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Medicare Advantage vs Medigap: How to Choose Between the Two

Medicare Advantage vs Medigap: How to Choose Between the Two

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Both Medicare Advantage and Medicare Supplement allow you to fill the gaps in coverage that are found in original Medicare. However, Advantage and Supplement plans will vary depending on costs, coverage and the provider network (HMO, PPO and PFFS). Therefore, you'll need to compare these policies to choose the ideal combination of Medicare policies for your situation.

What is Medicare Advantage?

Medicare Advantage, or Medicare Part C, is an alternative to the original Medicare Parts A and B. This plan is a bundled policy that includes Part A, Part B and sometimes Part D. Furthermore, an Advantage plan will provide some added benefits that original Medicare will not cover such as vision, hearing and dental care.

You are only eligible to purchase Medicare Advantage if you have already enrolled in Medicare Parts A and B. Once you have enrolled in a plan, you can then begin to look at the different Medicare Advantage policies offered by private health insurance companies.

What is Medicare Supplement or Medigap?

Medicare Supplement, sometimes called Medigap, is a health insurance plan that will complement your original Medicare. In other words, Medicare Supplement helps fill the gaps for Medicare parts A and B by providing financial help for deductibles, out-of-pocket costs and coinsurance.

Medigap plans are organized by different letters: plans A, B, C, D, F, G, K, L, M and N. Each plan will provide different benefits and will pay for different parts of your original Medicare. However, all the policies will vary in monthly premiums and thus the best Medicare supplement plan for you will be the right balance of cost and coverage.

Medigap policies are offered through private health insurance companies, such as Kaiser Permanente or UnitedHealthcare. However, there's no difference in coverage between the plans offered by the companies. For example, Plan K through Kaiser Permanente will be the same Plan K that is offered by UHC.

What are the differences between Medicare Advantage and Medigap?

Within Medicare Advantage and Medigap, there will be differences in coverage, cost and the provider networks. These will vary greatly and thus are important to recognize before you decide on a plan that will be right for your health situation. Below is an overview of the main differences between Advantage and Supplement coverage.

Medicare Advantage (Part C)
Medicare Supplement
CoveragePrivate health plan that includes parts A and BPrivate supplement coverage that supports original Medicare parts A and B
Part D coverageIncludedMust be purchased separately
Out-of-pocket costsHigherLow
Provider networksIn-network deductibles that depend on the planAny that participate in Medicare
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Coverage

Initially, both policies require and include Medicare parts A and B. These plans represent original Medicare and are your base Medicare health insurance. Beyond parts A and B, you can customize your coverage (through Medicare Supplement) or purchase a simple, comprehensive policy (through Medicare Advantage).

Medicare Advantage will provide you coverage for most medical services such as health, dental, vision and hearing care. On the other hand, Medicare Supplement is a pick-and-choose type of plan in which you can purchase policies that will provide for certain types of coverage. For example, if you want coverage for the Part B deductible, the best Medicare supplement policy would be Plan C. However, if you want to cover Part B excess charges, then Plan G would be the right purchase.

Cost

Medicare Supplement will typically have a higher monthly premium compared to Medicare Advantage. Specifically, Medicare Advantage plans could cost between $0 and $100 a month while Supplement coverage can vary between $50 and $1,000 per month.

However, although Medicare Supplement will cost more in premiums, you will find there are usually few or no out-of-pocket costs. This is significant as deductibles and out-of-pocket could be as high at $6,700 for Medicare Advantage.

For example, you could purchase a Medigap Plan G policy for $500 per month, which would equate to $6,000 per year. On the other hand, you could purchase a Medicare Advantage policy for $50 per month or $600 per year. But if you had paid the entire deductible for the Advantage policy, your yearly health bill could be $7,300 ($6,700 + $600 = $7,300).

Your cost for Medicare Supplement can also vary depending on your age and health history, while Medicare Advantage is standardized. This is important to consider if you currently have any health problems or suspect you may have complications later in life.

Provider networks

A difference to consider between Medicare Advantage and Supplement care will be the choice in providers or physicians available. Medicare Supplement policies, in conjunction with your original Medicare, typically do not have differences in provider networks. This means you could visit any doctor that currently participates in Medicare. Furthermore, if you are trying to visit a specialist such as a chiropractor, you often would need a referral.

On the other hand, Medicare Advantage may have different provider networks depending on the plan you choose. Similar to individual health insurance, which defines in-network coverage and out-of-network coverage. These include:

  • Health maintenance organization (HMO): You pay less for doctors and Medicare facilities that are in network, but if you go out of network you may pay full cost. Usually you will need to choose a primary care provider (PCP).
  • Preferred provider organization (PPO): There's a network of doctors who are preferred and classified as in network, but you'll pay more for out-of-network services.
  • Private fee-for-service (PFFS): A doctor must accept the plan's payment terms and conditions before services are provided. Emergency services are always covered.

Because there are significant differences between provider networks and the coverage you would receive, it is a good idea to compare networks so you can choose one that offers the right benefits for your health situation.

Should I choose Medicare Advantage or Medicare Supplement?

The decision of whether to choose Medicare Advantage or Medicare Supplement will depend on your budget, health care needs and how much effort you want to put into finding your Medicare coverage.

By selecting Medicare Advantage, you are choosing a simple policy that will provide comprehensive coverage. On the other hand, if you choose Medicare Supplement, then you would need to pick the policy or combination of policies that you wish to purchase. This requires you to analyze each plan and evaluate the costs versus the benefits, which can be difficult.

From a cost perspective, Medicare Supplement is best for someone who does not want to deal with tracking deductibles, copays or out-of-pocket maximums. Medicare Advantage has many of these costs built into each plan and thus requires a hands-on approach with your Medicare health insurance policy.

Finally, on a similar note, Medicare Advantage has restrictive provider networks. Therefore, if you prefer the ability to freely choose a doctor or require a specialist, then Medicare Supplement will be the best option.

Sterling Price

Sterling Price is a research analyst at ValuePenguin specializing in health and life insurance. He graduated from Syracuse University with a bachelors degree in Finance and Accounting and has previous experience as a licensed life insurance representative.

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.