Medicare Advantage vs. Medigap: Which Is Right for You?

Medigap vs. Medicare Advantage

To learn the basics, watch this short video.

What Does Medicare Cover?

The two main parts of Medicare are Part A and Part B. Part A is hospital coverage for inpatient services, and Part B is your doctors’ coverage for outpatient services. Part A is premium-free for most beneficiaries, and Part B comes with a standard monthly premium. If you’re in a higher income bracket, your premium will be higher than the standard premium. This is known as income-related monthly adjustment amount, or IRMAA.

Medicare Part A and Part B come with cost-sharing in the form of deductibles, copays, and coinsurance, and this is where Medicare Advantage and Medigap come into play. These options can cover most — if not all — of your cost-sharing.

Original Medicare With Medigap Benefits

Medigap, also known as Medicare supplements, were created to work with your Original Medicare benefits. Your provider will first bill Medicare, and then the balance is billed to your Medigap carrier.

All Medigap plans will cover coinsurance under Part A, and they also cover an additional 365 days in the hospital after you’ve exhausted your Medicare benefits. With the exception of Plan A, all Medigap plans also cover your Part A deductible.

Part B covers 80% of your medical costs in an outpatient setting. All Medigap plans cover the remaining 20%. Part B also comes with an annual deductible, which some Medigap plans will cover.

Depending on the plan you enroll in and where you live, monthly premiums can range from $40 to $250 per month. The higher the monthly premium, the better the benefits. Keep in mind, though, that this is in addition to your Part B premium.

Medicare Advantage Benefits

Private carriers also offer Medicare Advantage (also known as Part C), but these plans don’t work with your Original Medicare benefits. Instead, they replace those benefits.

You still have to enroll in both Part A and Part B to be eligible for Part C, but your care will now be managed by a private carrier instead of Medicare. Your provider will first bill your carrier, and then the balance will be billed to the beneficiary.

Medicare Advantage plans must cover all the same services Original Medicare covers, but the carrier determines how much of that service it will cover and your cost-sharing, which is not standardized by Medicare.

Medicare Advantage plans cost anywhere between $0 and $30 in monthly premiums. The lower the premium, the more you spend out of pocket as you use the benefits. That cost is in addition to your Part B premium.

Enrolling in Medicare

If you’re collecting Social Security benefits, you will be enrolled automatically in both Part A and Part B when you turn 65. If you’re collecting Social Security disability insurance, you’ll be enrolled automatically in both Part A and Part B after collecting benefits for 24 months.

If you’re not collecting Social Security benefits when you age into Medicare at 65, you’ll need to enroll in Part A and Part B during your initial enrollment period (IEP). You can do that easily by creating an account on MyMedicare.gov.

Enrolling in Medicare Advantage

Your initial coverage election period (ICEP) begins three months before your 65th birthday and ends either the last day of the month before your Part B becomes effective or the last day of your IEP.

Outside of your ICEP, you have two additional annual enrollment windows.

• Annual enrollment period
• Medicare Advantage open enrollment period

Enrolling in Medigap

Your Medigap open enrollment period (OEP) begins with your Part B effective date, which is a one-time six-month window to enroll in a Medigap plan without going through medical underwriting. You can enroll or change your Medigap plan at any time after this six-month window, but you’ll have to go through medical underwriting to enroll.

How to Decide Between Medigap and Medicare Advantage

The three main factors to consider when deciding between Medigap and Medicare Advantage are:

1. Your doctor network
2. Your current and future health
3. Your budget

Doctor Network

Original Medicare and Medigap do not have doctor networks. More than 96 percent of doctors accept Medicare, and those same doctors also accept Medigap.

Medicare Advantage comes with a limited doctor network. You will need to check whether your doctors accept the plan before enrolling.

Current and Future Health

It’s important to consider not only your current health, but also your future health. You can’t predict what your future health will be, but being proactive and planning for all scenarios will protect you from emptying your retirement savings and provide peace of mind.

If your family has a history of medical issues, then it’s in your best interest to enroll in a plan that gives you the most benefits now. Otherwise, you could be denied coverage if you wait to enroll after you’re diagnosed with a chronic condition or serious illness.

Your Budget

Your budget is another important factor to consider when choosing between Medigap and Medicare Advantage.

With Original Medicare and Medigap, your medical expenses are predictable. You know what your monthly premium is, and you know what you’ll spend out of pocket when you use your benefits.

With Medicare Advantage, the carrier determines your cost-sharing. There is no way to predict what your out-of-pocket expenses will be, and you won’t know your costs until you receive a bill.

Can You Switch From Medicare Advantage to Medigap?

You can technically leave your Medicare Advantage plan at any time and enroll in Medigap. The issue, however, is whether the Medigap carrier will accept you. If you’re outside your one-time Medigap OEP, you no longer have guaranteed issue rights and you will have to go through medical underwriting.

If you enroll in Medicare Advantage because you’re healthy, then you likely won’t be able to enroll in Medigap in the future if you’re diagnosed with a serious condition or illness. Your diagnosis will likely be considered a pre-existing condition.

If you enroll in Medicare Advantage but decide later you aren’t happy with the high cost-sharing, the carrier will accept you into the plan if you have no health issues. You’ll pay higher monthly premiums, however, since you’re older now.

There is a special enrollment period called “trial rights,” which is a 12-month window that allows you to leave your Medicare Advantage plan and enroll in a Medigap plan without going through medical underwriting. You’re eligible for trial rights only if you enrolled in Medicare Advantage when you were first eligible for Medicare or if you left your Medigap plan for a Medicare Advantage plan. You can use trial rights only once.