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Medicare Advantage vs Medigap (Medicare Supplement): How to Choose Between the Two

Published: June 18th, 2020

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Medicare offers two distinct products to supplement and add on to the basic coverage offered by Medicare Parts A and B. Understanding each option will help secure your physical and financial health in the years to come.

Medicare Advantage and Medigap, also known as Medicare Supplement Insurance, cannot be used at the same time. They each have pros and cons that you will need to weigh before deciding which product to purchase. 

We will break down the difference between Medicare Advantage and Medigap as you research which policy is right for you.

Medicare Overview

Medicare is a federal health insurance program that was created in 1965 as a way to provide coverage for Americans over the age of 65. The program also allows coverage for some younger Americans with disabilities.

More than 60 million Americans get their health coverage from Medicare.1

Medicare Part A covers inpatient hospital stays, skilled nursing facilities, some home health visits and hospice care.

Medicare Part B covers physician visits, outpatient services, preventive services and some home health visits.

Parts A and B are known collectively as Original Medicare. There’s also a Medicare Part D that covers prescription drug costs. 

What You Should Know About Medigap

Medigap fills in the coverage gaps left by Original Medicare.2 It is sold by private insurance companies and policy specifics can vary from state to state. Medigap often covers costs that Original Medicare does not, including co-pays and even medical care outside the U.S. if you get sick or are injured while traveling in a foreign country.

Here’s how it works — your Original Medicare policy will cover its approved share of covered services and healthcare costs. Then your Medigap policy will step in to pay its share of what’s left over.

One thing to remember is that you can’t join Medicare Part D and have a Medigap policy with drug coverage at the same time. If your Medigap policy covers prescription medication and you join Medicare Part D, your insurance company will remove the prescription drug coverage from your Medigap policy and adjust your premium. You won’t be able to get that drug coverage added back later on.

Medigap Pros

There are several advantages to purchasing a Medigap policy. You will have more choices with fewer out-of-pocket costs.

You have a larger healthcare provider network. And your network will be nationwide, which means you will be covered in the event you are traveling out of state.

Medigap also limits your out-of-pocket costs. In addition to covering co-pays that Original Medicare may not, your Medigap policy may also cover coinsurance and deductibles.

Medigap Cons

Medigap is not a free service. You will have higher premiums for certain Medicare programs, including Part D, Part B and Medigap. How much you pay, however, will depend on what plan you buy and the company you get it through. 

You should shop around to find the best Medigap plan and price for your needs and your budget.3

You will also have a limited, six-month enrollment window in which to pick a Medigap plan and sign up. The enrollment window starts the month you turn 65 and sign up for Medicare Part B. 

The private companies that sell Medigap policies use medical underwriting, a decision making process used by insurance companies that examines your medical history to decide whether or not to accept your application and how much to charge you. During the six-month Medigap open enrollment period,4 you can buy any policy the company sells for the same price as people who are in good health. 

Once that enrollment window closes, you may not be able to purchase a Medigap policy, especially if you don’t meet the company’s medical underwriting requirements. If you are able to purchase a Medigap policy, it may cost more than it would have during the six-month open enrollment. 

You may also not be able to purchase a Medigap policy if you are under the age of 65, but qualify for Medicare because of a disability. Several states, but not all, do require insurance companies to offer at least one type of Medigap policy to Medicare patients who are under the age of 65 and living with a disability.

Guaranteed Issue Rights

You have rights in some situations that mean insurance companies must offer to sell you certain Medigap policies. Those policies must cover all of your preexisting health conditions and the companies can not charge you more because of your health history. 

Examples of these protected situations include:

  • If your Medicare Advantage Plan is leaving Medicare or stops providing care in your area, or you move out of your plan’s service area.
  • You have original Medicare and an employer group health plan, including COBRA or union coverage, and the latter is ending.
  • Your Medigap insurance company goes bankrupt or you otherwise lose your coverage through no fault of your own.

Can You Switch From Medicare Advantage to Medicare Supplement Insurance?

If you enroll in a Medicare Advantage plan for the first time and you aren’t happy with the coverage, you are allowed by federal law to buy a Medigap policy as long as you return to Original Medicare within 12 months of joining Medicare Advantage, also known as the trial period..

If you already had a Medigap policy before you switched to Medicare Advantage, you may be able to get the same policy back if the company still sells it. If not, you can buy a different Medigap policy. 

What You Should Know About Medicare Advantage Plans 

Medicare Advantage, also known as Medicare Part C, is an all-in-one Medicare health plan that includes Medicare Part A, Medicare Part B and, often, Medicare Part D. Advantage plans are purchased through a private insurance company and plan offerings vary by state and policy. 

Medicare Advantage Pros

Medicare Advantage plans often have lower premiums than Medigap policies. You also have more flexibility to switch policies if you aren’t happy with your current plan. Medicare Advantage has two enrollment periods per year. 

Medicare Advantage also covers a host of emotional and physical well-being benefits that are not covered by other Medicare programs, including dental and vision coverage and gym memberships.

Medicare Advantage Cons

While Medigap policy coverage is nationwide, Medicare Advantage’s in-network coverage area is confined to a smaller geographic area. Medicare Advantage typically has smaller healthcare provider networks even within your local area and you may need referrals for certain services.5

Medicare Advantage plans typically have higher out-of-pocket costs even though they cover more services. 

What Else Should You Keep in Mind When Deciding Between the Two?

The benefits offered by Medicare Advantage versus Medigap are necessary to a healthy and fulfilling life, but they do vary wildly. 

Medicare Advantage benefits focus largely on health and wellness in can around the home. Some plans cover nutrition counseling and meal assistance, as well as the installation of safety equipment around the house, including shower rails. 

Medigap offers a very valuable benefit in covering medical costs overseas if you were to become ill or injured while traveling in a foreign country. If you want to spend your retirement taking cruises or touring other countries, this coverage would give you the peace of mind as you travel.

What to Remember — Medicare Advantage vs Medigap

There is no one-size-fits all option when it comes to your health coverage. Work with your doctor and other healthcare providers to determine your medical needs and then shop around to find the best plan for you, whether it’s original Medicare, Part D, Medicare Advantage or a Medigap policy.

Sources

1.  Kaiser Family Foundation. “An Overview of Medicare.” kff.org (accessed June 12, 2020)

2.  U.S. Government Website for Medicare. “What’s Medicare Supplement Insurance (Medigap)?” medicare.gov (accessed June 12, 2020).

3.  U.S. Government Website for Medicare. “Find a Medigap policy that works for you.” medicare.gov (accessed June 12, 2020).

4.  U.S. Government Website for Medicare. “When can I buy Medigap?” medicare.gov (accessed June 12, 2020).

5.   U.S. Government Website for Medicare. “How to join a Medicare Advantage Plan.” medicare.gov (accessed June 12, 2020).

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