Is it Better to Have Medicare Advantage or Medigap?

by David Bynon, last updated

While shopping for Medicare health insurance, particularly if you are getting your benefits for the first time, it’s important to understand the difference between Medicare Advantage and Original Medicare with a Medigap plan. In this article, we’ll cover the fundamental benefits of each.

We’ll also break down why one could benefit you a lot more than the other so you can decide if it is better to have Medicare Advantage or Medigap.

Key Takeaways

  • A Medicare Advantage plan replaces your Original Medicare (Part A and Part B) benefits with private health insurance.
  • A Medigap plan supplements Orginal Medicare by paying some of the out-of-pocket costs (deductibles, copayments, and coinsurance).
  • Medicare Advantage plans may include extra benefits not offered by Original Medicare.
  • Most Medicare Advantage plans include a Medicare Part D plan for prescription drug coverage.
  • Medigap plans cannot include extra benefits. They only help pay Medicare-approved benefits in Part A and Part B.
  • With Medicare Advantage plans, most costs are paid when you use healthcare services.
  • With Original Medicare and a Medigap policy, most costs are paid in advance.

Medicare Advantage vs. Medigap

Medicare Advantage plans and Medigap plans are very different types of health insurance products. Both are sold through private insurance companies. Both are regulated by the federal government. And both will protect you from sky-high healthcare costs.

That is about where their similarities end.

The best way to understand each product is to understand its goals.

The goal of a Medicare Advantage plan is to reduce healthcare costs for the plan, the government, and sometimes the beneficiary. They do this by controlling access to healthcare services through a network of contracted providers.

The goal of a Medigap policy is to reduce a beneficiary’s risk of high out-of-pocket expenses by covering these costs up to the limits of the policy.

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Medicare Advantage Plans Replace Part A and Part B

Medicare Advantage plans (Medicare Part C) are private health plans that replace your Original Medicare. If you enroll in a Medicare Advantage plan, it takes over providing all of your Medicare Part A and Part B benefits.

Not all plans are the same. There are different types of plans. Depending on where you live, you may have Health Maintenance Organization (HMO) plans, Preferred Provider Organization (PPO) plans, or Private Fee for Service (PFFS) plans.

If you have ever had managed care health coverage through an employer, such as an HMO plan or a PPO plan, you know it’s not always easy to get a procedure covered. And, with all of the deductibles, copays, and coinsurance requirements, your costs are not always easy to understand. Be sure to factor this into your decision-making.

Unlike Original Medicare, all Medicare Advantage plans have an annual maximum out-of-pocket (MOOP) limit. In many cases, particularly on plans with low monthly premiums, the out-of-pocket maximum can be very high.

Why does that matter?

A Medicare Advantage plan might be cheap to get into but expensive to own. Can you afford to shell out for your major healthcare needs in a year? That’s how high the in-network MOOP is on many plans. And that’s just your deductibles and copays on Part A and Part B services. It does not include monthly premiums or prescription costs.

Medigap Pays Part A and Part B Out-of-Pocket Costs

Whereas a Medicare Advantage plan replaces your Original Medicare benefits, a Medigap plan supplements them. This is why these plans are also called Medicare Supplements.

Medigap plans are easier to understand than an HMO plan or a PPO plan. Coverage is clear-cut.

There are 10 lettered Medicare Supplement insurance plans. Each lettered plan covers the gaps in Original Medicare differently, allowing you to choose the amount of Medicare coverage you need. The best way to understand is to look at a chart.

Medicare Supplement Plans Comparison Chart for 2024

When you buy a Medigap policy, if Medicare covers a service, your Medigap policy covers it, too (up to the limit of the policy). There is no ambiguity. And you don’t need a referral or pre-authorization to use healthcare services. This is why people feel a Medicare Supplement plan is the best coverage you can buy.

Medicare Advantage Plans Offer Extra Benefits

In addition to providing all of your Part A and Part B benefits, most Medicare Advantage plans include some additional benefits. The most common extra benefits plans offer include prescription drug coverage (Part D), and routine vision, hearing, and dental care.

However, while the extra benefits are nice to have, it’s important to do more than simply ask, “How much is Medicare Advantage per month?” Research out-of-pocket costs, too.

Medigap Plans Travel

Except in the event of an emergency, Medicare Advantage plans do not cover you outside of your local area. With Original Medicare, you’re covered where ever you go in the United States or its territories. Plus, some Medigap plans cover foreign travel emergencies.

Medicare Advantage Plans Use Provider Networks

One of the key features of Medicare Advantage plans is provider networks. Plans contract with local healthcare providers to deliver care to their members at a lower cost. When a member goes outside of the network for care, they pay a higher rate (PPO) or all costs (HMO).

To manage the delivery of healthcare services as economically as possible, Medicare Advantage plans require their members to have a primary care physician. They control access to specialists, through referrals, and to specific healthcare services, through pre-authorization with the plan.

Medigap Plans Do Not Require Referrals or Pre-Authorization

Medigap plans do not have provider networks. If a doctor, specialist, or other healthcare provider accepts Medicare, a Medigap plan is also accepted.

And, because Original Medicare itself does not require referrals or pre-authorization to receive care, Medigap plans do not impose this restriction, either.

Medicare Advantage Plans Have Lower Premiums

There’s a general misconception that Medicare Advantage plans cost less because many plans have low monthly premiums. In fact, some plans have a zero-dollar premium.

Are these plans free? What’s the catch?

There’s no catch and they are not free. When you join a Medicare Advantage plan you continue to pay your monthly Medicare Part B premium. And, if you don’t have premium-free Part A, you pay it, also.

When a Medicare Advantage plan has a monthly premium, it is the additional amount needed to cover the plan’s additional benefits.

Medigap Insurance Companies Can Turn You Down

Medicare Advantage plans cannot turn you down due to a preexisting condition. Even people with end-stage renal disease (ESRD) can get a Medicare Advantage plan. The same is not true when it comes to Medigap.

Why is that?

Medigap is not health insurance, per se. It’s actually a form of indemnity insurance.

A Medigap policy indemnifies a policyholder from the out-of-pocket costs in Medicare Parts A and B. It has different rules and regulations than health insurance.

When it comes to getting a Medigap policy, Medicare beneficiaries have guaranteed issue rights, but only during their Medigap Open Enrollment Period. Medigap protections end 6 months after a beneficiary enrolls in Medicare Part B.

If you are younger or older than age 65, and you can find a carrier that will cover you, contact your State Health Insurance Assistance Program (SHIP) to find out more about the rules in your area.

Medicare Advantage Plans Change Annually

Each year, Medicare Advantage plans are required to submit a benefits package to Medicare for approval. The benefits package details everything the plan covers and how it covers it. Potentially, that means a benefit that’s in a plan this year will not be in the same plan next year. It also means that rates on the healthcare services you use most can go up, or that doctors you see can leave the plan’s network.

That’s just the way it is. Plans have the right to make changes annually. And members have the right to jump ship and join a different plan. That is the whole purpose of the Open Enrollment Period, which starts on October 15 and ends on December 7 each year.

Medigap Rates Increase Annually

Unlike Medicare Advantage plans, Medicare Supplements do not have plan years. And their benefits rarely change. However, rates, deductibles, and out-of-pocket limits do change.

Every year Medicare sets new deductible limits for high deductible plans, like Medigap High Deductible Plan F and G. It also sets the maximum out-of-pocket limits on Medigap Plans K and L.

While it is not mandatory that insurance carriers increase their rates every year, most do. For some people, this can make staying in a Medigap policy difficult.

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Medicare Advantage Works with Medicaid

Medicaid is a healthcare program for low-income individuals. It is fully compatible with Medicare, meaning you can have both at the same time. The challenge for dual-eligible people is coordinating their benefits.

Medicare Advantage coordinates Medicare and Medicaid benefits through dual-eligible Special Needs Plans (D-SNPs). These plans cover all Part A and Part B benefits, include a Part D plan for prescriptions, and include all additional Medicaid benefits.

Medigap Does Not Work with Medicaid

Generally speaking, a Medigap policy will not be sold to anyone who qualifies for Medicaid. Nor should it be. If you have Medicaid, you do not need Medigap.

People who qualify for Medicaid are eligible for Medicare Part B premium assistance, out-of-pocket cost assistance, as well as a low-income subsidy for their prescriptions.

Medicare Advantage is an All-In-One Medicare Plan

If you’re looking for the convenience of having all of your healthcare managed through a single card, Medicare Advantage could be the solution you’re looking for. It all depends on the plans available in your local market.

With so many plans now including vision, hearing, dental, and prescription benefits, it’s getting easier to find all-in-one Medicare plans.

Medigap is A Ala Carte Medicare Coverage

If you want full control over your healthcare benefits, you have that option with Original Medicare coverage. Add a Medicare Supplement plan to help cover Part A and Part B out-of-pocket expenses. Add a Medicare Part D plan to get prescription drug coverage. And add a vision, dental and hearing plan for your routine care.

Who Benefits The Most From Medicare Advantage?

There’s no way to sugarcoat this, Medicare Advantage plans benefit healthy people and low-income individuals the most.

Healthy people benefit because they can take full advantage of all of the extra benefits offered by a Medicare Advantage plan without additional cost. And, because healthy people rarely need medical care, except for an annual checkup, their annual out-of-pocket costs are also low. When something bad does happen, their plan’s MOOP is there to prevent a financial disaster.

Low-income enrollees benefit because their plans are subsidized by the government to make them affordable. These people are shielded from out-of-pocket expenses that would put them further at risk.

Who Benefits The Most From Medigap?

Medicare Advantage can’t turn you down for a pre-existing condition, but Medigap insurance carriers can. If you have a chronic health condition, that should tell you everything you need to know about Medigap. It’s better coverage.

Wealthy people stay wealthy by insuring their most important assets. If your house burns down, you need it replaced. If your car is stolen, you need a new one. Not many of us can comfortably dip into our savings to buy a new house or car in cash.

The same principle can be applied when it comes to your health. The purchase of a Medigap insurance policy insures that you won’t be dipping into your retirement savings to pay a $10,000 hospital bill.

If you want peace of mind, and you can afford the monthly premiums, Original Medicare and a Medigap Plan G policy is the best coverage you can get today. Period.

If you qualified for Medicare prior to 2020, Medigap Plan F is the best coverage you can get. It pays the Medicare Part B deductible. Plan G doesn’t.

What is the Best Option for Me?

Everyone is different, and so are their health insurance needs. Your neighbor or friend may try to convince you that Medigap Plan F is the one and only plan to have. If it works for them, great, but they are not you.

The first step in figuring out the best option for you is to speak with a licensed insurance agent. Their job is to ask you smart questions about former employer benefits, military service benefits, Medicaid benefits, and so on.

They will also ask you about your health history and your family’s health history to better understand the amount of risk you can afford to take. Health insurance, like all other types of insurance, is all about balancing risk. If you buy too much you’re wasting money. If you buy too little, your out-of-pocket costs may skyrocket.

Your insurance agent can walk you through your options and help you understand how Medicare insurance cost-sharing works. If you decide to get supplemental insurance, they can help you with a stand-alone prescription drug plan, too.

Do You Have More Questions?

Are Medicare supplements worth it? It might seem as if Medigap plans are expensive. But, going with Original Medicare alone is not wise. The coverage gaps in Medicare add up fast, particularly if you have an emergency. Paying 20% of all your outpatient coverage might not seem so bad, but getting slapped with a $1,400 hospital bill really smarts. And that's just for the deductible! We answer this question in more detail here.

Medigap insurance policies are designed to fill the gaps (e.g., deductibles and copays) in Medicare Part A and Part B coverage, however, they do not offer additional benefits. Medicare Advantage plans replace Part A and B coverage and often include additional benefits, including prescriptions, dental, vision, and hearing. Click here to learn more about how Medigap plans work.

A Medigap plan works in concert with your Medicare Part A and Part B to pay some or all of your out-of-pocket costs, including deductibles, copays, and coinsurance. To compare what each plan offers, see our Medicare Supplement Plans Comparison Chart.

A Medicare Advantage plan may be a better choice if you are exceptionally healthy or if you can get an employer-sponsored plan. The reason is that Medicare Advantage plans have an out-of-pocket maximum that protects you from serious medical bills. Healthy people rarely have large medical bills, so they get to take advantage of low premiums. People with an employer-sponsored plan generally get help with their copays.

If you're not in great health and don't have access to an employer-sponsored plan, Original Medicare plus a Medigap plan offers better coverage and generally allows you more choice in where you receive your care. To compare plans, visit this page and enter your zip code.

Making the decision between Medicare Advantage vs. Medigap is a big one. Don’t make it alone.

Call 1-855-728-0510 (TTY 711) for plan assistance.

If you qualify for Medicare and don't know where to start,, an independent HealthCompare insurance broker, has licensed insurance agents who can help you with your Medicare enrollment options, Mon-Fri, 8am-9pm , SAT 8am-8pm EST.

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