Medicare Advantage Versus Medigap

Medicare doesn't cover everything, so many retirees pay extra to supplement their basic plan. You've probably heard about Medigap and Medicare Advantage, but how do you know which one may be right for you? Both options serve the same general purpose - to help cover the healthcare costs that Medicare doesn't - but they go about it in very different ways.

Let's break it down so you can make an informed decision based on your health needs and budget.

What is Medigap?

Medigap, also known as Medicare Supplement Insurance, is designed to fill the "gaps" in Original Medicare (Parts A and B). Those gaps include out-of-pocket costs that Medicare doesn't cover, like deductibles, coinsurance, and copayments. Medigap policies are sold by private insurance companies and come in a variety of standardized plans labeled A through N.

Each plan offers different levels of coverage. Some cover everything Medicare doesn't, while others only help with certain expenses. But no matter which Medigap plan you choose, you'll be free to see any doctor or specialist who accepts Medicare.

Key features include:

• It works alongside Medicare Parts A and B, but doesn't bundle everything into one plan.
• Depending on the plan, Medigap can help pay for deductibles, coinsurance, and copays.
• You're not limited to a specific network.
• Typically has a higher monthly premium, but you'll have more predictable medical service costs since the plan likely covers many out-of-pocket expenses.
• No prescription drug coverage. You'll need a separate Part D plan if you want help with prescription costs.

Medigap policies can be more expensive than Medicare Advantage, especially for more comprehensive plans, but you're paying for peace of mind and flexibility.

What Is Medicare Advantage?

Medicare Advantage, also known as Part C, is a way to get your Medicare benefits through a private insurance company. These plans bundle Parts A and B, and often include Part D prescription drug coverage as well. Medicare Advantage plans also frequently offer additional benefits, like dental, vision, and hearing coverage.

Unlike Medigap, Medicare Advantage doesn't just fill in gaps. It replaces your Original Medicare coverage with a plan that functions more like traditional private health insurance. These plans are typically either HMOs (Health Maintenance Organizations) or PPOs (Preferred Provider Organizations), which means you'll need to use doctors and hospitals within a network, and there may be restrictions on seeing specialists.

Key features include:

• All-in-one coverage - it bundles Parts A, B, and sometimes D into a single plan, often with extra benefits like vision and dental.
• Plans often have lower premiums than Medigap plans, but you may pay more out-of-pocket when you use services. For example, you may have copays for doctor visits or hospital stays.
• Most plans use networks, which means you'll need to see doctors and specialists within that network. If you go out of network, you may pay more - or your services may not be covered at all.
• There's an annual out-of-pocket maximum. Once you hit the limit, the plan covers 100% of your costs.

Key Differences

Here's a quick comparison of the most important factors of both plans:

Cost Structure

• Medigap - Higher monthly premiums but lower out-of-pocket costs. You'll have fewer surprises when it comes to medical bills.
• Medicare Advantage - Lower premiums but higher out-of-pocket costs when you use services. You'll need to budget for copays, coinsurance, and deductibles.

Networks

• Medigap - No network restrictions. You can see any doctor or specialist who accepts Medicare anywhere in the country.
• Medicare Advantage - Most plans require using a network of doctors and hospitals. You'll need referrals for specialists in some cases.

Prescription Drug Coverage

• Medigap - Does not include prescription drug coverage. You'll need to buy a separate Part D plan if you want help with medication costs.
• Medicare Advantage - Many plans include Part D coverage, so you won't need a separate plan for prescriptions.

Extras

• Medigap - Purely a supplement to cover medical costs with no extra benefits.
• Medicare Advantage - Often includes extra benefits like dental, vision, hearing, and wellness programs.

Travel

• Medigap - Some plans cover care outside the U.S., which can be helpful if you're traveling or living abroad for part of the year.
• Medicare Advantage - Coverage is usually limited to your local network, though emergency care is generally covered.

Making Your Choice

Deciding between Medigap and Medicare Advantage depends on your situation. Here are a few factors to consider:

Do you travel often?

If you're a frequent traveler or have homes in different parts of the country, Medigap might be the better option. The flexibility to see any doctor who accepts Medicare is a huge benefit if you don't want to be tied to a specific network.

How often do you visit the doctor?

If you have chronic health conditions and expect to see doctors frequently, Medigap's predictable costs might offer more financial security. On the other hand, if you're in good health and don't expect to use medical services often, the lower premiums of a Medicare Advantage plan might save you money.

How much can you afford in monthly premiums?

Medigap policies generally have higher premiums but fewer out-of-pocket costs. Medicare Advantage plans have lower premiums, but you may face higher out-of-pocket costs when you need care. Make sure you're comfortable with your budget, both for monthly premiums and potential medical expenses.

Do you want extra benefits?

If benefits like dental, vision, and hearing coverage are important to you, Medicare Advantage might be the better fit. Just be sure to check that your preferred doctors and hospitals are in the plan's network.

The Takeaway

Choosing between Medigap and Medicare Advantage depends on your healthcare needs, budget, and lifestyle. Medigap offers predictability and freedom but comes with higher premiums. Medicare Advantage gives you more bundled coverage options and extra perks, often at a lower upfront cost - but you'll have to navigate networks and variable out-of-pocket expenses.

Take the time to learn more about each option, consider what's most important to you, and review your healthcare needs carefully. With the right plan, you can enjoy peace of mind knowing that your healthcare costs are covered, regardless of your choice.