Is Medigap Or Medicare Advantage Better?Learn about Medigap (Medicare Supplement Insurance) and Medicare Advantage to find out which one is right for you.
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If you’re new to Medicare, finding the right private health cover can be difficult. One decision that is particularly important, is whether or not you should choose to get a Medicare Advantage or Medigap (Medicare Supplement Insurance) plan.
Both options offer great benefits, but because the federal Medicare program is so complicated, choosing the plan that is right for you isn’t always straightforward.
In this article, we will discuss what Medigap and Medicare Advantage are, how they work, how they compare, and help you decide which is right for you.
What Is Medicare?
Medicare is the U.S. federal health insurance program for:
People who are 65 or older.
Certain younger people with disabilities.
People with end-stage renal disease (permanent kidney failure requiring dialysis or a transplant, sometimes called ESRD.)
The Different Parts of Medicare
Medicare consists of four main parts which help cover specific medical services, tests, and items:
Medicare Part A
Medicare Part A covers inpatient hospital care. People who paid Medicare taxes while working are eligible to receive these benefits.
Medicare Part B
Medicare Part B is optional and requires individuals to pay a monthly premium. Co-payments and deductibles can also apply to the services.
Medicare Part C
Medicare Advantage Plans, previously known as Medicare Part C, are offered by private companies. These provide the same coverage as Parts A and B, while also offering Part D’s prescription drug coverage.
Medicare Part D
Medicare Part D relates to prescription drug coverage. You can buy an insurance plan for these costs from private companies that are approved by Medicare.
There are a couple of ways that you can get coverage as a Medicare beneficiary. Most people who join Medicare for the first time are enrolled in Original Medicare, which is a government-run coverage program.
Original Medicare consists of two parts: Part A and Part B. Original Medicare covers Medicare Part A (hospital insurance) and Medicare Part B (medical insurance.)
The other option is to sign up for a private health care provider’s insurance plan. You can either join:
A Medicare Advantage Plan (Coverage for Part A and B, and sometimes Part D.)
A Medicare Supplement Insurance Plan (Coverage for Part A and B out-of-pocket costs.)
A Prescription Drug Plan (Coverage for Part D costs.)
These plans offer the same coverage as Original Medicare and in most cases even offer additional benefits to their members.
Terms You Should Know
Premiums: These are monthly payments made to insurance companies to get insurance coverage.
Deductibles: These are amounts that Medicare recipients must cover before their Original Medicare or Medicare Advantage Plan will cover qualifying medical expenses.
Coinsurance: These are the portion of costs that beneficiaries must pay for medical treatments, services, and tests. For example, with Medicare Part B, the coinsurance rate is 20%.
Co-payment (co-pays): This is a fixed amount that an insured person pays when receiving certain treatments. For Medicare, this usually applies to prescription drugs (Part D).
What Is Medigap?
Original Medicare covers a large portion of the cost of health care services and supplies, but not all of them.
Some of the remaining health care expenses, such as co-payments, coinsurance, and deductibles, can be covered by Medigap (Medicare Supplement Insurance) coverage.
If you have Original Medicare and you buy a Medigap policy, here's what happens:
Medicare will pay its share of the Medicare-approved amount for covered health care costs.
Then, your Medigap insurance plan pays its share, covering the remaining amount.
Medicare Supplement Insurance (Medigap) helps fill "gaps" in Original Medicare and is sold by private insurance companies.
There are 12 different Medicare Supplement (Medigap) Plans available to most Medicare beneficiaries in 2022:
High Deductible Plan F
High Deductible Plan G
Some Medicare supplemental plans additionally cover services not covered by Original Medicare, like emergency medical care while traveling outside the U.S.
If you’d like to find out more or compare each of these Medicare Supplement Insurance (Medigap) plans, send an email to Help@PolicyScout.com or call 1-888-912-2132 to get in touch with one of PolicyScout’s experienced health care consultants.
What Is Medicare Advantage?
Medicare Advantage Plans are offered by private health insurance companies which have been contracted into the federal Medicare program.
In 2022, there are more than 3,830 Medicare Advantage Plans on offer and it is important to take the time to find the best plan for your unique circumstances.
These plans offer good options for Medicare beneficiaries who want insurance that suits their needs. People can also switch providers if they are dissatisfied with service or plan benefits.
People usually change to Medicare Advantage because it offers a cost-effective and straightforward way to manage Medicare expenses.
Generally, Medicare Advantage offers more benefits and options than Original Medicare, such as hearing, dental, and vision coverage.
When you sign up for a Medicare Advantage Plan, you'll have to pay a monthly premium amount on top of your Medicare monthly premiums.
Part A, Part B, and Part D coverage costs are all paid simultaneously in Medicare Advantage, unlike Original Medicare. Members of Medicare Advantage are also covered for additional medical expenses.
For example, if you signed up for Original Medicare and joined a Medicare Advantage Plan, you would pay Medicare Part A and B premiums in one monthly payment and get additional prescription drug coverage.
The Different Medicare Advantage Plan Types
Most Medicare Advantage Plans are one of the following:Health Maintenance Organization Plans
Health Maintenance Organization (HMO) Plans are health insurance plans that often only cover care provided by doctors who work for, or contract with, the HMO.
Some features of an HMO plan include:
A small group of providers to choose from.
Less paperwork than other types of insurance plans.
You need to get permission from your doctor to see a specialist.
However, Medicare HMO plans don't generally cover:
Out-of-area urgent care
HMO plans also only offer coverage within a set network of providers. These networks are generally local.Preferred Provider Organisation Plans
Preferred Provider Organization (PPO) Plans are health plans in which medical providers, such as hospitals and doctors, enter into contracts to form a network of participating providers. A PPO is ideal for someone wanting more control over their health care.
A PPO has:
Higher premiums and deductibles than an HMO
Members can go out-of-network
Does not need referrals
May need to file claims to be covered by their plan
Private Fee-for-Service (PFFS) Plans are health plans that pay certain rates for services, tests, and items. Doctors make the decision whether or not to accept patients on PFFS plans.
PFFS plans may offer an entire or a partial network of providers, or they may not use a network at all in some instances.
A PFFS plan's beneficiary is able to see any provider who is eligible to receive payment from Medicare and agrees to accept the plan's terms and conditions of payment, regardless of what kind of network the plan offers.Special Needs Plans
Special Needs Plans (SNPs) are coordinated care plans (CCP) that are designed to provide targeted treatment for people with special needs. A person with special needs could be any of the following:
An institutionalized individual
A person with a severe or disabling chronic condition, as specified by CMS
A person who is eligible for both Medicare and Medicaid
Different Plans Have Different Benefits
Because there's so much variety in the services and benefits offered by different Medicare Advantage Plans, shopping around for a Medicare insurance plan that suits you can be tricky.
For example, many Medicare Advantage Plans don’t charge monthly premiums and offer in-network benefits, like no co-payments for doctors’ visits and lab services.
Some Medicare Advantage Plans offer members free access to network health providers and even cover the cost of prescription medicine.
There are Medicare Advantage Plans that offer fitness perks, travel cover, and other health care benefits you wouldn't usually receive through Medicare.
If you’d like to learn more about the cost of enrolling in Original Medicare or Medicare Advantage Plans, send an email to Help@PolicyScout.com or call 1-888-912-2132 to get in touch with one of PolicyScout’s experienced health care consultants.
How Does Medigap and Medicare Advantage Compare?
Here are some of the key differences between Medicare Supplement Insurance (Medigap) and Medicare Advantage Plans:
|Enrollment||People may only enroll when first eligible for Medicare, with some exceptions||Two open enrollment periods each year|
|Coverage||Plans help cover out-of-pocket costs associated with Original Medicare Parts A and B||Bundled plans that include all the benefits of Original Medicare, and more|
|Extra Benefits||Plans may cover emergency care if a person travels overseas||Many plans offer dental, vision, and hearing care|
|In-network Provider Restrictions||No||Yes|
|Costs||Monthly premium||Monthly premium, deductible, coinsurance, and co-payment|
|Prescription Drug Coverage||Not included||Often included|
The Pros and Cons of Medigap
Advantages of Medigap
Although Original Medicare covers many of a person's qualifying health care expenses, it does not always do so.
Medicare Part A and B are supplemented by Medigap insurance. It may be able to fill in payment gaps left by co-payments, deductibles, and coinsurance.
One of the advantages of having Original Medicare plus Medigap is that a person can see any Medicare-affiliated doctor, which means they can see almost any doctor in the U.S.
Some Medigap policies may also cover emergency medical expenses outside of the U.S., which may benefit some people. This option may be helpful for people who frequently travel.
Disadvantages of Medigap
There are health issues and treatments that Medigap does not cover, including:
Vision care and eyeglasses
Medigap’s premiums may also be higher than Medicare Advantage Plans.
The Pros and Cons of Medicare Advantage
The Advantages of Medicare Advantage Plans
The plans, also known as bundles, must cover all of the benefits of Medicare Parts A and B, and may also provide prescription medication coverage.
Medicare Advantage Plans usually have lower monthly premiums than Medigap. With Medigap, you will have to enroll in a separate drug plan.
Additionally, if a person has a Medicare Advantage Plan and their medical expenses go beyond a certain limit, they will not be responsible for any additional costs for covered services. This is known as an out-of-pocket-maximum.
Choosing between HMOs, PPOs, PFFS plans, and SNPs is also a valuable benefit of Medicare Advantage Plans.
What Is the Maximum Out-of-Pocket Limit for Medicare Advantage Plans?
The ceiling for a Medicare Advantage Plan is the highest amount that you’ll potentially have to pay for out-of-pocket costs such as co-payments.
For example, if your Medicare Advantage out-of-pocket maximum is set at $6,000 a year, then you’ll need to cover a maximum of $6,000 for any out-of-pocket expenses. After this, Medicare will cover all of your costs.
Disadvantages of Medicare Advantage
It's worth noting that Medicare Advantage provides less flexibility in terms of health care providers, which means that people must usually stick to their plan's network.
This means that visiting a health care provider who is not part of the network may result in higher fees.
Medicare Advantage can become expensive when you fall sick, because of uncovered co-payments.
Something else to be aware of, is that you also won’t be able to change your plan anytime you want to. There are limited enrollment periods throughout the year when you can do this.
The most popular time to modify or sign up for a Medicare Advantage Plan is during the open enrollment period, which starts in October each year.
Eligibility and Enrollment for Medigap
Enrolling in a Medigap Plan requires that you have Original Medicare (Part A and B.) Buying Medigap coverage during the 6-month initial enrollment period (IEP) is the best option. This window starts the month a person turns 65.
If an individual has particular medical problems, the Medigap Plan provider may refuse coverage once the IEP has ended.
Medigap Plans may differ depending on location and offer a variety of plans with varying deductibles.
They all, however, offer Medicare Supplement Insurance benefits that are standardized across the U.S., which means they all cover the same basic services, but with some plans including additional benefits.
Eligibility and Enrollment for Medicare Advantage
If you are enrolled in Original Medicare and live in the service area of the Medicare Advantage Plan you want to join, you may be eligible for it.
After deciding on a specific Medicare Advantage Plan, a person can enroll by doing one of the following:
Enroll through the plan provider’s website.
Complete a printed enrollment form, and then mail it to the private insurer.
Call the plan provider to give them the enrollment information over the phone.
Which Is Better, Medigap or Medicare Advantage?
Deciding between Medicare Supplement insurance (Medigap) or Medicare Advantage Plans will entirely depend on your circumstances and what kind of health insurance coverage you want.
Keep these points in mind:
Because Medicare only covers roughly 80% of medical expenses, signing up for Medigap might provide you with more coverage than you need.
However, Medicare Advantage provides patients with more alternatives and freedom than Original Medicare.
Beneficiaries can get Medicare Advantage Plans that include services such as wheelchair ramps, adult daycare, gym membership, and respite care.
What Is Respite Care?
Respite care gives temporary relief to a primary caregiver, enabling them to take a much-needed break from the demands of providing care to a sick, aging, or disabled family member.
It can take place:
In your own home
At day-care centers
At residential or nursing facilities that offer overnight stays
Tips for choosing between Medicare Advantage and Medigap
Before deciding between the Medicare Advantage and Medigap, consider your priorities, such as:
How much choice you want with your plan
Your future plans, such as traveling
Your existing health conditions
Medicare Advantage Plans can help you save money, but make sure you check to see if prescription drug coverage is covered, or you might need to purchase a separate prescription drug plan (Part D cover).
Also make sure to look at the cost of any premiums, co-pays, out-of-pocket payments, or any coverage limitations. If other benefits are provided, such as assistance with hearing aids or dental bills, make sure you know how much of these costs will be covered.
Compare these costs to the costs of Medigap and stand-alone Medicare Part D prescription drug insurance if you're concerned about expenses.
Calculate the premiums and out-of-pocket costs (deductibles, co-pays, and coinsurance) that the policies may require.
When choosing a plan, people with chronic diseases and those who develop severe health conditions should consider the costs of their ongoing treatment.
A Medicare Advantage Plan may be a better choice if it has an out-of-pocket maximum that protects you from huge bills.
On the other hand, having Original Medicare plus a Medicare Supplement Insurance (Medigap) Plan generally allows you more choice in where you receive your care.
If dental and vision coverage is crucial to you, Medicare Advantage may be the better option, as Medigap does not cover these services.
Medicare Advantage may also be better for you if you are flexible on which doctors you are willing to see, since you will have to use in-network health care providers to cut out-of-pocket costs.
|Medigap (Medicare Supplement Insurance)||Medicare Advantage Plans|
|❌||Higher premiums||✅||Typically lower premiums but has co-pays|
|✅||No co-pays||❌||Has co-pays|
|✅||Freedom to choose doctors||❌||May be restricted to provider network|
|✅||No referrals necessary||❌||May need referrals for a specialist|
|❌||Some routine services not covered (vision, hearing)||✅||May include extra benefits (vision, hearing, fitness)|
|✅||Covered anywhere in the U.S.||❌||Only covered in specific areas|
|❌||Does not include prescription drug plan||✅||Plans may have prescription drug coverage|
Medigap and Medicare Advantage FAQs
Can I Switch Between Plan Types?
Yes, there are three opportunities for a person to switch from Medicare Advantage to Medigap.
During the initial enrollment period (IEP): This 7-month period begins the month before a person reaches 65 years of age.
During the Medicare Advantage OEP: Each year, the open enrollment period (OEP) runs from January 1 until March 31. A person can cancel their Medicare Advantage Plan, return to regular Medicare, or enroll in a Medigap Plan between these dates.
Shortly after enrolling: When someone first becomes eligible for Medicare and enrolls in a Medicare Advantage Plan, they have three months to change to original Medicare and enroll in Medicare Supplement Insurance.
Can I Have Both Medigap and Medicare Advantage?
No, the option to have both Medicare Advantage and Medigap isn’t available..
An individual can use Medigap to assist with the co-payments, deductibles, and coinsurance of Original Medicare, but not for Medicare Advantage out-of-pocket costs.
Note: It is illegal for a company to sell Medigap coverage to someone who has a Medicare Advantage Plan, unless they intend to transition to Original Medicare.
What Other Insurance Policies Are Available?
Coverage to supplement your Original Medicare is essential if you’re worried about getting all the care you need.
If you’re unsure about Medicare Supplement Insurance or Medicare Advantage Plans, head to PolicyScout’s Medicare hub.
We have loads of articles to help you understand costs, enrollment options, different plans, and coverage for the many different types of Medicare.