Medigap vs. Medicare Advantage

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  • How do Medigap plans and Medicare Advantage plans differ? How can you decide which type of plan is best for you? Read this detailed Medigap vs. Medicare Advantage comparison to find out how to decide.

Many Medicare beneficiaries decide that they want more than what Original Medicare (Medicare Part A and Part B) offers. They’re then left to consider the possibility of choosing between Medigap or Medicare Advantage.

Medigap plans and Medicare Advantage plans are very different. You’re not allowed to have both types of insurance plans, so you must choose one or the other. 

What’s the difference between these two types of policies and how do you decide which one is best for you? We’ll tackle all that and more below. 

Overview of Medigap and Medicare Advantage Plans

Let’s start with a brief summary of each type of policy. 

Medigap, Also Known as Medicare Supplement Insurance

Medigap plans are also referred to as Medicare Supplement Insurance, and there are 10 different types of standardized Medigap plans that are available from private insurance companies in most states. Medigap plans pay for some of the out-of-pocket costs that are required by Original Medicare. The costs that Medigap plans can cover include things like Medicare deductibles, copayments, coinsurance and more.

Each type of Medigap plan is designed with a unique combination of covered costs. For example, Medicare Part A requires a coinsurance payment when you receiving inpatient skilled nursing care. Some Medigap plans fully cover those coinsurance costs, while other types of plans might cover 50% or 75% of those costs, and some plans might not cover them at all.

The chart below illustrates exactly what Medicare costs can be covered by each type of Medigap plan.

Medicare Supplement Insurance Plans 2021
Medicare Supplement Benefits A B C1 D F1 G K L M N
Part A coinsurance and hospital costs
Part B coinsurance or copayment 50% 75%
First 3 pints of blood 50% 75%
Part A hospice care co-insurance or co-payment 50% 75%
Co-insurance for skilled nursing facility     50% 75%
Medicare Part A deductible   50% 75% 50%
Medicare Part B deductible                
Medicare Part B excess charges                
Foreign travel emergency     80% 80% 80% 80%     80% 80%
1. Plans C and F are not available to new beneficiaries who became eligible for Medicare on or after January 1, 2020.
2. Plans F and G also offer a high deductible plan which has an annual deductible of $2,370 in 2021. Once the annual deductible is met, the plan pays 100% of covered services for the rest of the year. The high deductible Plan F is not available to new beneficiaries who became eligible for Medicare on or after January 1, 2020.
3. Plan K has an out-of-pocket yearly limit of $6,220 in 2021. Plan L has an out-of-pocket yearly limit of $3,110 in 2021.
4. Plan N pays 100% of the Part B coinsurance, except for a copayment of up to $20 for some office visits and up to $50 for emergency room visits that don’t result in an inpatient admission.
View an image version of this table.

When you use a Medigap plan, it works alongside your Original Medicare coverage so that when you receive care that’s covered by Medicare, your Medicare Supplement plan will pay certain out-of-pocket costs that might be due when you receive that care. 

Medicare Advantage, Also Known as Medicare Part C

Medicare Advantage (MA), also called Medicare Part C, is a type of private Medicare health plan sold by insurance companies. These plans replace your Medicare Part A and Part B coverage and offer all of the same benefits you would otherwise receive from Medicare Part A and Part B. In fact, they are required by federal law to cover everything that Original Medicare covers. 

Beyond the minimum coverage requirement, most Medicare Advantage plans also offer benefits that are not covered by Original Medicare. Some of the most popular “extra” benefits that some Medicare Advantage plans may offer include coverage for things like:

  • Routine dental care, such as teeth cleaning
  • Dentures
  • Routine vision care such as eye exams and prescription eyeglasses or contacts
  • Hearing care and hearing aids
  • Membership to fitness programs such as SilverSneakers and Silver&Fit

Most Medicare Advantage plans include prescription drug coverage. These plans are often referred to as Medicare Advantage Prescription Drug plans (MA-PD).

It’s important to note that the specific Medicare Advantage plans and benefits that are available where you live may vary.

Some Medicare Advantage plans may even cover things like acupuncture, non-emergency medical transportation, home modifications for aging in place, home meal delivery and more.

How Are Medigap and Medicare Advantage Different?

Now that we’ve summarized each type of policy, let’s examine some of the key differences between Medigap and Medicare Advantage. One key difference between the two is that Medigap is used with Original Medicare, while Medicare Advantage is used in place of Original Medicare.

Some other major differences include how these types of Medicare insurance are used, the variety of plans that are available, the types of costs they include and whether or not they cover prescription drugs.

Medicare Plan Usage and Provider Networks

Medigap plans are accepted by any health care provider who accepts Original Medicare. There are no network restrictions or participating providers to worry about. If a doctor accepts your Medicare insurance, they will accept your Medigap coverage as well. 

Medicare Advantage plans, however, operate more like some traditional health insurance plans. Medicare Advantage plans often come in the form of HMOs or PPOs that typically feature provider networks restricted by area, state or region. You may not necessarily be able to use one specific Medicare Advantage plan in other parts of the country. Some Medicare Advantage plans allow you to visit providers outside of the plan’s preferred network, but you typically pay less out of pocket if you stay inside your plan network.

Plan Variety Where You Live

Medigap plans are standardized in terms of their benefits (except for Medigap plans in Massachusetts, Minnesota and Wisconsin, where plans are standardized differently). For example, Medigap Plan A purchased in California will include the same benefits as Medigap Plan A purchased in New York. 

Medicare Advantage plan benefits are not standardized, and insurance companies are free to customize their own plans within the overall parameters set by the Centers for Medicare & Medicaid (CMS), which is the federal organization that oversees and administers Medicare.

There are thousands of Medicare Advantage plans across the country, though the plan variety can vary where you live. 

Out-of-Pocket Spending Limits

Only two types of Medigap plans contain an out-of-pocket spending limit: Plan K and Plan L.

Medicare Advantage plans are required by law to contain an out-of-pocket spending limit that is no higher than a predetermined amount ($7,550 in 2021). The out-of-pocket limit is the most that you will be forced to pay for covered services and items in a calendar year. Once that limit is reached, the plan pays 100% of your covered costs for the remainder of the year. 

Medicare Drug Coverage

Medigap plans do not cover prescription drug costs. Beneficiaries who have a Medigap plan must enroll in a Medicare Part D plan or other type of prescription drug insurance plan (such as an employer-provided drug plan) if they want drug coverage. 

Most Medicare Advantage plans include prescription drug coverage. If a beneficiary has a Medicare Advantage plan without drug coverage, they can also enroll in a Medicare Part D prescription drug plan.

Which Is Better: Medigap or Medicare Advantage?

Neither type of policy is necessarily “better” than the other. But one option may prove to be better for a particular person’s needs. 

  • One of the advantages of Medigap is that a plan can potentially help you greatly reduce or even eliminate many of your out-of-pocket Medicare costs. Surprise medical bills can be stressful and damaging to your household budget, and a Medigap plan can provide you with more predictable Medicare spending.

    Medigap plans also have the luxury of being accepted all over the U.S. If you’re a frequent traveler, you can use your Medigap plan anywhere in America where Original Medicare is accepted. 

  • On the other hand, Medicare Advantage plans include out-of-pocket spending limits and generally have lower monthly premiums than Medigap plans. (Many Medicare Advantage plans actually have $0 premiums). 

    Medicare Advantage plans may also cover things you don’t otherwise get through Original Medicare, which can allow you to bundle a variety of benefits under one plan without having to juggle multiple insurance policies for everything you need. 

    One type of Medicare Advantage plan called a Special Needs Plan (SNP) can even be customized to fit the needs of someone with a specific health condition or circumstance

If you need to choose between a Medigap plan and a Medicare Advantage plan or would just like some further information about these policies and how they differ, consult with a licensed insurance agent who can walk you through some of the subtleties and help you determine the best type of Medicare plan for your needs.