Medicare Advantage vs. Medigap: Which Is Better?

Kelly Blackwell

Certified Senior Advisor (CSA)®

Kelly Blackwell

Certified Senior Advisor (CSA)®

Kelly Blackwell is a Certified Senior Advisor (CSA)®. She has been a healthcare professional for over 30 years, with experience working as a bedside nurse and as a Clinical Manager. She has a passion for educating, assisting and advising seniors throughout the healthcare process.

Your two primary Medicare coverage options are Original Medicare and Medicare Advantage Plans. You can supplement Original Medicare with a Medigap policy or choose a Medicare Advantage Plan that replaces both. While both Original Medicare with Medigap and Medicare Advantage provide health coverage, the benefits and costs vary greatly. Understand your Medicare Advantage and Medigap options to ensure you get the best Medicare coverage for you.

What's the Difference Between Medicare Advantage and Medigap Coverage?

“The differences between Medicare Advantage and Medigap coverage can get confusing for people very quickly,” says Ryan Cicchelli, founder of Generations Insurance & Financial Services in Cadillac, Michigan. While both provide protections Original Medicare does not, he says the two couldn’t be more separate from one another.

Medigap

Medigap, also known as Medicare Supplement Insurance, is the simpler of the two. Provided by private health insurance companies, Medigap policies are designed to fill the “gap” in Original Medicare by paying some of the healthcare costs not covered by Parts A and B. These costs can include copayments, coinsurance, and deductibles, such as your Part B deductible. Some Medigap plans cover services Original Medicare doesn’t cover, such as medical care while traveling internationally.

“Original Medicare Parts A and B cover roughly 80% of hospitalization and doctoring costs,” Cicchelli says. “Most people would say that sounds pretty good all by itself until they find themselves in a six-figure hospital stay. Then, that seemingly paltry 20% becomes a serious problem.”

Medigap comes in by helping cover that 20% that Parts A and B don’t cover. When you have a Medigap policy, Medicare pays its 80% share of the Medicare-approved costs for your care, then your Medigap policy’s coverage kicks in.

“There are 10 standardized plans available, all tightly regulated by the government and all designated with single-letter names,” Cicchelli says. “The differences between the plans can seem subtle, but each covers multiple aspects of the gap ranging from minimal additional coverage plans to ones that cover nearly everything Medicare does not.”

Each plan’s upside will provide the same benefits based on its letter, regardless of which insurance carrier provides it. “That takes some variables out of the decision-making process,” Cicchelli says. “Then it becomes more a question of pricing and the reputation of the insurance companies in question.” You must pay a monthly premium for a Medigap policy.

Medigap policies don’t work with Medicare Advantage Plans. It’s illegal for anyone to sell you a Medigap policy while you have Medicare Advantage.

Medicare Advantage Plans

Medicare Advantage is a little more complicated. Unlike Medigap, which is used in addition to Original Medicare, Medicare Advantage Plans, also called Medicare Part C or MA Plans, are an alternative to Original Medicare coverage. MA plans provide the same coverage as Parts A and B but are offered by Medicare-approved private insurance companies.

“These plans essentially give the responsibility of managing a person’s original Medicare benefits to a private insurance company rather than the government,” Cicchelli says. “They are still strictly regulated by Medicare, and any plan offering must contain benefits at least as good as those offered by Original Medicare alone. Beyond that, these plans can offer additional benefits, even covering some areas Original Medicare normally does not, such as dental.”

Most MA plans also include prescription drug coverage like that offered by Medicare Part D. With Medigap, you’d need to get a separate Medicare prescription drug plan. Like an employer-sponsored health plan, extra benefits may be included in a MA Plan, such as wellness programs or nutritional food assistance.

“With additional benefits that vary between company offerings comes additional choices,” Cicchelli says. “Not only do people need to be mindful of which insurance company they choose, but they need to look very closely at the specific plans as well. Each offering contains varying amounts of copays and coinsurance for covered services.”

MA Plans have annual out-of-pocket maximums for covered services to limit how much you may be required to pay in a given calendar year, but these maximums can also vary by plan.

Many MA plans are similar to traditional health maintenance organization (HMO) plans in that you have to choose doctors and use hospitals and clinics within the plan network or risk paying more for out-of-network services.
“This can be problematic if you are on vacation somewhere, need a medical procedure, and there is no network facility in that area,” says Joe Boden, Certified Financial Planner (CFP), vice president, and partner at EP Wealth Advisors in Seattle. “You could find yourself with no medical coverage and have to pay any cost that Medicare doesn’t cover out of pocket.”

Some plans have coverage for out-of-network services, but this usually comes at a higher cost. In general, “Medicare Advantage plans by themselves often cost people more money for services, but less in annual premiums, than Medigap coverage,” Cicchelli says.

Can You Change From Medicare Advantage to Medigap Coverage?

You can change from Medicare Advantage to Original Medicare with Medigap coverage with certain limitations. If you missed your initial six-month enrollment period for Medigap, you might not be able to purchase Medigap policies sold in your area.

The only time you can reliably enroll in Medigap is during the six-month enrollment period that starts around your 65th birthday. If you miss that window, there is no guarantee that you can go from a Medicare Advantage Plan to Medigap.

However, you can try during the Medicare Advantage annual open enrollment period from January through March. You can drop your Medicare Advantage plan and return to Original Medicare, but a Medigap policy may not be available even if you’re eligible for Medicare.

“It is important to know that Medigap coverage does not have these same enrollment restrictions and are able to be joined or dropped at the will of the insured,” Cicchelli says. But there is no guarantee that an insurance company will sell you a Medigap policy outside of your initial enrollment period. This is a major difference between Medicare Advantage and Medigap coverage.

“Medicare Advantage must accept anyone who has original Medicare Parts A and B, regardless of health conditions, at any appropriate enrollment time,” Cicchelli says. “Medigap coverage, on the other hand, is only compelled to accept Medicare recipients without underwriting during their initial six-month enrollment period that starts when they turn 65 years old.”

When you apply for a Medigap policy, you’ll need to answer questions about your health. These are designed to “weed out people with costly medical conditions before they even get to the underwriting stage,” Cicchelli says. “It sounds terrible, but these restrictions help keep costs for the insurance companies down, which in turn keeps coverage costs lower for the insured.”

The upside is that once you have a Medigap policy, it is guaranteed renewable, meaning if you keep paying your premium, your coverage won’t lapse regardless of any changes to your health condition. The only exception to this is some states allow insurance companies to refuse to renew Medigap policies purchased before 1992.

Some states also allow you to buy Medicare SELECT, a type of Medigap policy that requires you to use in-network providers to receive full benefits. If you choose to use a Medicare SELECT policy, you can change your mind and switch to a standard Medigap policy at any time during your first 12 months.

Which Is Better: Medicare Advantage or Medigap?

The question of whether Medicare Advantage or Medigap is better is one of the most common questions Cicchelli gets but, unfortunately, comes with no easy answer, he says. The reason is that the decision is subjective and depends on your individual needs.

“It can be a real gamble when choosing whether to go Advantage or Medigap,” he says. “A person’s overall health profile can give clues, but none of us knows what will happen one day to the next.” Every appointment often comes down to weighing pros and cons between the different types and levels of coverage, he says.

An advantage of MA Plans is the monthly premiums can be quite low, Boden says. “However, you could have a deductible and out-of-pocket maximums as high as $7,550 depending on the plan.”

On the other hand, Medigap plans have higher monthly premiums, but he says the only cost for services is usually just a small copay. “You can also generally choose your own doctor regardless of where they work as long as they take Medicare insurance,” which “means you have medical insurance coverage all over the country.”

But with Medigap you need to get separate prescription drug coverage, whereas with Medicare Advantage, drug coverage is usually bundled with the plan, he says. This can be a benefit or drawback, depending on your situation.

Since your drug coverage is provided separately when you use Medigap, you can switch your drug plan every year if you need to, while with Medicare Advantage, you’re stuck with whatever is bundled into your plan, Cicchelli says. “That means if this year’s chosen plan changes its formulary for next year and a few needed prescriptions are no longer covered, people may have to change their entire health plan while trying to find coverage for their medications.”

This is why when he discusses MA Plans with beneficiaries, he starts by evaluating a plan’s drug coverage. “Having the wrong drug plan in place can rack up additional costs for people in very short order,” he says. Once the medication side is figured out, it becomes about digging into the differences between health benefits, copays, additional benefits, and premiums.

“If you are in good health and rarely go to the doctor, flexible on what doctors you will be able to see, and usually travel to areas that are covered by your plan, then Medicare Advantage might be better because of the low, and in some cases no, monthly premiums,” Boden says. “If you want to be able to choose your own doctors and you see them often because of poor health, then Medigap might be the better choice for you.”

Regardless of which coverage you choose, you can generally find small, ancillary plans to increase coverage in weaker areas, Cicchelli says.

“Most importantly, the best coverage a person can have is the one they have in place when it is needed,” he says. “Anything at all is better than no protection, and that should be crystal clear to everyone.”

Learn More From Our Sources

• CMS | Medigap (Medicare Supplement Health Insurance) | Last accessed July 2024
• Medicare | Joining a health or drug plan | Last accessed July 2024
• Medicare | Join, switch, or drop a Medicare Advantage Plan | Last accessed July 2024
• Medicare | Medicare Advantage Plans | Last accessed July 2024
• Medicare | What’s Medicare Supplement Insurance (Medigap)? | Last accessed July 2024
• Medicare | When can I buy Medigap? | Last accessed July 2024
• Medicare | Your Medicare coverage choices | Last accessed July 2024