Medicare Advantage vs. Medigap

Medicare Advantage and Medigap plans are both sold through private insurers, but there are major differences. Medigap fills gaps in paying out-of-pocket costs with Original Medicare while Medicare Advantage plans provide additional coverage. You can choose to buy one plan or the other, but not both.

How Are Medicare Advantage and Medigap Different?

The biggest difference between Medicare Advantage and Medicare supplemental insurance (Medigap) is the way they work.

Medigap is intended simply to cover some of the gaps that Original Medicare doesn’t pay for — coinsurance, copayments and deductibles for instance.

Medicare Advantage plans cover everything that Original Medicare does but may offer more coverage for things that Medicare doesn’t.

You may have fewer choices in some cases with Medicare Advantage plans.

Biggest Differences Between Medicare and Medigap
Choice of Doctors
  • Medicare Advantage: Requires you to use doctors in the plan’s network or you have to pay more out-of-pocket.
  • Medigap: You can use any doctor or hospital that accepts Medicare.
Costs
  • Medicare Advantage: An average $23 a month premium (for 2020) on top of your Medicare Part B premium.
  • Medigap: The average Medigap cost is $2,100 per year ($175 per month), and covers about $1,600 in out-of-pocket expenses per year, on average.
Coverage
  • Medicare Advantage: Covers Medicare Parts A and B, but most have other coverage, including vision, dental, hearing and prescription drugs.
  • Medigap: You still have Medicare Parts A and B, and the 10 different Medigap plans provide different kinds of coverage.
Out-of-Pocket Limit
  • Medicare Advantage: Plans must cap annual out-of-pocket costs at $6,700 for in network services and $10,000 for out-of-network services.
  • Medigap: Medigap annual caps for out-of-pocket costs ranged from $2,940 to $5,880 in 2020 depending on plan.
Prescription Drug Coverage
  • Medicare Advantage: Plans may include prescription drug coverage.
  • Medigap: You have to buy separate Medicare Part D prescription drug coverage.
Referrals
  • Medicare Advantage: May be required to get a referral from your primary care doctor.
  • Medigap: Referrals from your primary care doctor are not required.

Is Medicare Advantage or Medigap Coverage Your Best Choice?

Generally, if you are in good health with few medical expenses, Medicare Advantage is a money-saving choice. But if you have serious medical conditions with expensive treatment and care costs, Medigap is generally better.

Speaking with a licensed insurance advisor about your particular health situation can help you decide which is best for you. Since you are not allowed to have Medicare Advantage and Medigap at the same time, you have to choose carefully to make sure you have the best coverage for your specific situation.

Weighing what options are most important to you and talking with a licensed insurance advisor about your particular wants and needs can help you make an informed choice between Medicare Advantage and Medigap.

Positives of Medicare Advantage Plans

Medicare Advantage plans usually have lower monthly premiums than Medigap. They may also include prescription drug coverage. You have to enroll in a separate drug plan if you go with Medigap.

If dental or vision coverage is important to you, you might choose Medicare Advantage, since Medigap doesn’t help with these services. Medicare Advantage may also be better for you if you are flexible on which doctors you are willing to see since you will have to use in-network health care providers to cut out-of-pocket costs.

Did You Know?
The average monthly premium for Medicare Advantage plans was $0 to more than $100 a month in 2014. Medigap plans averaged $150 to $200 a month.

Positives of Medigap Plans

Medigap helps cover your out-of-pocket expenses if you decide to stick with Original Medicare.

The biggest advantage of Medigap may be your choice of doctors. You have more doctors and hospitals to choose from since you can go to any provider that accepts Medicare.

If your doctor is not in a Medicare Advantage plan you’re considering, and you don’t want to switch doctors, you may want to consider Medigap. This will allow you to see any doctor who accepts Medicare.

While Medigap premiums are generally higher than Medicare Advantage, Medigap will likely charge you lower out-of-pocket expenses. You’ll need to calculate how much you expect to pay for health care over a year and compare that to your annual premium cost.

Finding a Medigap plan that works for you can be less confusing because there are only 10 types to choose from. This can simplify enrolling in Medicare.

Did You Know?
With Medigap, out-of-pocket expenses are generally low to none. Medicare Advantage out-of-pocket expenses in 2020 range from $6,700 to $10,000 per year.

Can You Switch Between Medicare Advantage and Medigap?

If you originally sign up for Medicare Advantage and decide it isn’t right for you, you can switch to Medigap supplemental coverage. You can also switch from Medigap to a Medicare Advantage plan.

However, you have to follow certain rules and there may be some problems if you decide to switch down the line.

You have to make any switch during Medicare’s open enrollment period, which runs from October 15 through December 7 each year.

You may also not be able to get a Medigap policy if you give up your Medicare Advantage plan. When you first qualify for Medicare, insurers are required to sell you a Medigap policy. But after that initial enrollment, there’s no guarantee that they will sell you one.

Insurers can also charge you more for a Medigap policy if you have serious medical problems when you decide to switch from a Medicare Advantage plan.

A handful of states protect your ability to switch back to Original Medicare with Medigap coverage.

States That Allow You to Switch Year-Round
  • New York
  • Connecticut
  • Washington
States That Allow You to Switch During Enrollment Periods
  • California
  • Massachusetts
  • Maine
  • Missouri
  • Oregon

Rules guaranteeing your ability to switch vary between each of these states. You should check with your state’s rules to determine what applies in your case.

Last Modified: July 21, 2020

5 Cited Research Articles

  1. White, J. (2020, January 24). Medigap vs. Medicare Advantage: What's’ the Difference? Retrieved from https://www.thestreet.com/personal-finance/insurance/health-insurance/medigap-vs-medicare-advantage
  2. U.S. Centers for Medicare & Medicaid Services. (2019, April 1). Announcement of Calendar Year (CY) 2020 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter. Retrieved from https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/Announcement2020.pdf
  3. Curto, V. (2017, October). Pricing Regulations in Individual Health Insurance: Evidence from Medigap. Retrieved from https://scholar.harvard.edu/files/vcurto/files/Curto_Medigap.pdf
  4. Consumer Reports. (2014, October 14). Medigap vs. Medicare Advantage; Know the Difference Before You Choose. Retrieved from https://www.consumerreports.org/cro/news/2014/10/medigap-vs-medicare-advantage-consumer-reports/index.htm
  5. U.S. Centers for Medicare & Medicaid Services. (n.d.). Medigap & Medicare Advantage Plans. Retrieved from https://www.medicare.gov/supplements-other-insurance/whats-medicare-supplement-insurance-medigap/medigap-medicare-advantage-plans