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Medicare Advantage vs Medigap: Which is Best For You?

Medicare Advantage vs. Medigap

While shopping for Medicare health insurance, most people want to know “What is the big difference between Medicare supplements and Medicare advantage plans?” Medicare supplements and Medicare Advantage are very different health insurance products, but they both attempt to protect you from the high cost of a chronic illness or being hospitalized.

Unfortunately, it’s very difficult to compare Medicare supplements, also known as Medigap plans, with a Medicare Advantage plan. These insurance plans truly are apples and oranges.

Both Medigap and Medicare Advantage plans are sold by private insurance companies. But that’s about where the similarity ends.

Medicare Supplements Fill the Gaps and Medicare Advantage Replaces

The most important thing to understand is that a Medicare supplement fills the gaps in Original Medicare coverage, whereas Medicare Advantage replaces completely. As a result, a Medigap policy is much easier to understand. Coverage is clear-cut, because if Medicare covers a service, a Medigap policy covers it, too (up to the limit of the policy).

If you have ever had managed care health coverage through an employer, such as a Health Maintenance Organization (HMO) plan, you know it’s not always easy to get a procedure covered. And, with all of the deductibles, copays, and coinsurance requirements, coverage is very difficult to understand.  Yes, Medicare supplement insurance generally has higher premiums than Advantage plans, but this is often where enrollees get fooled.

Here’s why.

A fundamental difference between Medicare Advantage vs. Medigap is when you, the Medicare beneficiary, pay out-of-pocket costs. With Medicare Advantage, most costs are paid when you use health services, via copayments or coinsurance. With Medicare supplement insurance plans you pay most costs in advance.

Find affordable Medicare Supplement Insurance

What are the Bottomline Differences?

One big difference is that a Medigap policy helps you budget your healthcare costs and gives you peace of mind. A Medicare Advantage plan will help you save money, so long as you remain healthy and don’t need healthcare services.

A Medigap policy fills the gaps in Original Medicare coverage. It does this by being in lockstep with Medicare Part A and Medicare Part B coverage. Medicare pays for about 80 percent of all Part A and B healthcare services, and Medigap plans cover all or a portion of the remaining 20 percent. It’s so simple that all coverage options fit on a chart. Medicare Advantage plans can’t do that because every insurer’s coverage is different and copays for each medical care service are different.

Another huge difference between these types of plans is provider networks. Medicare Advantage plans have them and supplement plans don’t. When a health insurance plan uses provider networks, your primary care doctor becomes the insurance companies gatekeeper, requiring you to get a referral to see a specialist in the plan’s network. With supplemental insurance, you see any specialist you want, when you want, so long as they accept Medicare.

Does Medicare Part C Have Any Advantages?

From what has been said so far, it might seem as though Medicare Advantage plans (aka, Part C) have few, if any, benefits whatsoever. That simply isn’t true.

There are many.

One of the top reasons that millions of Americans choose a Medicare Advantage plan is that they offer additional benefits. Some of the most common additional benefits include prescription drug coverage (i.e., a Medicare Part D plan), and routine dental, vision, and hearing care. These are benefits that are not provided in Medicare Parts A or B.

Also, the monthly premium on most Medicare Advantage plan is very low, and in many cases has no additional cost at all. By that we mean your monthly Medicare Part B premium covers the full cost. Some people call these free Medicare Advantage plans, but they really are not free, they are zero additional cost.

Another benefit is that a Medicare Advantage plan can’t turn you down for coverage based on your pre-existing conditions. There is one exception, and that’s end-stage renal disease.

In contrast, a Medicare supplement insurance company can and will turn you down based on your health conditions. The federal Medicare program and state insurance regulations give them the legal right to send your application through a medical underwriting process to decide if they want to issue a policy to you or not.

Find affordable Medicare Advantage Plans

There’s another difference, too, and that’s the Medicare Annual Election Period (AEP). During AEP you can easily switch from one Advantage plan to another or from one drug plan to another, without probing health questions. There are no penalties for making a change, and as mentioned above, you can’t be turned down. It’s a bit more complicated with Medicare supplement insurance.

If you buy a Medigap policy as soon as you get your Medicare benefits (e.g., turn age 65), you have a guaranteed issue right and cannot be turned down. As long as you continue to pay your premiums, the policy you purchase also has a guaranteed renewal. But, if you want to switch plans, or go to a different insurer to get a better rate, you will need to complete an application and go through underwriting.

Many people who switch to Medicare Advantage and then later want to go back to Original Medicare and a Medigap policy find that they can’t because their health has declined, making them a bad risk.

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 Medicare 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 trusted insurance agent (call 1-855-266-4825 if you don’t already have an advisor). 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?

Making the decision between Medicare Advantage vs. Medigap is a big one. Don’t make it alone. Call 1-855-266-4865 and let a licensed HealthPlanOne agent answer your toughest 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.

You may also visit Medicare.gov or call their toll-free hotline.

Citations & References:

medicare.gov

cms.gov

kff.org

This article was written by David Bynon and was last updated on .

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