Medigap vs. Medicare Advantage

Key points

• Medigap supplements your Medicare plan.
• Medicare Advantage is a replacement for Medicare and can offer you coverage Medicare doesn’t.
• After comparing Medigap vs. Medicare Advantage, choose what’s best for you based on your health needs and budget.

What are Medigap and Medicare Advantage?

Let’s start with definitions of these two Medicare supplemental plans and then we’ll take a deeper dive.

• Medigap is Medicare Supplement Insurance that helps fill gaps in Medicare. It is sold by private companies. While Medicare pays for much of your health care services and supplies, some things are not covered, including copayments, coinsurance and deductibles.
• Medicare Advantage is a replacement for Medicare and also offers coverage that Medicare doesn’t. Like Medigap, it is offered by private companies.

How Medicare supplements and replacements work

When you turn 65, you become eligible for Medicare. This is an official government-sponsored health insurance plan, also called “Original Medicare.”

It includes two parts, A and B. You may have to pay for Part A, depending on whether or not you paid Medicare taxes for a certain amount of time while working. Part B will cost $174.70 per month in 2024 for most insureds, but could be more if you have a higher income.

Part A includes hospital coverage and Part B includes coverage for doctor’s visits, mental health services, some prescription drugs and durable medical equipment.

But Original Medicare does not provide complete coverage for seniors.

If you think you need more coverage, you can buy Medigap to bridge the gaps or opt for Medicare Advantage, which has more comprehensive coverage.

What is Medigap?

Medigap is a supplemental insurance policy that is purchased from a private insurance provider. You need to have an Original Medicare policy to buy Medigap. A Medigap policy can cover some or all the remaining costs that Original Medicare does not.

When you have any kind of medical expense, Original Medicare will be billed first. Whatever it doesn’t cover, Medigap will then be billed. Medigap can cover the coinsurance, copayments and deductible costs that Original Medicare doesn’t.

Medigap may also provide coverage for emergency medical expenses incurred when you travel abroad. Medigap plans do not have networks. If Medicare is not accepted by a certain physician, there is nothing for Medigap to supplement.

One downside to Medigap is that it may not cover preexisting conditions for the first six months that you have the policy. Medigap also does not provide coverage for long-term care, vision, hearing or dental care.

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What is Medicare Advantage?

Medicare Advantage is an alternative to Original Medicare. When you buy a Medicare Advantage plan, you’re getting Medicare Part A, Part B and most plans include Part D. Part D includes prescriptions that are not covered by Original Medicare.

Unlike Medigap, Medicare Advantage plans also often include coverage for vision, hearing and dental care.

As with traditional health insurance, consumers with Medicare Advantage are usually only covered when they use in-network providers. If you visit an out-of-network provider, you may be responsible for all costs. The Medicare Advantage network is often smaller than the network for Original Medicare.

Unlike Original Medicare, you may need a referral from your primary care doctor to visit a specialist. The specialist should be in network for the visit to be covered.

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How to choose between Medigap and Medicare Advantage

It’s not always easy to choose between Medigap and Medicare Advantage. Consumers who want more flexibility in terms of doctors should consider Original Medicare with a Medigap supplement. Medicare Advantage plans have cheaper premiums, but consumers won’t have as many doctors to choose from.

Jim Blankenship, a certified financial planner and the author of “A Medicare Owner’s Manual,” recommends you use the tools available on Medicare.gov, which can provide guidance on which plan is best for you.

“Most folks who have the means will choose one of these options to supplement Original Medicare, because there are many gaps in the coverage of Original Medicare that can become costly,” said Blankenship.

Take a close look at the monthly premiums and see which you can comfortably afford. Make sure to factor in any additional costs for regular prescriptions and other services you’ll have to pay out of pocket. If you’re considering Medicare Advantage, check to see if your doctors are in-network, especially if you have a pre-existing condition and want to stay with the same doctor.