailed Medicare Supplement Insurance reviews to learn which providers stood out among the competition!
What Is Medicare Advantage?
Medicare Advantage (also called MA or Part C) is all-in-one Medicare coverage that bundles Original Medicare (Part A and Part B). Most Medicare Advantage plans include Part D (prescription drug coverage). When shopping for a Medicare Part C plan, you have several options, including a traditional HMO or PPO. Some plans come with a preset list of in-network services and doctors, while others allow you to see both in-network and out-of-network providers. Many plans also cover routine extras like vision and dental care, but there may be network and referral restrictions. As with Medigap, you buy Medicare Advantage through private insurers approved by Medicare.
Pro Tip: You cannot get Medicare Advantage if you have a Medigap plan, and vice versa.2 But you can switch from one to the other at certain enrollment times.
Medicare Advantage Plans may offer extra coverage, such as:
- Health and wellness programs (like gym discounts)
- Medicare-covered prescription drugs (Part D)
- Emergency and urgent care
- Medical transportation, adult day care, and over-the-counter medication
Medicare Advantage does NOT cover:
- Some services deemed unnecessary by Medicare (dependent on plan)
Did You Know: Federal regulations require all Medicare Advantage providers to set an out-of-pocket limit to help protect you from huge bills. Our Medicare Part C guide breaks down these maximum costs.
Pros and Cons of Medicare Advantage Plans
Medicare Advantage combines the separate hospital, doctor, and other Medicare parts into one plan, which can save money and time. But you need to know the details and downsides to figure out if Medicare Advantage is your best solution.
What We Like About Medicare Advantage Plans
- It has lower monthly premiums than Medigap.
- It combines multiple Medicare plans into one policy (usually Parts A, B, and D) and often covers prescription drugs.
- It covers additional benefits that Original Medicare does not, like dental and hearing aids.
- It usually places a cap on out-of-pocket spending.
Things to Keep in Mind About Medicare Advantage Plans
- Not all medical facilities or doctors accept Medicare Advantage.
- There are wide cost variations.
- Plans and coverage vary widely by location and benefits.
- Numerous options make comparing plans difficult.
- Some plans (often $0 premium plans) have high out-of-network fees and out-of-pocket maximums.
Things to Consider When Choosing Medigap vs. Medicare Advantage
Some Medicare supplemental plans base their rates on age, either issue age (your age when you buy the policy) or attained age (meaning prices go up as you grow older). Make sure to find out how rates are factored and if coverage differs by age throughout the policy.
Many companies offer Medicare Advantage plans or subsidies for retiring employees. Seniors turning 64 should check their employer benefits before retiring or signing up for Medicare supplemental insurance.
Both Medigap and Medicare Advantage offer different coverage in different states, and not all plans provide coverage during travel. Seniors who live in multiple states or travel throughout the year need to make sure their coverage travels with them.
Do you have a chronic illness that requires regular attention? Do you need several prescription medications? Are you relatively healthy and only need to see a doctor a few times a year? Seniors with chronic conditions or those at risk of frequent or urgent hospital care might pay more out of pocket. Pick plans based on the amount of coverage you likely need, and also consider possible future needs, such as emergency or long-term care.
Even supplemental insurance policies have extra expenses. Some Medigap and Medicare Advantage plans have out-of-pocket limits. For example, Medigap Plans K and L have a limit of $6,220 and $3,110, respectively, in 2021.3 niors should estimate their typical annual medical expenses to get the policy that is closest. Use Medicare's out-of-pocket cost estimator to get an idea.4
You can apply for Medigap at any time. However, seniors can only receive guaranteed Medigap coverage during their six-month Medigap open enrollment period. The clock automatically starts the month you turn 65 and enroll in Medicare Parts A and B. After that, you may not be able to get Medigap if you don't meet insurers' underwriting requirements.5 Prices also go up after open enrollment ends. To get the best Medigap prices and options, sign up during the Medigap open enrollment period.
There are three main eligibility periods to enroll in or switch to a Medicare Advantage plan:
- Initial Enrollment is when an individual first becomes eligible for Medicare.
- Open Enrollment is Oct. 15 to Dec. 7 annually to join, change, or leave plans.
- Medicare Advantage Open Enrollment is Jan. 1 to March 31 annually. Those already enrolled in Medicare Advantage can switch plans or go back to Original Medicare during this time.
Can I Switch From Medicare Advantage to Medigap or Vice Versa?
Yes, you can switch from Medicare Advantage to Medigap or vice versa if you decide that one fits your needs better than the other after enrolling. However, you cannot be enrolled in both Medigap and Medicare Advantage at the same time.
- You need more or different benefits.
- You're overpaying for benefits you don't use.
- You want to switch insurance companies.
- You want a lower premium.
How to switch will depend on which plan you're starting with.
Switching From Medigap to Medicare Advantage
If you're thinking about switching from your Medigap plan to a Medicare Advantage plan, you can make the move during the Medicare Annual Enrollment Period from Oct. 15 to Dec. 7.
FYI: If you drop your Medigap policy to join a Medicare Advantage plan, you may not be able to get it back. Rules vary by state and your situation.6
Switching From Medicare Advantage to Medigap
Individuals with Medicare Advantage can change over to Medigap during specific times of the year.
- Medicare Advantage Trial Period: During the first 12 months after enrolling in Medicare Advantage, you can switch back to Original Medicare and apply for Medigap
- Medicare Annual Enrollment Period: Oct. 15 – Dec. 7.
- Medicare Advantage Open Enrollment Period: Jan. 1 – March 31.
Understanding the facts and features of Medicare can be challenging! Our editor-in-chief, Jeff Hoyt, explains how to avoid missing out on valuable Medicare benefits.