Medigap vs. Medicare Advantage: Which Is Right for You?

Two male boxers are exchanging angry glances representing Medigap vs. Medicare Advantage

Medigap vs Medicare AdvantageArguably, the most important decision you make as a new Medicare beneficiary is how you choose to supplement your Original Medicare benefits. The majority of people do not want to rely on Original Medicare alone as there are many out-of-pocket costs associated with Parts A and B.

There are two ways to supplement that coverage. You can enroll in a Medigap plan or a Medicare Advantage plan. Both are great choices, and both are better than having Medicare alone. But, you’ll need to understand how each works and what their pros and cons are before choosing which is right for you.

How does Medigap work?

A Medigap plan (also called a Medicare supplement plan) works as a secondary form of insurance. If you enroll in Medigap, the Medicare program is still your primary insurance plan. Your Medigap plan acts as the secondary payor and will pick up some or all of Medicare’s leftover costs.

There are only about ten Medigap plans to choose from, which makes comparing them relatively easy.

Medigap Pros

Little to no out-of-pocket costs. Medigap plans pick up many costs that remain after Parts A and B have paid.

Predictable coverage. You’ll know exactly what you’re expected to pay out-of-pocket each year. For example, if you enroll in Plan G, the only thing you’ll pay is the Part B deductible.

Provider accessibility. There are no networks. If your provider accepts Medicare, they will accept your Medicare supplement plan. This includes any treatment out-of-state.

No need to review the plan every year. Medigap policies never change. Your premiums may increase, but the benefits are always the same. These plans are low maintenance.

Medigap Cons

Higher premiums. Premiums are higher than Medicare Advantage plans. Plus, they typically increase several percentage points each year.

Must obtain Part D and possibly other ancillary plans. If Original Medicare does not cover the service, neither will your Medigap plan. You’ll need to purchase a stand-alone Part D plan and a separate plan if you want benefits for dental, vision, and hearing services.

No extra benefits. Medicare Advantage plans boast lots of bells and whistles. You won’t find extra benefits like gym memberships, meal delivery, or transportation services in a Medigap plan.

Switching plans isn’t always an option. If you want to switch Medigap plans, you’ll need to pass medical underwriting in most cases. Individuals with moderate to severe health conditions are often not allowed to switch plans, which limits your ability to find lower premiums.

How does Medicare Advantage work?

Medicare Advantage takes the place of Original Medicare. Technically, you still have Parts A and B in place, but instead of getting those benefits from the federal Medicare program, you’ll get them directly from the private insurance company.

Medicare Advantage Pros

Lower premiums. Many Advantage plans have $0 premiums. Plans that do have premiums are still typically lower than Medigap plans.

Convenient, all-in-one plan. Every Medicare Advantage plan is different, but many offer prescription drug coverage, so you won’t need a separate Part D plan. You’ll also usually find coverage for dental, vision, and hearing care.

scrabble tiles spelling extra refering to Medigap vs. Medicare Advantage
Again, these vary by plan, but many offer fitness memberships, over-the-counter drug stipends, meal delivery, transportation to appointments, etc.

Extra benefits. Again, these vary by plan, but many offer fitness memberships, over-the-counter drug stipends, meal delivery, transportation to appointments, etc.

Can switch plans easily. There is no medical underwriting for Medicare Advantage plans, so you’ll be able to purchase a plan or switch plans regardless of your health history.

Tailored plans. There is a group of Medicare Advantage plans called Special Needs Plans. These can tailor benefits for people with chronic conditions, people who live in institutions, or those who are also eligible for Medicaid. These can greatly reduce medical costs and offer specialized help for those who qualify.

Medicare Advantage Cons

Provider networks. Depending on the type of Medicare Advantage plan you choose, you’ll need to find providers who participate in that plan. Some plans have no out-of-network coverage. If you travel out of your plan’s service area, you may not have benefits available.

Plans change every year. You’ll need to have your plan reviewed every fall. Networks and benefits often change, so the coverage you have one year could be significantly different the next year. Providers you were seeing may no longer accept your plan.

More out-of-pocket costs. Think of these plans as a “pay as you go” type of coverage. You’ll typically have copays and coinsurance amounts due for every visit and service. Still, they all have out-of-pocket maximums that will limit what you have to pay each year.

Switching to Medigap can be difficult. If you decide Medicare Advantage isn’t right for you or you move to a location that has limited providers, you may not be able to switch to a Medicap plan since you’ll need to pass medical underwriting. Rules can vary by state.

By now, you should have an idea of which way you’re leaning. But, to make sure you choose the right route, speak with one of our Medicare advisors. We’ll teach you a few more things about each type of plan and take time to understand your situation. When you’ve made your decision, we’ll help you pick the plan you need and submit your application. Give us a call today to schedule a consultation.