Medigap and Medicare Advantage are both healthcare plans used by people in retirement. Medigap insurance helps supplement areas like coinsurance, deductibles and copayments. Medicare Advantage, sometimes called Part C, plans are offered by private firms approved by Medicare. We’ll dive into detail about the differences between Medigap and Medicare Advantage and what each is used for.
A financial advisor could help you create or adjust a financial plan for your medical care needs in retirement.
What Is Medigap?
Medigap acts as a supplement to Medicare, sometimes known as original Medicare in this context. Because Medigap acts as a supplement to original Medicare, you must enroll in Medicare Part A and Medicare Part B to be eligible.
Medigap can help fill in certain gaps in coverage, like covering you while you are traveling. It can also fill gaps with copayments, deductibles and coinsurance. This is because choosing original Medicare with Medigap means you can see any doctor in the country who accepts Medicare. Plus, you can get coverage for healthcare in foreign countries under Medicare Part N. You will also have Medicare Part B coinsurance, which reduces doctor’s office visits to $20 and emergency department visits to $50.
Premiums are often higher when you have Medigap coverage, but you can reduce your out-of-pocket expenses. Thus, it may be suitable for those with health conditions that require frequent attention. However, Medigap coverage doesn’t include prescription drug coverage and can’t be paired with Medicare Advantage. In fact, it is illegal for anyone to sell Medigap to you if you have a Medicare Advantage plan.
To qualify for Medigap, you generally must be 65 years of age or older. Unlike Medicare Advantage, Medigap doesn’t have an open enrollment period. However, if you know you want Medigap, it’s usually best to enroll immediately after you enroll in Medicare Part A and Medicare Part B. This helps ensure that there won’t be extensive underwriting, which could lower your approval odds.
What Is Medicare Advantage?
Medicare Advantage is a type of private health insurance that is Medicare-approved. Also known as Medicare Part C, Medicare Advantage covers a broader range of healthcare services than original Medicare with Medigap. For instance, it may cover things like vision, dental and home healthcare. Plus, it often includes prescription drug coverage, also known as Medicare Part D. These plans often have lower premiums than Medigap with original Medicare, allowing you to save money on your monthly bill.
Medicare Advantage plans come in a variety of forms. They can be HMOs, PPOs, Special Needs Plans (SNPs), private fee-for-service (PFFS) plans, or Medical Savings Account (MSA) plans. You may see Medicare Advantage plans available from large health insurance companies like Aetna, UnitedHealthCare and Humana.
While Medicare Advantage can be more convenient for some patients, it also has its share of downsides. For instance, these plans typically require you to stay in network, which could be problematic if you often travel to other parts of the country. Similarly, a referral or prior authorization may be required in some situations. Its lower monthly premiums also mean you may have higher out-of-pocket costs.
Like Medigap, those 65 and older are eligible for Medicare Advantage plans. Those who are younger than 65 may also be eligible if they have a disability. Lastly, those with end-stage renal disease may be able to enroll. Although Medicare Advantage is generally not considered a supplemental plan like Medigap, it still requires you to enroll in Medicare Part A and Part B coverage to be eligible. You should also live within the Medicare Advantage plan’s service area.
Medigap vs. Medicare Advantage: Comparison
Both Medigap and Medicare Advantage plans can provide more coverage than original Medicare. However, there are many differences between the two.
How Medigap and Medicare Advantage Compare
| Medigap | Medicare Advantage |
| Many plans have a $0 deductible and low copays, but premiums may be higher | Lower premiums, but higher out-of-pocket costs |
| Accepted nationwide | May require you to stay in-network |
| Includes international coverage | Excludes international coverage |
| No coverage for prescription drugs (Medicare Part D) | Usually includes prescription drug coverage (Medicare Part D |
| Some plans may cover hearing, vision and dental; many do not | Usually covers things like hearing, vision and dental |
| Requires enrollment in Medicare Part A and Part B | Requires enrollment in Medicare Part A and Part B |
Bottom Line
Both Medigap and Medicare Advantage offers a wide range of coverage and services, but neither is the best choice in all situations. For instance, Medigap may be right for those who frequently travel or regularly visit a doctor or the emergency department. Medicare Advantage is well-suited to those who mainly want to keep their monthly premiums low or need things like prescription drugs, vision or dental. Each plan has its pros and cons, so it’s important to carefully consider your situation before choosing one.
Tips for Healthcare
- For help navigating healthcare costs and all other financial matters, consider working with a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool connects you with three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Health insurance isn’t the only type of insurance you need. Make sure you have life insurance, especially if you have a family who will need help if you were to have an unfortunate accident.
Photo credit: ©iStock.com/Phiromya Intawongpan, ©iStock.com/dragana991, ©iStock.com/PeopleImages