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Medicare Advantage vs Medigap




Once you approach 65, you know you have to make some big decisions regarding Medicare. You are probably aware that Medicare is not enough. There are gaps. Medicare has 4 basic parts: A (Hospital Care), B (Doctors, Procedures, etc.), C (let’s leave that a mystery for now), and D (Prescription Drugs). The gaps Medicare does not cover are deductibles, co-pays, and other expenses that could eat into your nest egg or monthly income.




Coverage Gap Examples




Hospital Gaps:


Let’s say you have to be admitted to the hospital, and you only have Original Medicare. You will pay the first $1,484 of expenses incurred in the Part A deductible.  


If your hospitalization becomes extended and you stay in the hospital for more than 60 days, you have to pay a portion of each day’s cost. You daily payment depends on how long you’ve been in the hospital. It continues to increase the longer you stay.




Doctor Visits:


Under traditional Medicare, your deductible is $203, but after that, you have to pay 20% of the Medicare-approved amount. That doesn’t sound bad, does it?


What if you have $100,000 in medical expenses? You will be receiving a $20,000 bill in the mail. Ugh. There is no limit on how high those expenses will go either.




There are two basic products designed to bridge those gaps and provide full health insurance benefits to you. The products are the Medicare Advantage plan and the Medicare Supplement or Medigap plan.  So how do you know which one to choose? In this article, we will give you the basics on each product complete with pros and cons. Then we will discuss the ideal person for each product.




          Medicare Advantage


Medicare Advantage is the mysterious Medicare Part C we mentioned above. Advantage Plans are delivered through private insurance companies and include traditional Medicare Plans A & B plus other benefits. Like most health plans they pay for doctor visits, labs, surgery, etc. after a co-pay. The plans can vary from state to state and may offer HMO or PPO networks along with yearly max out-of-pocket limits for doctors willing to accept your coverage.




          Medigap (Medicare Supplement)


Medigap policies are supplements you purchase on top of traditional Medicare. There are 10 Medigap insurance plans available in most areas. The plan is designated by a letter and the benefits are regulated by the federal government regardless of the insurance provider.


To enroll in a Medigap plan, it is to your advantage if you do so during the open enrollment period. This period last 3 months prior to your 65th birthday through 3 months after your birthday. The benefit of enrolling during this period is that underwriting is loosened and you can qualify regardless of pre-existing conditions. If you wait till after the period, you will be subjected to individual company underwriting and may be declined by certain insurance carriers.




This chart gives a quick side by side breakdown of the differences:




Medigap Plan Medicare Advantage
Doctors & Hospitals You choose your doctor or hospital Required to use doctors in the network
Specialists No referrals are needed to see a specialist Referrals may be required to see a specialist
Health Networks (HMO / PPO) No Network Restrictions You may have restrictions depending on the plan
Enrollment You can buy anytime after you turn 65 and join Medicare Part B Specific time periods through the year when you can join an Advantage Plan
Out of Pocket Costs Low to None Depends on Plan. In-network deductibles and co-pays may apply
Prescription Drug Premium Not included but you can purchase additional coverage where premiums cost as low as $6/mon Included with many Advantage Plans. Drugs cost separate.




So now you know the basics of each product, let’s run through the Pro’s and Cons of each product.


Medicare Advantage


Medicare Advantage Plans Pros & Cons




Medicare Advantage Pros:


  • You can potentially bundle your medical, dental and drug plan.
  • Generally, you won’t be denied for preexisting conditions.
  • You can potentially save on premium with an HMO, PPO or another Advantage plan. Medigap plans will have similar plans, so you should compare the premiums with those plans.
  • Typically plans provide extra added value services such as a preventative dental plan. However, you most likely will need to pay an optional premium to get a plan that covers major dental services.




Medicare Advantage Cons:


  • There are stricter enrollment periods on when you can join, change or leave your plan.
  • Depending on the plan you might need referrals from your Primary Care Physician (PCP.)
  • Generally, you will be limited to a more restrictive network of acceptable providers and hospitals.
  • Many Medicare Advantage plans can become a burden when your doctor leaves your network.  Changes can also occur unexpectedly while you are still under your 1 year contract.
  • Higher chances that a Medicare Advantage Plan will have unintended and unexpected expenses.
  • You cannot take your Medicare Advantage plan with you when you move states or out of your coverage area.
  • They are managed care plans that take over Medicare so you are under their rules and regulations
  • Approvals for procedures and approval from claims from the private insurance carrier
  • Step therapy: To decrease costs, Advantage plans always begin with the cheapest pharmaceuticals then step you up if needed. You may have to change your current medication to something cheaper even if the current prescription is working for you.
  • These plans have higher out of pocket maximums and more co-payments.
  • If your drugs are expensive, you might be best advised to leave your coverage from the Advantage plan during the appropriate enrollment period. You can pick a standalone drug plan to significantly lower your drug costs of which there are over 25 Stand Alone Part D plans to choose from in your area.




Medigap Pros & Cons




Medigap Pros:


  • A Medicare Supplement Plan is pretty straightforward. After Medicare approves coverage, generally your Medicare Supplement (aka Medigap) plan pays as well.  You can see any doctor/hospital of your choice and your insurance will be honored and respected.
  • Enrollment periods are determined on a monthly basis.
  • Plans are guaranteed renewable on a monthly basis.
  • You can take your plan with you if you move states.
  • Predictable health care costs that you can budget and estimate more easily.
  • Open Enrollment for Medigap plans happens within 6 months of your Part B effective date or 6 months of turning 65 where you will not be asked health questions and not be denied claims after Medicare approves services under any circumstances.
  • Your doctors and hospitals will have to accept the Medigap coverage for payment after Medicare approves services




Medigap Cons:


  • In certain enrollment situations, you can be denied for preexisting conditions or need to satisfy a waiting period of 3-6 months for a preexisting condition. However, not the case for those turning 65 or those 6 months from their Part B effective date. Medicare does not have a waiting period, only the insurance carrier for the balance of the bill.
  • Potentially higher premiums due to lower out of pocket costs, but a rate comparison is still needed to confirm price rate differences
  • You cannot bundle your drug or dental plan. However, you can still get them separately.




Below is a chart of the Medicare supplement plans available:Medicare Supplement Chart 2021




Similarities between Plans


  • Prescription Drug Donut Hole. Prescription drug coverage or Part D can be covered under both plans.  Both Medicare Advantage and Medigap plans have the donut hole coverage gap. This is where you spend more after the initial co-payments for your drugs. They both comply similarly with the Medicare drug formulary
  • Both can provide extra benefits, such as a discounted gym membership
  • You will need to pay your Part B premium regardless (with some rare exceptions.) For example, Medicaid covers Part B if you qualify for welfare benefits.




Other Considerations


You can not purchase both. In fact, it is illegal for an insurance company to try to sell both to you. You have to pick one or the other. To be eligible for either Advantage or Medigap, you must first be enrolled in Medicare. For each option, you will want to shop around. Pricing and benefits can vary from company to company. Medigap policies benefits are standardized by the federal government, but each company may price their products differently.


You may be able to save on premium with a Medicare Advantage plan, but there are many considerations for choosing such a plan. Such as choice of doctors/hospitals that the insurance carrier approves. There is typically a Medigap plan that has a comparable premium, so it is still worth discussing the rate and coverage differences in your area.


With a Medigap plan, as long as the doctor/hospital accepts the Medicare Assignment you can deal with Medicare directly.  Your supplement plan will pay the gap in coverage once you reach your deductible (if any deductible at all.)


Health Insurance Form


Final Thoughts


There is never a one size fits all to choosing a Medigap or Medicare Advantage plan. We do want you to be on the most suitable plan for yourself. There are more considerations than outlined here, such as where you live, pre-existing conditions, current medication, etc.


Let us help you sort through your options. We represent numerous carriers that can provide both products, and can find the plan that fits your health and budget perfectly.



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