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Medigap vs. Medicare Advantage: Which Medicare Supplement Plan is Best?

Mary Senderak
June 20, 2019

Blog_Medigap vs. Medicare Advantage

The first thing that most seniors considering health care ask us is, “Which is best: Medigap vs Medicare Advantage.”  Before we can answer the question, however, we want to discuss how each product works because they are drastically different.

What is Medigap and Medicare Advantage?

Medigap
Medigap refers to a group of supplemental insurance plans that work in conjunction with your regular Medicare benefits. They cover many expenses not covered under Original Medicare such as additional hospital days or international travel.  Also Medigap plans often cover expensive deductibles or copayments that are charged to Medicare patients without Medigap. These cost can add up to hundreds of thousands of dollars should you have a major illness or accident.

The benefits of Medigap plans are standardized by the federal government, meaning that plans sold by different insurance companies all offer the same benefits. The most popular Medigap Plan is called Plan F.

Medigap does not cover prescription benefits so most people purchase additional Rx coverage through Medicare Part D.

Medicare Advantage
In contrast, Medicare Advantage plans replaces Original Medicare. Medicare Advantage plans are run by private companies and must provide the same coverage as Medicare A and B, but vary beyond this minimum set of benefits. Medicare Advantage can still leave open the gaps that Original Medicare leaves in case of major medical issue. Some Medicare Advantage plans offer dental, vision or prescription coverage. Most Medicare Advantage plans are HMOs, therefore have a smaller network of doctors than those that accept Original Medicare.

Medicare Advantage plans are usually cheaper than Medigap plans. So, if you’re willing to deal with the restricted network (i.e., you don’t plan on traveling the country) and your funds are limited, the Medicare Advantage plan may be the best choice for you. 

One nice thing about Medicare Advantage is that each year there is an Annual Enrollment Period (AEP) where you can switch companies. The AEP is from October 15 to December 7 each year.

Medigap

Medicare Advantage

Typically More Expensive

Typically Less Expensive

Offers significant additional coverage to Medicare

Usually offers same coverage as Medicare

Larger Network of Doctors

Smaller Network of Doctors

Does not cover RX

Can include RX coverage

Recommended for those who can afford it

Recommended for those on a tight budget

 

Making the Choice of Medigap vs Medicare Advantage

At the end of the day, only you can determine which is the correct type of plan for you. We like to say that the decision comes down to “pay now or pay later.”

Pay Now Medigap plans are usually more expensive each month but will save you a significant amount money if you need extensive medical services.  If you budget can afford a Medigap plan, they will usually be the best way at protect your wealth.

Pay Later Medicare Advantage will almost always be less expensive in the short run because their monthly premiums are usually lower than Medigap.  Out-of-pocket costs for many services such as hospital stays, however, are often much more expensive with Advantage plans than they are with Medigap plans. Seniors considering a Medicare Advantage plan should be aware that their annual out of pocket maximum could be as high as $6700.  You should also contact your physicians to ensure you can keep seeing them if you go with Medicare Advantage.

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