Medigap vs. Medicare Advantage — Which Plan Is Right for You?

Medigap vs. Medicare Advantage — Which Plan Is Right for You?

Medigap vs. Medicare Advantage — What Are the Differences?

Medicare offers a variety of options and plans for you to choose from to best fit your healthcare needs.

Original Medicare covers services like hospital visits and outpatient needs, but it has certain limitations. If Original Medicare doesn’t cover everything you’re looking for, you can enroll in a Medicare Supplement (Medigap) or Medicare Part C (Medicare Advantage) plan.

  • Medigap plans are best if you’re seeking plan flexibility and control while reducing out-of-pocket costs.
  • Medicare Advantage plans may better suit you if you want an alternative to Original Medicare with additional benefits like prescription drug coverage.

In this article, we’ll go further in-depth on the differences between Medigap and Medicare Advantage to cover:

  1. Original Medicare and the gaps in coverage
  2. Medigap plan options and extra benefits
  3. Medicare Advantage plan options and extra benefits
  4. How to choose the right plan

Review of Original Medicare

Before we discuss Medigap vs. Medicare Advantage, let’s review Original Medicare and the gaps in coverage. Original Medicare consists of two parts — Part A and Part B.

Medicare Part A 

Part A covers inpatient services and procedures like hospital visits, skilled nursing needs, home health, and hospice care. You must pay the Part A deductible before your coverage begins. For 2020, the deductible for Medicare Part A s $1,408.

You pay the deductible for each “benefit period.” A new benefit period begins when 60 days have passed since you received Part A services. If you go to the hospital twice in one month, that’s only one benefit period. But, if your visits are separated by six months, that’s two benefit periods and two deductibles.

You could pay the Part A deductible several times during the course of one year.

Medicare Part B Coverage

Part B covers all your outpatient medical needs. Part B helps with:

  • Doctor’s visits
  • Therapy visits (physical, occupational, etc.).
  • Durable medical equipment like CPAPs and oxygen
  • Diagnostic tests like blood work, X-rays, MRIs
  • Infusion-based cancer treatments like chemotherapy

Just like with Part A, you will have some out-of-pocket expenses for these services. Costs for Part B come in several forms:

  • Part B deductible ($198 for 2020)
  • Part B coinsurance (20% of the cost for every Part B service or procedure)
  • Part B excess charges (amounts up to 15% of the Medicare-approved amount—this only applies if your doctor or facility doesn’t accept Medicare pricing)

Gaps in Original Medicare Coverage

Important points to always remember about Original Medicare:

  • Prescription drugs are not covered by Original Medicare.
  • There is no out-of-pocket maximum—your total potential costs are uncapped.
  • Original Medicare does not provide emergency coverage outside the United States.

Medigap Insurance

Medigap plans are a great tool for limiting your out-of-pocket costs with Medicare. These insurance policies, which are issued by private insurance companies, work with Original Medicare.

Medigap plans fill in some or all of the gaps in Original Medicare, hence the name. You will pay an additional premium for Medigap coverage. This premium goes directly to the insurance company.

Medigap policies are issued in standardized “plans.” Every insurance company must offer the coverage specified by Medicare for each plan. There are 10 standardized plans: A, B, C, D, F, G, K, L, M, and N. Not all companies offer every plan in every state. 

Medicare Supplement (Medigap) Plans
A B C D F* G K L M N
Part A coinsurance and hospital costs up to an additional 365 days after Medicare benefits are used up Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Part B coinsurance or copayment Yes Yes Yes Yes Yes Yes 50% 75% Yes Yes
Blood (first 3 pints) Yes Yes Yes Yes Yes Yes 50% 75% Yes Yes
Part A hospice care coinsurance or copayment Yes Yes Yes Yes Yes Yes 50% 75% Yes Yes
Skilled nursing facility care coinsurance No No Yes Yes Yes Yes 50% 75% Yes Yes
Part A deductible No Yes Yes Yes Yes Yes 50% 75% 50% Yes
Part B deductible No No Yes No Yes No No No No No
Part B excess charge No No No No Yes Yes No No No No
Foreign travel exchange (up to plan limits) No No 80% 80% 80% 80% No No 80% 80%
Out-of-pocket limit for 2020*** N/A N/A N/A N/A N/A N/A $5,880 $2,940 N/A N/A

* Plan F also offers a high-deductible plan. If you choose this option, this means you must pay for Medicare-covered costs up to the deductible amount of $2,340 in 2020 before your Medigap plan pays anything.

** After you meet your out-of-pocket yearly limit and your yearly Part B deductible, the Medigap plan pays 100% of covered services for the rest of the calendar year.

*** Plan N pays 100% of the Part B coinsurance except for a copayment of up to $20 for some office visits and up to a $50 copayment for emergency room visits that don’t result in inpatient admission.

Each plan covers a different portion of the gaps in Original Medicare. An important benefit to all the standardized plans is that they allow you to see any doctor in the nation, as long as they take Medicare patients. Several of the standardized plans provide worldwide emergency coverage.

Medigap plans do not provide drug coverage, so you’ll need to enroll in a standalone prescription drug plan if you enroll in Medigap.

Medigap Extra Benefits

Many insurance companies choose to offer extra benefits with their Medigap plans. They are not required to do this and the extra benefits are not guaranteed. However, insurance companies tend to keep the extra benefits in place as a service to their customers.

Some of the extra benefits that companies offer include:

  • Discounts on vision, dental, and hearing services.
  • Healthy living packages including gym membership programs.
  • Access to 24-hour nurse hotlines.

Medicare Advantage Plans

Medicare Advantage is also known as Part C of Medicare. Unlike Medigap plans, Medicare Advantage is a distinct alternative to Original Medicare. When you enroll in a Part C plan you are no longer in Original Medicare.

Medicare Advantage plans combine all of the coverage you receive under Original Medicare Part A and Part B.

In addition, most Medicare Advantage plans also include Part D prescription drug coverage along with extra benefits such as hearing, dental, and vision coverage

Medicare Advantage plans work like traditional private health insurance. You will generally pay a small copayment or coinsurance for every service or procedure you receive. The payments are usually less than you would pay under Part A or B. Costs you may encounter with a Medicare Advantage plan may include:

  • Monthly premium (many have $0 premium).
  • Annual deductible (many have no deductible).
  • Copayments / coinsurance for services and procedures.

Medicare Advantage plans are usually network-based.

  • Some are Health Maintenance Organizations (HMOs), which require you to use their network of doctors and facilities. A HMO plan provides medical coverage and health care from a specific set of doctors, specialists, and hospitals in a plan’s network. If the situation is an emergency, medical care is accessible regardless of the network.
  • Other plans are Preferred Provider Organizations (PPOs). One of the major benefits of PPOs is that you can receive care without a referral from a primary care physician. PPOs have a network of preferred doctors and facilities. You will pay less if you stay in-network, but you can use out-of-network doctors if you’re willing to pay more.

Medicare Advantage plans must offer a hard yearly out-of-pocket maximum. You will know with certainty the most you can spend in a bad year, unlike with Original Medicare.

Extra Benefits of Medicare Advantage Plans

Just like Medigap plans, Medicare Advantage plans frequently come with extra benefits. These plans often provide:

  • Vision coverage (for exams, lenses, and sometimes frames).
  • Hearing coverage (for exams, and also discounted hearing aids).
  • Dental coverage (sometimes included, sometimes for a low extra premium).
  • Fitness or gym memberships.

Choosing a Medicare Plan

We’ve looked at options for Medicare coverage and compared Medigap vs. Medicare Advantage plans, but you may still want a few guidelines to help you choose. Here’s a quick way to apply what we’ve covered:

  • Medigap plans likely have a higher monthly premium, but more complete coverage
  • Medigap plans allow you to see any doctor who accepts Medicare patients nationwide
  • Medicare Advantage plans often include prescription drug coverage
  • Medicare Advantage plans are likely to offer more complete extra benefits in the form of vision and hearing coverage

The bottom line is that:

  • If you’re most concerned about out-of-pocket costs, Medigap is probably your best bet.
  • If you’re worried about paying too much each month, then a Medicare Advantage plan probably suits you.

Regardless of the decision you make, conducting your own research, recognizing what your needs are, and speaking with a licensed Medicare insurance agent before choosing a Medigap or Medicare Advantage plan will help empower you during the enrollment process.