Medigap vs. Medicare Advantage: What's the Difference?

Your choice depends on your lifestyle and needs

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With all the different options for Medicare, figuring out what coverage you do (or do not) need can be confusing. Beyond the basic coverage, two major options you'll have to consider are Medigap and Medicare Advantage.

If you want to save money on your health insurance but make sure you're covered, understanding the basics will help you decide which coverage is best. Let's compare Medicare Advantage and Medigap to see which is right for you.

An Overview of Medicare Options

Medicare is available in a few different "parts" or coverage options. They are:

  •  Medicare Part A and Part B combine to form the Basic Medicare coverage plan.
  • Part C, also known as Medicare Advantage, provides you with more comprehensive coverage than Basic Medicare and limits out-of-pocket costs.
  • Part D works with Parts A & B. It adds prescription drug coverage, and there is an additional premium for this.
  • Medicare Supplement Insurance, also known as Medigap, can lower your out-of-pocket costs even more than a Medicare Advantage plan can. It does not, however, add additional coverage to Medicare.

Now that you know the ABCs (and Ds) of Medicare, how do you compare the coverage options between Medicare Advantage and Medigap? Which is the better option for you?

What's the Difference Between Medigap and Medicare Advantage?

  Medigap Medicare Advantage
Coverage for Prescription Drugs No Yes
Coverage for Out-of-Pocket Costs Will pay some (or all) of Medicare coinsurance depending on plan Has different options for deductibles, copayments, and/or coinsurance
Choice of Doctors Valid with any doctor who accepts Medicare May have additional limits or restrictions
Dental or Vision Care No Yes, many plans offer this
Coverage out of State Yes May be limited or excluded
Coverage out of Country Yes No
Extra Medical Benefits No Yes

Both Medicare Advantage and Medigap are health insurance options that are provided by private insurers; their coverage basics are regulated by the government, just like Medicare. Each one has its advantages, either providing you with more coverage or helping to lower your out-of-pocket costs.

Prescription Coverage

Medigap does not include prescription coverage. If you want to add that on to Medigap, you'll need Medicare Part D. Most Medicare Advantage plans include prescription coverage.

Coverage for Out-of-Pocket Costs

Medicare Part B covers 80% of your health-care costs, which then leaves 20% for you to cover out of pocket. Traditional Medicare has no out-of-pocket maximum, so that 20% could add up to a lot of money if you have a lot of medical needs.

Medigap can help cover that 20% Medicare co-pay or part of the deductibles which you would otherwise pay out of pocket with Basic Medicare coverage. Some of the Medigap plans also include maximum out-of-pocket limits. The scope of coverage depends on the Medigap plan you choose.

Medicare Advantage has maximum limits for out-of-pocket costs, so it can save you money in the long term compared to Medicare Basic. These costs vary depending on your plan details.

Medigap open enrollment allows you to get a Medigap plan, regardless of your health conditions for a limited time. The open enrollment period is limited to six months/180 days from the Part B effective date. Outside of the open enrollment period, Medigap uses medical underwriting, so you may be denied coverage due to preexisting conditions.

Choice of Doctors

Since Medigap is supplemental Medicare, you can use your coverage at any U.S. provider that accepts Medicare. Some plans even offer coverage outside the U.S.

Medicare Advantage may have its own limits in terms of network, specialist restrictions, and more.  There may be some coverage for out-of-network providers, but these are subject to different rates depending on the plan.

Dental or Vision Care

Medigap is only designed for standard health care, so it doesn't include dental and vision coverage. Many Medicare Advantage plans do offer dental or vision coverage.

Coverage Outside the State or Country

If you tend to travel a lot, Medigap has a clear advantage for you. It works anywhere that Medicare is accepted, regardless of whether you're out of state. Many plans offer coverage outside the U.S., as well, for certain emergencies.

Medicare Advantage may be limited for out-of-state travel, and it does not apply for travel outside the U.S.

Additional Medical Benefits

In terms of extra benefits, Medicare Advantage is the clear winner over Medigap. Since Medigap is designed only to supplement your existing Medicare coverage, it doesn't offer any additional benefits.

Medicare Advantage, on the other hand, offers benefits such as

  • Plans customized for certain chronic conditions
  • Coverage for transportation to doctor's visits
  • Health and wellness services
  • Hearing coverage
  • Fitness programs

You cannot have a Medigap plan and a Medicare Advantage plan; you will have to choose one or the other.

Which Is Right for You?

Choosing supplemental or additional Medicare coverage comes down to your needs and life situation.

Using the table above, you can see that if you travel a lot, the Medicare Advantage plan may limit your access to medical care while you travel, whereas a Medigap Plan will give you access to the entire U.S. network of doctors accepting Medicare, and may cover out of country costs. However, if you don’t travel as much, and what you are really interested in is drug, dental coverage, and vision care, then a Medicare Advantage plan can be the way to go since Medigap does not cover these options.

How to Find the Best Medigap or Medicare Advantage Plan

When trying to find the best price for Medigap coverage or a Medicare Advantage plan, consider shopping with independent brokers and non-captive agents. If you call an insurance company directly, it will not be able to offer you more than one option for each plan because the insurance company can only speak for its own plans.

An independent broker or agent may represent a few different companies and will be able to compare several options and give you advice. Agents and brokers are regulated by the government and by codes of ethics; they will not charge you fees. They are paid a commission by the insurance company. 

If you want to learn more about what options are available while you research plans, you can use the Medicare Plan Finder to get a personalized list of plans.

Get the advice of a licensed Medicare health insurance professional before making any final decisions. It won't cost you anything but may save you money in the long run.

The Bottom Line

Take some time to review your lifestyle and medical needs, including prescription drug costs, before making a decision on what kind of plan will work best in your situation. Consider the limits or consequences of switching plans if you become sick later in life. Switching from a Medigap plan to an Advantage Plan is always possible, but switching back may not be.