Many individuals enrolled in Original Medicare choose to purchase a separate Medigap plan to help cover out-of-pocket expenses not covered by Medicare. These Medigap plans are also called Medicare supplement plans.
On the other hand, you might choose to enroll in a Medicare Advantage plan instead. You might also hear these plans called Medicare Part C. They combine all your Medicare coverage into a single plan that is easier to manage and maintain. Plus, they can provide additional benefits beyond traditional Medicare coverage.
The catch is that you cannot enroll in both a Medigap plan and a Medicare Advantage plan. While neither is mandatory, you can only choose one if you decide to enroll in either. So, what are these plans, and how are they different? Keep reading as we give you all the details on Medigap and Medicare supplement insurance.
What Is Medigap?
Medigap, or Medicare supplemental insurance, is an insurance policy that helps pay for out-of-pocket costs not covered by Medicare. This could be deductibles, copays, coinsurance amounts, or other charges you might be required to pay out of your pocket.
- These plans are not mandatory and are not officially part of the Federal Medicare program. They are managed and administered by private insurance companies. Each insurance company can set its rates on these plans, although they are standardized across 47 states. Here is what that standardization means.
Many different Medigap plans are available, such as Plan A, Plan B, Plan G, Plan F, and others. Approximately ten different Medigap plans are available today. Since the plans are standardized in 47 states, the coverage details of each type of plan will be the same across those states and insurance companies. This means that the coverage details of Plan A sold by Blue Cross Blue Shield in one state will be the same as those sold by Cigna in another.
- Some Medigap plans provide more comprehensive coverage, while others offer more minimal coverage. Since these plans have monthly premiums, the plans with higher coverage typically have higher premiums as well.
Medigap plans can no longer cover the Medicare Part B deductible. Still, they can cover almost every other cost associated with Medicare, including the Part A deductible, coinsurance amounts, Part B excess charges, and even foreign medical emergencies.
What Is Medicare Advantage?
So, what is a Medicare Advantage plan? Unlike Medigap plans, Medicare Advantage plans are not standardized. Private insurance companies also manage these plans, and each insurance company can set its own rules around rates and coverage details.
- The only requirement is that a Medicare Advantage plan provide at least the same minimum level of coverage as Original Medicare.
Many of these Advantage plans provide extra benefits well beyond those provided by Medicare. These include dental care, vision care, hearing aids, and even gym memberships. Special needs plans are also available that are designed specifically for individuals with certain health conditions.
- Medicare Advantage plans are not available across the country in most cases. Each insurance provider offers its plan options within its service area. This means that you must select an available plan in your area if you decide to enroll in coverage.
You can use the plan finder tool at Medicare.gov to find the plans available in your area. Costs of these plans vary according to the coverage details as well as your location, age, and medical history. While many plans require a monthly premium for enrollees, some Advantage plans have a zero premium.
Some will even help pay a portion of your Medicare Part B premium. As you might expect, the best Medicare Advantage plans typically have the highest premiums. If you decide to sign up, you should closely examine the coverage options of your available plans to select the one that is right for you.
KEY TAKEAWAYS
- Medigap can potentially reduce your overall out-of-pocket costs with Original Medicare, plus most plans provide coverage for items beyond traditional Medicare coverage.
- Medicare Advantage plans typically offer more significant benefits than Original Medicare, such as dental, vision, hearing aid, etc.
- Medicare Advantage plans replace Original Medicare and typically include drug coverage; Medigap plans are an addition to Original Medicare used to reduce overall healthcare costs.
Medicare Advantage Plans VS Medigap Plans: Key Differences
Now that you know about each of these types of plans, let’s explore their details a little deeper. We will explore several critical differences between Medigap and Medicare Advantage.
Coverage Details
One of the most significant differences between Medigap and Medicare Advantage is the coverage. Remember that a Medicare Advantage plan replaces your Original Medicare coverage while a Medigap plan supplements that coverage.
Medicare Advantage
- Medicare Advantage plans typically require copays and coinsurance amounts when you receive service from your healthcare provider.
- Many also require that you meet an annual deductible when receiving treatment.
- Advantage plans are usually available in both Preferred Provider Organization (PPO) and Health Maintenance Organization (HMO) options. Some plans have large provider networks, while the networks of other plans are much smaller.
- Most of these plans also provide prescription drug plans like Medicare Part D plans.
Medigap
- You still use your Original Medicare coverage when receiving treatment.
- Your Medigap policy helps pay for your out-of-pocket expenses. For example, suppose you visit the doctor and must pay a $40 coinsurance. Your Medigap plan would cover that $40 for you.
- The specific expenses covered depend on the plan that you select. The plans with lower premiums typically have lower coverage benefits as well.
- You should note, however, that Medigap plans do not provide any benefits for prescription drugs. You would need to enroll in a Medicare Part D plan for those benefits, but Medigap would not cover any out-of-pocket expenses related to prescription drug coverage.
Costs of Coverage
The costs of both types of plans vary depending on several factors, including your location, gender, age, and tobacco status.
- Some Advantage plans have no monthly premium. However, you should always check the coverage details of those plans to ensure they will meet your needs.
- Medicare Advantage plans can cost anywhere from $0 to $500 monthly.
- Medigap plans, on the other hand, always require a monthly premium.
- The cost of Medicare supplement plans can range from $50 to $150 in most cases.
- If you sign up during your initial enrollment period, you will pay the lowest possible premium. Your Medigap policy will be a guaranteed-issue policy in that case.
- However, you must undergo full medical underwriting if you wait until an open enrollment period. Your premium may increase significantly, or you could be denied coverage altogether.
Doctor Referrals
As you likely know, some health insurance plans require a referral before seeing a specialist.
Some Medicare Advantage plans require referrals to see specific doctors. This means you must pay a copay to your primary care physician and the specialist. This is more typical in HMO plans.
However, with Medigap, there is no referral process. Referrals are not required for Medigap to pay for your out-of-pocket expenses. When you visit a physician, your Medigap policy will cover the items in your coverage details whether or not you had a referral.
Out-of-Pocket Limits
For Medicare beneficiaries, you likely already know there is no out-of-pocket maximum during the calendar year. This means you could receive a hefty medical bill if you have a severe health condition. Suppose you spend a few weeks in the hospital. Your Medicare Part A might cover many expenses, but your cost-sharing coinsurance amount could be several thousand dollars.
- With Medicare Advantage, the annual maximum is capped at $7,550 annually. Your plan will cover 100% of your expenses once you have paid that amount during the year. The maximum is a little higher if you use providers outside your plan’s network.
- Medigap, on the other hand, attempts to ease the burden of the fact that Original Medicare has no out-of-pocket limit. Since Medigap helps cover your out-of-pocket costs, these plans can help lower your healthcare costs. These plans have no limit to the amount you might be required to pay out of your pocket, but most plans help reduce the amount you will need to pay when you receive Medicare-covered services.
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Benefits Of Medigap Plans
There are many benefits of Medigap health plans. One of the most significant benefits is that they can lower your overall healthcare costs. Even though these plans have a monthly premium, they can reduce the amount you might need to pay out of your pocket. When you visit the doctor, you must pay a copay or coinsurance under Original Medicare. However, these Medigap plans will cover at least some of these amounts.
- Many Medigap plans cover items not covered by Original Medicare. Several plan options include coverage for up to 365 additional days in the hospital after your Part A benefits have been used.
- Some plans also include coverage for foreign emergency care and the first three pints of blood in a transfusion.
Medicare does not provide coverage for these things, but you might find that having Medigap coverage is extremely beneficial.
Benefits Of Medicare Advantage Plans
Now that you know some of the benefits associated with Medigap plans, let’s look at the benefits of a Medicare Advantage plan.
- The first benefit is that these plans often provide additional benefits beyond Original Medicare. Most plans include dental, vision, and prescription drug coverage.
- Some Advantage plans even include coverage for hearing aids or free gym memberships. Most people find this additional helpful coverage.
- Another benefit of Advantage plans is that some do not have a monthly premium, and some can even cover some or all of your Part B monthly premium.
These zero-premium plans can reduce your healthcare costs if you do not visit the doctor often. However, remember that plans with lower premiums typically provide lower benefits when you receive treatment. You should carefully weigh all your options when choosing the right plan for your situation.
TIP
You can switch between Medigap and Medicare Advantage plans during the open enrollment periods. However, if you don’t select Medigap during your initial enrollment, you will need to undergo a complete underwriting process. This evaluation may lead to higher costs or coverage denial.
Choosing Between Medicare Advantage And Medigap
So, how do you choose between these two types of plans? Remember that you cannot be enrolled in a Medicare Advantage plan and Medigap, so you must select one or the other.
There are several factors that you should consider when making your decision. You should first consider the coverage details and costs of the plans. Carefully consider the complete list of benefits each plan provides and decide whether you need those benefits.
Overall Cost
Also, remember that the monthly premium is not the only cost associated with each plan. There are other out-of-pocket costs, such as copays, deductibles, and coinsurance amounts. You will want to consider the overall cost of each plan option and not just the premium amount.
Health & Lifestyle
Next, you should consider your lifestyle and overall health. If you are generally healthy and rarely visit the doctor, a plan with lower benefits and a lower premium might be your best option.
However, for those with multiple health conditions, you may benefit more from a plan that offers the highest benefit. Also, remember that you will likely need to purchase a separate Medicare Part D plan if you decide to go with Medigap. However, prescription drug coverage is included with most Medicare Advantage plans.
Available Providers
Finally, the availability of plans and providers in your area can influence your chosen plan. You might find that the list of network providers for an Advantage plan in your region is minimal. In that case, you may decide that Original Medicare with a Medigap policy is right for you. This could significantly increase the list of providers you could receive treatment from.
If you have trouble deciding between the two, consult a licensed insurance agent. They can help you find plans and make choices based on your situation.
Switching Between Medicare Advantage & Medigap
What if you select a plan and later decide it is unsuitable? Can you switch between Medicare Advantage and Medigap? The answer is yes, although there are a few things that you should be aware of when attempting to switch plans.
The most common scenario is where you want to take advantage of the lower premiums of a Medicare Advantage plan during your younger years and then switch to a Medigap plan in your older years. This is allowed, but there is a caveat to switching.
- If you sign up for Medigap during your Medicare initial enrollment period, the policies are generally guaranteed-issue policies.
- This means you are guaranteed coverage, and the insurance companies selling the policies cannot charge you more because of pre-existing health conditions.
However, if you wait and switch to Medigap during an open enrollment period, you must undergo the complete underwriting process. This means that your premiums will likely be higher due to your age and any health conditions you may have. It might even mean that your application for Medigap could be denied.
So, even though you can switch between the plans, it is best to select one when you first become eligible for Medicare and stick with it.
The Bottom Line
Medigap and Medicare Advantage are pretty different, but they can both be highly beneficial to enrollees. Medicare Advantage combines all your Medicare coverage into a single policy, making things easier to manage.
These plans usually provide extra benefits, like dental, vision, and prescription drug coverage. Medigap is purchased with Original Medicare to help lower out-of-pocket expenses for things not covered by Medicare.
Medigap helps pay for things like deductibles, copays, and coinsurance. Selecting the right plan depends on your personal financial and health situation.
Frequently Asked Questions
The biggest downside to Medigap plans is the fact that they require the payment of a monthly premium. Even though some people might consider this a downside, most people still benefit from a Medigap plan.
While you might have to pay a monthly premium, these plans can significantly reduce your overall out-of-pocket costs. The amount of the copays and coinsurance that a Medigap plan will cover can more than account for the monthly premium cost. To determine whether one of these plans is right for you, you should look at your overall health care costs.
A Medigap plan should lower your overall out-of-pocket expenses, even when you factor in the monthly premium. If you rarely receive medical treatment, a Medigap plan might not make sense for you. You might pay more in monthly premiums than your plan pays for you in covered expenses.
One of the biggest disadvantages of Medicare Advantage is that the plans are not standardized. Coverage details and costs vary from plan to plan, and the details also vary from state to state.
The plans available to you depend on the area in which you live, and the insurance companies who administer the plans might change coverage details from year to year. This means that your Advantage plan could change without much warning, and this could have a huge effect on your health care expenses.
No, you cannot enroll in both Medicare Advantage and Medigap. First, you should know that neither plan is mandatory. You might decide to simply enroll in Original Medicare. You could also decide to enroll in Original Medicare and add a Part D plan.
You are not required to purchase Medigap or an Advantage plan. However, if you decide to purchase one of these plans, you cannot purchase the other. If you opt for Original Medicare with a Medigap policy, you cannot sign up for a Medicare Advantage plan.
It is possible to switch between the two, but that could cost you higher premiums if you change plans during an open enrollment period.
Whether or not you need Medigap depends on your personal financial situation, overall health, habits, and lifestyle. Medigap is not mandatory.
If you have Original Medicare, you are not required to purchase a Medigap plan. You should carefully consider your situation and the coverage details provided by the different Medigap plans to determine whether one is right for you.
In many cases, they can help lower your overall health care expenses. However, for some, they are not beneficial and would simply be an added expense.
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