When you first become eligible for Medicare, one of the biggest choices is how you want to receive your coverage. Many people compare Medicare Advantage plans with Medicare Supplement insurance, also called Medigap.
Both options can help cover healthcare costs, but they work in very different ways. Understanding those differences may make it easier to choose a path that fits your doctors, travel habits, budget, and comfort level with out-of-pocket costs.
The most important thing to know is that you generally choose either a Medicare Advantage plan or a Medigap policy. You cannot use a Medigap policy to pay for costs under a Medicare Advantage plan.
Start With Original Medicare
Original Medicare has two main parts: Part A and Part B. Part A generally helps cover inpatient hospital care. Part B generally helps cover doctor visits, outpatient care, preventive services, lab work, and durable medical equipment.
Original Medicare gives you broad access to providers. In most cases, you can see any doctor or hospital in the United States that accepts Medicare and is accepting new Medicare patients.
However, Original Medicare does not pay every healthcare expense. It usually leaves deductibles, copayments, and coinsurance for you to pay. It also does not include most routine dental, vision, hearing, or prescription drug coverage.
From there, people often choose one of two main coverage approaches: keep Original Medicare and add a Medigap policy, or receive Medicare benefits through a Medicare Advantage plan.
What Is Medicare Advantage?
Medicare Advantage, also called Part C, is an alternative way to receive your Medicare benefits through a private insurance company that contracts with Medicare. You still need to stay enrolled in both Medicare Part A and Part B and continue paying your Part B premium.
Medicare Advantage plans must cover all medically necessary services covered by Original Medicare, except hospice care, which remains covered by Original Medicare. Many plans may also include extra benefits, such as prescription drug coverage, dental services, vision care, hearing benefits, fitness programs, or transportation support.
Most Medicare Advantage plans use a provider network. An HMO may require you to use in-network providers except in emergencies. A PPO often gives you the option to see out-of-network providers, although your share of costs may be higher.
These plans can be a good fit for someone who is comfortable with networks and plan rules, wants extra benefits in one package, and does not mind reviewing coverage each year. Benefits, provider networks, drug lists, and costs can change from year to year.
What Is Medigap?
A Medigap policy is private insurance that works alongside Original Medicare. It does not replace Medicare. Instead, it may help pay some or all of the out-of-pocket costs that Original Medicare leaves behind, such as Part A coinsurance, Part B coinsurance, and certain deductibles.
Medigap plans are standardized in most states and are identified by letters, such as Plan G or Plan N. A Plan G from one company generally provides the same basic Medicare-covered benefits as a Plan G from another company in the same state. However, premiums, underwriting rules, customer service, discounts, and rate histories can vary by carrier and state.
With Medigap, you can generally see any doctor or hospital nationwide that accepts Medicare. There are usually no provider networks and no referrals required for Medicare-covered services. This flexibility can be especially important for people who travel frequently, live in more than one state during the year, or want access to specialists without network concerns.
Medigap policies sold today do not include outpatient prescription drug coverage. If you choose Medigap and want drug coverage, you would generally enroll in a separate Medicare Part D prescription drug plan.
How Do Provider Choices Compare?
Provider access is one of the clearest differences between these two options.
- Medicare Advantage: You may need to use a plan’s network of doctors, hospitals, pharmacies, and specialists. Rules vary by plan type.
- Original Medicare with Medigap: You can generally use any provider nationwide that accepts Medicare.
Before choosing a plan, consider your current doctors, preferred hospitals, and any specialists you see. It may also help to think about whether you would want flexibility if your health needs change later.
How Do Out-of-Pocket Costs Work?
With Medicare Advantage, you may pay copayments or coinsurance as you use services. Plans have an annual maximum out-of-pocket limit for covered Part A and Part B services. Once you reach that limit, the plan generally pays the full cost of covered services for the rest of the year.
With Medigap, you usually pay a separate monthly premium in addition to your Part B premium. In exchange, the policy may reduce many of the deductibles and coinsurance amounts left by Original Medicare. Your costs can be more predictable, depending on the Medigap plan you choose.
Neither approach is automatically better for everyone. A Medicare Advantage plan may have a lower monthly plan premium but more pay-as-you-go costs when you receive care. A Medigap policy may have a higher monthly premium while offering more predictable cost sharing for Medicare-covered services.
Do Medicare Advantage and Medigap Cover the Same Extras?
Medicare Advantage plans may include benefits beyond Original Medicare, such as routine dental, vision, hearing, or fitness benefits. The specific benefits and limits vary by plan and location.
Medigap is designed to help with Medicare-approved medical costs. It generally does not include routine dental, vision, hearing aids, long-term care, or prescription drugs. Some people prefer to choose separate coverage for those needs, while others prefer the convenience of having certain benefits packaged together in a Medicare Advantage plan.
Can You Switch Later?
You may have opportunities to change your Medicare coverage during certain enrollment periods. For example, the Annual Enrollment Period each fall may allow you to switch Medicare Advantage plans or return to Original Medicare.
However, getting a Medigap policy after your first enrollment period can be more complicated. Outside of certain guaranteed-issue situations, an insurance company may use medical underwriting when you apply. That means it may review your health history and can decide whether to accept your application. Rules vary by state, and some states offer additional consumer protections.
For that reason, it is wise to think carefully about whether broad provider access and more predictable medical costs are important to you before making your first Medicare choice.
Which Medicare Option May Fit You Best?
Medicare Advantage may be worth considering if you are comfortable using provider networks, like having benefits bundled into one plan, and are willing to review your plan details each year.
Original Medicare with a Medigap policy may be worth considering if you value the freedom to see Medicare-accepting providers nationwide, want fewer network restrictions, or prefer more predictable costs for Medicare-covered care.
Your right choice depends on your health needs, travel plans, finances, doctors, prescriptions, and personal preferences. Eric can help you compare Medicare Supplement options available in your state and explain how they work with Original Medicare. Reach out to Eric for free, no-pressure help as you sort through your Medicare choices.