Medigap vs. Medicare Advantage: Pros and Cons
When you first enroll in Medicare, you’ll sign up for Original Medicare, which includes Part A and Part B. After enrolling, you have additional coverage options to choose from, and the primary choice is between Medigap (which is also known as Medicare Supplement) and Medicare Advantage (which is also known as Medicare Part C).
In a nutshell, Medigap plans stack on top of your Original Medicare coverage and help pay for the 20% of costs not covered by Original Medicare. As such, they significantly reduce your out-of-pocket costs. Medicare Advantage plans, on the other hand, replace your Original Medicare. These plans also generally come with Part D (prescription drug) benefits and additional perks, like dental, vision, and hearing benefits.
We explain the differences between Medigap and Medicare Advantage in more detail below.
Key Takeaways:
Medicare is not one-size-fits-all, and it’s important to consider your unique needs when choosing the right Medicare coverage.
Medigap plans significantly reduce your out-of-pocket costs and allow you to see any doctors who accept Medicare.
Medicare Advantage plans must provide at least the same coverage as Original Medicare, and often also includes prescription, dental, vision, and hearing benefits.
The enrollment periods are different for Medigap and Medicare Advantage.
What is Medigap?
Medigap plans, also commonly called Medicare Supplement plans, stack on top of your Original Medicare to help cover the 20% of costs not covered by Original Medicare. There are ten types of Medigap plans, labeled by letters A through N. (Plans F and G also have high-deductible variations.) Each plan type is a little different, but all plans of the same type (e.g., all Plan Fs) have identical coverage.
Benefits of Medigap
Medigap gives you a way to enhance your Medicare coverage. Below are the three biggest benefits of enrolling in a Medigap plan.
Your out-of-pocket costs are reduced
The main thing Medigap plans do is reduce your out-of-pocket costs and give you greater financial predictability. When you go to the doctor, you don’t have to worry about how much you’ll owe because most of your costs are covered, especially if you choose one of the more comprehensive Medigap plans, like Plan G.
You can see any doctor who accepts Medicare
Medigap plans don’t have provider networks, so you can see any doctor who accepts Original Medicare—which is about 90% of doctors across the US. This is important for people who split time between two homes or frequently travel domestically. On the flip side, Medicare Advantage plans limit you to provider networks, making it challenging to get care outside of your hometown.
You don’t need to prior authorization
Prior authorization requirements have become a common practice among Medicare Advantage policies. Furthermore, many prior authorization requests are denied, even when the service requested is medically necessary. With Original Medicare and Medigap, you don’t ever need to get prior authorization for covered services, which makes it easier to get quick access to the care you need.
Disadvantages of Medigap
Original Medicare plus Medigap is often considered the most comprehensive coverage. Of course, nothing in life is free, and there’s got to be a reason why 50% or more Medicare beneficiaries choose Medicare Advantage plans over Medigap. So, let’s explore the downsides of Medigap plans.
Higher premiums
All Medigap plans cover your Part A coinsurance and all or part of your part B coinsurance. Most Medigap plans pay for even more of your out-of-pocket costs. You know the saying, “nothing in life is free.” In exchange for peace-of-mind when you do need to go to the doctor, you’ll pay a higher monthly premium. Your specific premium will depend on a number of factors including where you live and which plan type you choose. Learn more about Medigap premiums.
No dental, vision, hearing, or prescription coverage
Unfortunately, Original Medicare doesn’t provide coverage for dental, vision, and hearing services or prescription drugs. Because Medigap plans only help cover the costs leftover by Original Medicare and not additional healthcare services, these benefits are not included for Medigap planholders.
People on Original Medicare and Medigap will need to enroll in a separate Part D (prescription drug) plan to get drug coverage.
Enrollment periods restrictions
There are only select times during which you can enroll in a Medigap plan and be guaranteed acceptance without any additional charges due to your age and health history. The main guaranteed issue period is your Medigap Open Enrollment Period, which is a six-month window after your Medicare Part B becomes effective. There are a handful of other guaranteed issue periods that you can learn about in our Medigap enrollment guide. Outside of guaranteed issue periods, you’ll likely need to go through medical underwriting. During medical underwriting, insurance carriers can ask you questions about your health history and they may deny your application or charge you more based on your answers.
What is Medicare Advantage?
Medicare Advantage plans replace your Original Medicare coverage rather than adding to it like Medicare Supplement plans do. Medicare Advantage plans provide a bundled approach to Medicare. Most include prescription drug (Part D) coverage and dental, vision, and hearing benefits in addition to what is covered under Part A and Part B. Medicare Advantage plans have some attractive features, but it’s important to be aware of their drawbacks before making your choice about your Medicare coverage.
Benefits of Medicare Advantage
There’s a reason that over 50% of Medicare beneficiaries enroll in Medicare Advantage plans. They come with their perks.
Affordability
The average range for Medigap premiums is $150-200 each month. On the flip side, many Medicare Advantage plans have $0 premiums, and the average cost is $18 each month. This doesn’t make them free though! Keep in mind that when you’re on a Medicare Advantage plan, you still need to pay your Part B premium. Still, Medicare Advantage plan premiums are significantly lower than Medigap premiums.
Attractive benefits
Many people are surprised to learn that Medicare doesn’t cover dental, vision, hearing, and prescriptions. And many people choose to enroll in Medicare Advantage plans specifically because they want these healthcare needs covered. In addition to dental, vision, hearing, and prescription benefits, Medicare Advantage policies also offer a variety of ancillary benefits to attract customers. These may include:
Transportation services
Meal delivery services
Annual enrollment periods
Enrolling in Medicare Advantage plans and changing from one plan to another is relatively easy. You can enroll when you first sign up for Medicare. You can also enroll or change your plan every year during the Medicare Open Enrollment Period. This allows beneficiaries to choose a plan that fits their changing healthcare needs year after year.
Disadvantages of Medicare Advantage
You may hear many people say that Medicare Advantage plans are bad. Unfortunately, due to misleading ads and poor sales tactics, people are often unaware of what is and isn’t covered with their specific Medicare Advantage plan.
Limited provider networks
One of the ways Medicare Advantage plans are able to offer low or no cost premiums is by implementing provider networks. Many of us are used to these types of networks because that’s how most employer-linked insurance plans work. But the limited networks sometimes means you cannot find a new doctor or specialist accepting new patients when you need one or that your access to care could be delayed. You also won’t be able to see doctors outside of your state, which is a problem for people who split time between different places.
Prior authorization requirements
Most Medicare Advantage enrollees are enrolled in plans that require prior authorization (generally for more expensive services). Many people have complained about the high number of prior authorization requirements and denials, and it’s clear there’s a problem when 82% of prior authorization denials are overturned. These requirements delay medical care, and the denials may prevent someone from receiving care they need.
High out-of-pocket costs
Medigap does a fantastic job reducing out-of-pocket costs for Medicare beneficiaries. On the bright side, Medicare Advantage does have an out-of-pocket maximum to prevent someone from having catastrophic healthcare costs. Otherwise, the cost structures don’t do much to help reduce beneficiaries’ expenses.
Lack of transparency
Every Medicare Advantage plan is different, and every beneficiary has access to an average of 43 of them! Between commercials advertising every benefit out there and quick phone calls with little explanation given, many Medicare Advantage enrollees walk away thinking their plan is much better than it turns out to be. Unfortunately, they don’t often find out that their plan isn’t a good fit for them until they try to visit their doctor who’s no longer in-network or try to fill a prescription that isn’t covered by their plan. When you work with a Chapter Advisor, we put your needs first, ensuring the plan you choose covers your unique health and financial needs best.
Which is better: Medicare Advantage or Medigap?
There’s not one “best” option for all Medicare beneficiaries.
Pairing a Original Medicare with Medigap Plan G and a prescription drug plan is the most comprehensive insurance you can get with Medicare. This combination is generally considered “the best,” but not everyone can afford the monthly premiums that come with Medigap Plan G.
For some people, a low-cost Medicare Advantage plan is the best way to get their healthcare needs covered while keeping in mind their financial needs. Some people may benefit most from a plan that gives back some of their Part B premium.
Because everyone’s health and financial situations vary, we always recommend working with an independent Medicare advisor who will ask questions about your needs, compare every plan available to you, and recommend one based on your specific needs. At Chapter, we do just this, and our advice is always free.
Schedule a free consultation or call us at (855) 900-2427 to get your questions answered and feel confident in your Medicare decisions.
Switching between Medicare Advantage and Medigap
You can switch from Medicare Advantage back to Original Medicare (and vice versa) once each year, during the Medicare Open Enrollment Period. If you’re unhappy with your Medicare Advantage plan, you may also use the Medicare Advantage Open Enrollment Period, which occurs every year from January 1 - March 31.
If you switch back to Original Medicare, you can then apply for a Medigap plan. Keep in mind that if you don’t have a guaranteed issue period, you’ll likely need to answer questions about your health history and your application could be denied. Also keep in mind that if you choose to leave Original Medicare for Medicare Advantage, therefore giving up your Medigap policy, you may have a difficult time getting that Medigap policy back later on.
Medicare beneficiaries have options, but trying to understand all of them can feel overwhelming! Our goal at Chapter is to make it easy for you to choose the best Medicare coverage for your specific needs. We’ll answer any questions you have, explain your options, help you compare or switch plans, and ensure that you’re getting the best value from your Medicare.
Schedule a free consultation or call us at (855) 900-2427 to get your questions answered and feel confident in your Medicare decisions.