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Navigating the choice between Medicare Supplement (known commonly as Medigap) and Medicare Advantage can be difficult. Both are offered by private insurance companies, some of which provide both types of plans.
However, these plans function quite differently in terms of providing coverage for healthcare costs. It’s crucial to grasp the distinction between Medigap and Medicare Advantage to make an informed decision about your healthcare coverage.
What is Medigap?
Medigap, a short-hand for Medicare Supplement, is an insurance policy designed to fill the “gaps” (in other words, out of pocket costs you owe) under Original Medicare (Part A and Part B) coverage.
While Original Medicare is the default option provided directly by the government, it doesn’t cover all healthcare costs, leaving beneficiaries responsible for out-of-pocket expenses like deductibles, copays, and coinsurance — these are the “gaps” that a Medigap plan could cover.
By purchasing a Medigap plan, these out-of-pocket costs are ‘shifted’ to the Medigap insurance company who will cover the costs.
Medigap plans provide predictability in healthcare expenses in exchange for a consistent monthly premium that you pay.
In total, there are 10 standardized Medicare Supplement plans available in most states: Plans A, B, C, D, F, G, K, L, M, and N. All policies offer the same basic benefits, but some offer additional benefits, so you can choose which one meets your needs.
Each “plan type” provides a different level of coverage which is standardized and determined by the government. For Medicare-covered services, once Original Medicare has paid your claims, it will automatically forward them to your Medigap plan.
In Massachusetts, Minnesota, and Wisconsin, Medicare Supplement policies are standardized in a different way.
Medigap plans do not include Part D (prescription drugs) coverage. You must also purchase a standalone Prescription Drug Plan (PDP) plan if you want drug coverage.
When to Buy a Medigap Plan
Medigap plans offer financial predictability and give policy holders peace of mind. In addition, beneficiaries have the freedom to select doctors and specialists without network restrictions as they work with all doctors that accept Medicare. Some Medigap plans even offer coverage for emergency medical care during international travel.
Once you decide you want a Medigap plan alongside Original Medicare, you’ll need to enroll in a plan. The best window for purchasing Medigap starts during the six-month period when you first sign up for Medicare Part B. This timeframe, known as the Medigap Open Enrollment Period, ensures that insurance companies must offer you a Medigap plan at the same price available to everyone else.
Once this enrollment period ends, obtaining a policy might become more challenging. You may need to undergo medical underwriting, which could lead to higher costs or even denial of coverage, particularly if your health is not optimal. (Exceptions to this rule exist in Connecticut, Massachusetts, Maine, and New York, where guaranteed issue protections are in place.)
Considering whether a Medigap plan suits your needs is crucial during your initial eligibility period. Waiting might result in higher expenses or the inability to secure a plan later on. Therefore, it’s vital to weigh your options carefully and make an informed choice about Medigap coverage when the opportunity arises.
What is Medicare Advantage?
Medicare Advantage (also known as “Part C” coverage) plans work differently from Medicare Supplement plans. Instead of helping to pay for the costs under Original Medicare, Medicare Advantage plans are designed to be a bundled “all-in-one” alternative to Original Medicare.
Medicare Advantage plans are required by law to provide the same coverage for services covered under Original Medicare (Part A and B) but often bundle in coverage that is not included with Original Medicare such as Part D (prescription drugs) coverage as well as additional benefits such as coverage for dental, vision and hearing.
When you enroll in a Medicare Advantage plan, you are choosing to receive your Medicare coverage through the plan provider rather than directly from the government.
Similar to insurance that you may have received previously through an employer, Medicare Advantage plans are managed care plans and often you will have to receive your care from doctors, hospitals, and other providers within the plan’s network. The most common types of plans are HMO and PPO plans.
Medicare Advantage will also have deductibles, copays, and coinsurance obligations. However, unlike Original Medicare, they also have an annual out-of-pocket limit. That means that once you have paid out-of-pocket costs that add up to the maximum annual limit, the plan will pay 100% of your medical bills for the remainder of the calendar year.
READ NOW: How to compare Medicare Advantage Plans
While you may have to pay a premium for your Medicare Advantage plan, however, many Medicare Advantage plans are “$0 premium” plans meaning there is no additional premium on top of your standard Part B premium.
You can read more about how Medicare Advantage works in our comprehensive guide to Part C.
When to buy a Medicare Advantage Plan
Choosing a Medicare Advantage plan over Original Medicare can be advantageous for several reasons. Medicare Advantage plans consolidate hospital insurance, medical insurance, and often prescription drug coverage into a comprehensive package, offering the convenience of all-in-one coverage. Additionally, these plans frequently provide additional benefits like dental, vision, hearing, and fitness programs, enhancing the overall healthcare experience.
With a cost cap due to out-of-pocket maximums, Medicare Advantage plans can also offer financial security relative to Original Medicare by itself, which lacks annual spending limits.
Managed by private insurance companies, Medicare Advantage plans often feature structured care coordination, making them suitable for individuals seeking a managed healthcare approach.
Furthermore, Medicare Advantage plans can offer financial savings, as they often come with lower monthly premiums compared to certain Medigap plans. Assessing your healthcare needs and preferences, budget constraints, and the benefits offered by different plans will help you determine if a Medicare Advantage plan aligns with your requirements and provides comprehensive coverage tailored to your unique health situation.
People eligible for Medicare can enroll in Medicare Advantage during their initial enrollment period, typically encompassing their 65th birthday month, along with the three months before and after. Changing plans is allowed during the annual Medicare open enrollment period, which runs from October 15 to December 7 each year, or during the Medicare Advantage open enrollment period from January 1 to March 31 annually.
Additionally, individuals may qualify for a special enrollment period, enabling plan changes if they have moved out of their plan’s service area or transitioned into a skilled nursing facility.
What are the differences between Medigap and Medicare Advantage?
In terms of total enrollments, 25% of Medicare (around 15 million beneficiaries) are enrolled in Medigap plans, while 48% (around 28 million) are enrolled in Medicare Advantage. The bundled nature of Medicare Advantage plans has seen them gain popularity.
But how does Medicare Supplement differ from Medicare advantage? The differences between the two often boil down to:
Doctor choice and network
With Original Medicare (including if you buy a Medigap plan) you can use any doctor across the country that accepts Medicare, while with Medicare Advantage you may only be able to see a plan’s “in-network” doctor (some plans such as PPO plans will cover out-of-network doctors but at a higher cost).
Cost management
Original Medicare has no cap on out-of-pocket costs. If bundled with a Medigap plan, it can result in very comprehensive coverage as the Medigap plan helps eliminate most of your out-of-pocket expenses (copays and coinsurances) in return for an additional monthly premium.
Medicare Advantage, on the other hand, typically has an $0 additional premium and an annual maximum limit on out-of-pocket costs that can range from $2,000 to $11,000, meaning you may have more variability in monthly costs.
Here’s a table that summarizes the differences between the two:
| Medicare Supplement (with Original Medicare) | Medicare Advantage | |
|---|---|---|
| Description | Helps pay for all or most out-of-pocket costs for Medicare-covered services | Bundled “all-in-one” alternative to Original Medicare that provides coverage in place of Original Medicare |
| Premium | Premiums typically range from $100 to $300 a month, and may vary with age and/or health status | Premiums can range between $0 to more than $100 per month, however, the majority of Medicare Advantage enrollees pay $0. All enrollees pay the same regardless of age or health status |
| Out-of-Pocket Costs | Limited to no out-of-pocket costs for covered services. Plans cover out-of-pocket costs in return for you paying the monthly premium. | In 2023, out of pocket costs are capped at a maximum of $8,300 a year for in-network services and $12,450 for out-of-network services. Many costs charged on copay (fixed dollar) basis so you know what costs are upfront. |
| Doctors and Hospitals | As Medicare Supplement plans work with Original Medicare, you can see any doctor that participates in Medicare. | HMOs: In-network providers only. PPOs: Any provider but out-of-network providers cost more. |
| Part D Prescription Drug Coverage | Not included. You must buy a separate standalone Prescription Drug Plan (PDP). · | Most plans bundle in Part D coverage. |
| Additonal benefits (e.g., vision, dental and hearing) | Not covered | Included with most Medicare Advantage plans |
How to Choose Between Medigap and Medicare Advantage
Deciding between Medigap and Medicare Advantage involves understanding your specific coverage needs.
Medigap plans serve as supplements to Original Medicare, filling the gaps in Parts A and B, and providing comprehensive nationwide coverage but they cannot be used in conjunction with Medicare Advantage.
Medicare Advantage plans provide an all-in-one alternative to Original Medicare, encompassing the same coverage as Parts A and B, often with additional benefits like prescription drug coverage (Part D), dental, vision, and hearing care. Medicare Advantage plans can be more economical, budget-wise if you don’t use a lot of health services.
It’s crucial to assess not only your current healthcare needs but also anticipate future requirements. Consider factors such as your budget, preferred healthcare providers, prescription medications, and any chronic conditions you may have. As Medigap plans work with Original Medicare, they offer the flexibility of choosing doctors and specialists without network restrictions, providing peace of mind and financial predictability.
In contrast, Medicare Advantage plans often have networks and may require referrals for specialists. Additionally, think about whether you travel frequently and might need coverage outside your local area. Evaluating these aspects will help you make a well-informed decision that ensures your healthcare coverage meets your needs comprehensively and effectively.
At CoverRight, we’re here to help you find the right coverage that you deserve. Reach out today and start finding the right Medicare plan for you.
