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

Updated on: August 27th, 2020

Reviewed by Elaine Wong Eakin

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Traditional or Original Medicare (Part A and B) provides good coverage for most healthcare needs, paying for 80% of the costs it approves. The other 20% is the patient’s responsibility and, since there is no cap on the amount you may have to pay in a year, it can be financially devastating should you suffer a serious illness or injury.

As a result, most people get another plan to supplement their coverage. For the majority of Medicare consumers, there are two choices: a Medicare Advantage plan or a Medigap policy (also known as Medicare Supplement). 

A Quick Overview on Medicare Advantage vs Medigap

Just know that you can only have one type of plan, you can’t have both. Also be aware, if you have coverage from another source, like retiree health benefits from a former employer or Tricare for Life (if you or your spouse is retired from military service), you probably don’t need Medicare Advantage or Medigap. Before you enroll in a Medicare Advantage plan or buy a Medigap policy, make sure you don’t have supplemental coverage from another source.

Medicare Supplement and Medicare Advantage plans are offered by private insurance companies, and many of these companies offer both types of plans. Medigap works with Original Medicare, paying cost-sharing after Medicare has paid its portion. In contrast, Medicare Advantage replaces Original Medicare, and each plan has its own schedule of cost-sharing. Whether you choose Medigap or Medicare Advantage, you still have to pay the Part B premium.

Overall, the premiums for Medigap policies may be higher than for Medicare Advantage plans, but a Medigap policy will also cover you for any hospital or doctor in the U.S. that accepts Medicare. These plans are labeled A, B, C, D, F, G, K, L, M, and N. This option may be beneficial to people who want the freedom to choose their own providers, such as specific doctors or hospitals. About 29% of people with Original Medicare have Medigap policies.

Medicare Advantage plans typically have lower premiums than Medigap policies and cover the same benefits as Original Medicare but they also provide benefits not covered by Original Medicare, such as prescription drugs, eyeglasses, dental care and gym memberships. Since most Medicare Advantage plans have provider networks, enrollees in HMO plans are required to use providers in the plan’s network. In addition, Medicare Advantage plans may not cover care outside a particular geographic area except in an emergency. About one-third of all Medicare beneficiaries select a Medicare Advantage plan.   

We break down the differences between Medicare Advantage and Medigap policies to help you decide which policy is right for you.

What Is Medicare?

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 people younger than 65 who have disabilities and qualify for Social Security Disability Insurance.

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 Is Medicare Advantage? 

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. Unlike Medigap, Medicare Advantage plans have a contract with Medicare and are required to accept anyone eligible for Part A and Part B and does not have kidney failure (also known as end-stage renal disease). 

Medicare Advantage plans are predominantly HMOs or PPOs, and most include benefits in addition to Part A and Part B benefits. If you enroll in a Medicare Advantage plan, you pay cost-sharing set by the plan instead of the cost-sharing in Original Medicare. For example, you may pay a $20 copayment to see your doctor in the plan’s network instead of the 20% coinsurance in Original Medicare.

What Are Medicare Advantage Pros?

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

Many Medicare Advantage plans offer benefits not in Original Medicare, such as gym memberships and dental and vision coverage.

What Are Medicare Advantage Cons?

While Medigap policy coverage is nationwide, many Medicare Advantage plans have provider networks confined to a regional or local geographic area. Depending on where you live, you may have to travel a distance to see providers in your Medicare Advantage plan’s network. 

If your Medicare Advantage plan is an HMO, you will need a referral from your primary care doctor for most services, including seeing specialists, unless it’s an emergency. If you see providers outside the network without the HMO’s authorization and it’s not an emergency, the plan will not cover the cost. 

If your Medicare Advantage plan is a PPO, you may see providers outside the network but your copay is higher than if you used an in-network provider.

Medicare Advantage plans typically have copays for most services, whereas Medigap policies cover coinsurance and copays in Original Medicare. Be assured, there is a maximum out-of-pocket amount in Medicare Advantage plans; if your total payments for copays, coinsurance, and deductible reach the maximum out-of-pocket amount, the Medicare Advantage plan will cover 100% of covered services for the remainder of the year.

What Is Medigap?

Medigap fills in the coverage gaps in Original Medicare. Medigap policies are sold by private insurance companies and are regulated by states. Specifically, Medigap covers the 20% coinsurance in Part B and hospital coinsurance in Part A. Depending on the Medigap policy you buy, it may also cover deductibles in Part A and/or Part B and other cost-sharing expenses. Six of the 10 plans also cover emergency medical care outside the U.S. if you are traveling in a foreign country.

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

What Are Medigap Pros?

There are several advantages to purchasing a Medigap policy. Mainly, you will have more freedom with provider choice and fewer out-of-pocket costs.

You have more choices of physicians and hospitals since both Original Medicare and Medigap do not have networks. Therefore, you aren’t limited to specific providers, as long as they are willing to bill Medicare. This holds true nationwide, so you will be covered in the event you are traveling out of state. (One exception is if you use Medicare SELECT, which is a hybrid of a Medigap policy and a PPO, with specific networks.) 

Medigap policies also limit your out-of-pocket costs since they cover the 20% coinsurance in Part B and hospital copays in Part A. Depending on which Medigap policy you buy, it may also cover deductibles and other cost-sharing.

What Are Medigap Cons?

Medigap premiums depend on a number of factors: what plan you buy, when you buy the plan, and the insurance company you select.  

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

You can buy a Medigap policy at any time, but there is a definite advantage to enrolling during a specific six-month window, starting the month your Medicare Part B becomes effective. During your six-month Medigap open enrollment period, the Medigap insurance company cannot use medical underwriting. 

What is medical underwriting? It’s a decision-making process used by insurance companies to examine your medical history before deciding whether or not to accept your application and how much to charge you. In other words, during your six-month Medigap open enrollment period, you can buy any policy the company sells at the best price for your age.

After the six-month open enrollment period, the private companies that sell Medigap policies may use medical underwriting. This gives them the right to decline your application if you don’t meet the underwriting requirements. Or, they may charge you a higher premium than if you had bought the policy during your six-month open enrollment period. 

In some states, if you are under the age of 65 and qualify for Medicare because of a disability,  you may not be able to purchase a Medigap policy. But several states do require insurance companies to offer at least one type of Medigap policy to Medicare consumers under the age of 65 living with a disability.

What Are Guaranteed Issue Rights?

In some situations, insurance companies are required to offer you certain Medigap policies. If you buy a Medigap policy during these situations, the policy must cover all of your preexisting health conditions. Also, the companies cannot charge you more because of your health history. 

Examples of these protected situations include:

  • If your Medicare Advantage Plan is leaving Medicare, stops providing care in your area, or you move out of your plan’s service area.
  • You have Original Medicare and coverage that is secondary to Medicare, such as a retiree health benefit, COBRA or union coverage, and it 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 (Medigap) Insurance?

Yes, you can switch from one to another when the coverage you have is not meeting your needs, but only during specific time periods. Certain situations also make it easier to switch.

You can change from a Medicare Advantage plan to a Medigap in two situations. The first situation is if you enroll in a Medicare Advantage plan when you become eligible for Medicare at age 65 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 the Medicare Advantage plan. This time is known as a trial period.

The second situation is if you had a Medigap policy and gave it up to enroll in a Medicare Advantage for the first time and you aren’t happy with your new Medicare Advantage coverage. There is no age requirement for this trial period. You may return to Original Medicare within 12 months of joining Medicare Advantage and get the same Medigap policy back, if the company still sells it. If not, you can buy a different Medigap policy. In these two situations, the Medigap insurance company cannot use medical underwriting or impose a waiting period for pre-existing conditions.

In addition to these two trial periods, Medicare Advantage consumers can switch to Medigap, but they may face some hurdles. You can buy a Medigap policy after you disenroll from a Medicare Advantage plan during an enrollment period and return to Original Medicare. However, a Medigap insurance company may use medical underwriting and impose a waiting period for pre-existing conditions, or refuse to sell you a Medigap policy.

You may switch from Medigap to Medicare Advantage by enrolling during an enrollment period, typically between October 15 – December 7 (called the Annual Election Period). Medicare Advantage plans must accept your enrollment so long as you have Medicare Part A and Part B and do not have kidney failure or end-stage renal disease.

What Else Should You Know When Deciding Between the Two?

There are benefits offered by both Medicare Advantage and Medigap but they are different and not always comparable. Choosing between them depends on your healthcare, financial needs,  and preferences. 

Since most Medicare Advantage plans use managed care models, care coordination is part of your care. In other words, providers in the network of your Medicare Advantage plan have access to your medical history and information, such as what treatments and medications you have received or are receiving. 

As of 2019, Medicare Advantage plans may include health and wellness services that are not traditionally considered medical services. For instance, some plans cover nutrition counseling and meal assistance, as well as the installation of safety equipment in the house, such as shower rails. If your plan offers these benefits and you request them, the plan will evaluate your specific needs before providing these benefits. This allows Medicare Advantage plans to tailor care for each individual member.

Medigap’s primary benefit is that it pays your portion of Original Medicare costs. This can give you peace of mind to better estimate your medical expenses instead of being surprised by unexpected cost-sharing. 

It is also more advantageous for people who want to receive care from specific doctors or hospitals, as it is accepted by any provider that takes Medicare. Just remember that with Medigap policies, you choose your own doctors, so you will need to coordinate your own care. You will have to share with each doctor what medications and treatments you are receiving from other physicians. 

If emergency care overseas is important, you may want to choose one of the six Medigap policies that offer that benefit. Be aware, however, that the foreign travel emergency benefit has some restrictions. It is limited to emergencies during the first two months of a trip. The benefit pays 80% of covered emergencies after you pay a $250 deductible, and stops paying after the lifetime limit of $50,000 is reached. Many seniors choose to buy travel insurance in addition to the Medigap policy.

What to Remember — Medicare Advantage vs Medigap

There is no one-size-fits-all option when it comes to your health coverage. Whether a Medicare Advantage or Medigap policy works better for you depends on your health care and financial needs, and your preferences. Work with your doctor and other healthcare providers to determine your medical needs, look at your financial picture, and then shop around to find the best plan for you, whether it’s a Medicare Advantage plan or a Medigap policy.

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Article Sources
  1. Centers for Medicare and Medicaid Services, Office of Enterprise Data and Analytics. “CMS Fast Facts,” February 2020 (accessed July 2020).