Is it Better to Have Medicare Advantage or Medigap?

Medicare Advantage vs. Medigap: Which Is Right for You?

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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 help alleviate some of 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, plan-dependent $25 monthly average
Doctor and Hospital Visits Covered Yes Yes, varying by plan
Enrollment Period First six months after you turn 65 and are enrolled in Medicare A and B At 65; Oct. 15-Dec. 7; Jan. 1-March 31
Network Restrictions Medicare SELECT plans only Yes
Referrals Required No Yes
Prescription Drug Coverage No Yes
Travel Coverage Yes (Plans C, D, F, G, M, N) Varies by plan
Copays Varies by plan Yes

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, 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 in the month you turn 65. Some states offer Medigap to qualifying seniors under 65, but the monthly premiums might be higher.

Pro Tip: You have to have both Medicare Parts A and B to get (and keep) Medigap. If you want drug coverage, you can join a Drug Plan (Part D) in addition to buying a Medigap policy.

Medigap plans cover:

  • Copays for Medicare Parts A and B
  • Coinsurance for Medicare Parts A and B
  • Deductibles
  • Healthcare outside the country (foreign travel)

Medigap does NOT cover:

  • Prescription drugs (for policies starting after January 1, 2006)
  • Vision or dental care
  • Hearing aids
  • Eyeglasses
  • Private-duty nursing
  • Long-term care

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 as beneficial for everyone, so it's essential to weigh the pros and cons.

What We Like About Medigap

  • Helps cover out-of-pocket Medicare expenses that can add up.
  • Protects against hefty costs due to chronic illness or major health emergencies. Some plans cover services Medicare doesn't provide, such as healthcare while you're traveling outside the U.S.
  • Auto-renews annually as long as premiums are paid; private insurance companies cannot revoke Medigap coverage as long as you're in good standing with Medigap and Medicare.

Things to Keep in Mind About Medigap

  • Additional monthly premium.
  • Prices can fluctuate largely by provider based on different criteria. Some Medigap plans are flat rate, while others vary based on state, age, gender, overall health, and even time of year.
  • Certain providers do not accept or cover preexisting conditions.
  • Does not cover all expenses (like prescription drugs, some medical equipment, or long-term care).

Medigap Costs

Like any private supplemental insurance, Medigap charges a monthly premium. Insurance companies can set their rates in three different ways:

  1. Community: Same set rate for all clients, regardless of age or conditions.
  2. 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.
  3. Attained-age: Rates are set according to a person's current age, and they will increase as buyers get older.

What is Medicare Advantage?

Medicare Advantage (also called MA or Part C) is all-in-one Medicare coverage that bundles Medicare Part A and Part B with Part D (prescription drug coverage), hence the name Part C. It essentially functions like a Medicare HMO or PPO with a pre-set list of in-network services and doctors. These plans come with out-of-pocket maximums to help protect you from huge bills. Most plans also cover routine extras like vision and dental care, but there are network and referral restrictions. Like 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 covers:

  • Vision
  • Hearing
  • Dental
  • Health and wellness programs (like gym discounts)
  • Medicare-covered prescription drugs (Part D)
  • Emergency and urgent care
  • Some plans provide extras like medical transportation, adult day-care, and over-the-counter medication.

Medicare Advantage does NOT cover:

  • Copays
  • Coinsurance
  • Deductibles
  • Some services deemed unnecessary by Medicare (plan-dependent)

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

  • Lower monthly premiums than Medigap.
  • Combines multiple Medicare plans into one policy (usually Parts A, B, and D) and often covers prescription drugs.
  • Covers additional benefits that Original Medicare does not, like dental and hearing aids.
  • Usually offers out-of-pocket spending cap.

Things to Keep in Mind About Medicare Advantage Plans

  • Not all medical facilities or doctors accept Medicare Advantage.
  • Wide cost variations.
  • Plans and coverage vary widely depending on 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

Age

Some Medicare supplemental plans base their rates on age, either issue-age (your age when you buy the policy) or attained-age (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.

Employment status

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.

Location

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.

Medical Conditions

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.

Out-of-Pocket Expenses

Even supplemental insurance policies have extra expenses. Some Medigap and Medicare Advantage plans have out-of-pocket limits. For example, Medigap plans K & L have a limit of $6,220 and $3,110, respectively, in 2021.3 Seniors should estimate their typical annual medical expenses to get the policy that is closest. Use Medicare's out-of-pocket cost estimator to get anidea.4

Enrollment Periods

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 Medicare Advantage plans:

  • Initial Enrollment: When seniors first become eligible for Medicare.
  • Open Enrollment: October 15 – December 7 annually to join, change, or leave plans.
  • Medicare Advantage Open Enrollment: January 1 – 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 Vise Versa?

Yes, you can switch from Medicare Advantage to Medigap or vise 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. Why switch?

  1. You need more or different benefits.
  2. You're overpaying for benefits you don't use.
  3. You want to switch insurance companies.
  4. You want a lower premium.

How to switch will depend on which plan you're starting with.

Switching From Medigap to Medicare Advantage

Medicare Advantage offers annual enrollment regardless of any preexisting conditions (except some end-stage exceptions). You can move from Medigap to Medicare Advantage during these times:

  • Initial Enrollment: At 65 or eligible for Medicare
  • Open Enrollment: October 15 – December 7
  • Medicare Advantage Open Enrollment: January 1 – March 31

Switching From Medicare Advantage to Medigap

Because seniors are only guaranteed Medigap enrollment during the six-month enrollment period, many sign up for Medigap first and switch to Medicare Advantage later. But remember, it can be harder and more expensive to get Medigap after the initial six-month eligibility at 65.

Seniors with Medicare Advantage can change over to Medigap during specific times of the year:

  • Six-Month Open Enrollment: At age 65 with enrollment in Medicare Parts A and B.
  • Medicare Open Enrollment: October 15 – December 7.
  • Medicare Advantage Open Enrollment: January 1 – March 31.
  • 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.

Since graduating from Harvard with an honors degree in Statistics, Jeff has been creating content in print, online, and on television. Much of his work has been dedicated to informing seniors on how to live better lives. As Editor-in-Chief of the personal… Learn More About Jeff Hoyt

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Citations
  1. Fidelity. (2020). How to plan for rising health care costs.

  2. Medicare.gov. (2021). Medicare Advantage Plans cover all Medicare services.

  3. Center for Medicare & Medicaid Services. (2020). K & L Out-of-Pocket Limits Announcements.

  4. Medicare.gov. (2021). Estimate Medicare Costs.

  5. Medicare.gov. (2021). When can I buy Medigap?