With Original Medicare, your out-of-pocket expenses have no cap and can potentially be infinite. This is why many people choose to enroll in either Medigap or Medicare Advantage both sold by private insurance companies.

A Medigap (Medicare Supplement insurance) policy, can help pay some of the out-of-pocket costs from Original Medicare, such as copayments, coinsurance, and deductibles. Coverage varies by plan, but most plans cover Part A and B coinsurances.

A Medicare Advantage plan is an alternative way of getting Medicare coverage that bundles what Original Medicare covers with prescription drug coverage plus additional benefits like dental, vision, hearing, while also providing a cap to your out-of-pocket expenses. Coverage varies by plan.

Why do we need Medigap or Medigap Advantage? Is Original Medicare not enough?

An important first step when choosing between Medicare Advantage and Medigap is to understand the many expenses that someone will experience when they have Original Medicare (sometimes also called traditional Medicare).

With Original Medicare, beneficiaries are responsible for:

Part A and Part B Monthly premiums

For most people Part A premium is zero, if you or your spouse worked long enough to pay Medicare taxes. For most people, the standard Part B monthly premium they pay in 2023 is $164.9 and $174.70 in 2024. But depending on their income they could be paying up to $560 in 2023 and $594 in 2024.

Out-of-pocket expenses

All Medicare beneficiaries experience these expenses, and they come in the following flavors:

• Deductibles: For Part A you have to pay $1,600 in 2023 and $1,632 in 2024 deductible for each benefit period. For Part B you have to pay $226 in 2023 and $240 in 2024.
• Coinsurance and copayments: For Part A there are specific amounts you need to pay that range from $0 to $816 or more depending on how many days your hospital stay is. And for Part B you have to pay 20% of the Medicare-approved amount for the service you receive.

This means that your out-of-pocket expenses could potentially be infinite since there’s no cap. And depending on your health, you might be more or less willing to take the risk of having to pay a lot of money in health care expenses if these expenses are not capped. Keep in mind that for people in need, who cannot afford Medicare premiums, there are federal and state programs (see Medicare Saving Programs).

To help cap out-of-pocket expenses, beneficiaries can decide to purchase either a Medicare Advantage plan or a Medigap plan. Below we describe the differences between Medigap and Medicare Advantage to help you decide which is best for you. Keep in mind that everyone’s situation is different, so what’s right for you might be very different from what’s right for your spouse or friend.

What is Medigap?

Medicare Supplement, or Medigap, is supplemental insurance you can buy from private insurance companies to cover out-of-pocket expenses arising from Original Medicare (Part A and Part B) insurance. This type of insurance policies work alongside Original Medicare.

With a Medigap policy, you wouldn’t have to cover all your out-of-pocket expenses on your own, whether they are deductibles, coinsurance, or copayments. 

Types of Medigap plans

Medigap plans are standardized by letters and must be clearly identified as “Medicare Supplement Insurance.” All these plans offer the same basic benefits, and some offer additional benefits. Usually, the more benefits the plan offers, the higher the premium it charges. Some plans cover all Part A coinsurance, copays, and deductibles, plus Part B coinsurance and copays. As of 2020, the plan that used to also cover Part B deductible is no longer available for new beneficiaries coming into Medicare. Other plans are less expensive but cover only certain coinsurance and copays.

What is Medicare Advantage?

Medicare Advantage is also provided by private health insurance companies. Also known as Part C, Medicare Advantage provides benefits received under Part A and Part B while providing Part D (prescription drug coverage) and benefits like dental checkups or eyeglasses. 

Medicare Advantage plans serve as a private alternative to the government-run Original Medicare. They are well-known for lower premium costs, and for providing additional coverage such as prescription drugs, dental and vision care, and a growing list of additional benefits.

Types of Medicare Advantage plans

There are different types of Medicare Advantage plans:

• Health Maintenance Organization: HMOs provide care from doctors and other providers exclusively in your plan’s network. Only in cases of emergency care will you receive coverage by using other providers outside the network.
• Preferred Provider Organization: A PPO has a network of healthcare providers you can use, but you can also use providers out of the network. It usually means that deductibles, coinsurance, and copayments for out-of-network providers are higher. 
• Private Fee-for-Service: This is a different plan from private providers, different from Original Medicare or Medigap. Here, you can get treatment at any Medicare-approved provider who hasn’t opted out.
• Special Needs plans: These are specifically tailored for people with specific diseases or particular healthcare needs who also have Medicaid coverage.
• Medical Savings Account: This type of plan combines a plan with high yearly deductibles with a special type of savings account that deposits money into your account. You can use money from this savings account to pay your health care costs before you meet the deductible.

The fundamentals: what is the difference between Medicare Advantage and Medicare Supplement? 

Main difference

The prominent difference between the two is that one works alongside Original Medicare while the other is a direct substitute. Medigap simply covers out-of-pocket costs arising from Medicare Part A and Part B, thus requiring you to enroll in a separate Part D Prescription Drug plan unless you already have qualifying equivalent drug coverage. Medicare Advantage is a substitute for Original Medicare with an explicit cap to your out-of-pocket expenses. Medicare Advantage covers everything that Original Medicare does (see details for hospice care), bundles prescription drug coverage so you don’t need to buy a separate plan and offers extra benefits that Original Medicare doesn’t such as dental care, vision care, and fitness programs.

Flexibility

Medicare Advantage plans may also be a bit restrictive since for most plans you have to stay within a network of providers to keep your costs as low as possible. However, with Medigap, you can see any providers that accept Medicare. Note that the providers that are most commonly opting out of Medicare are psychiatrists at 40%.

Extra benefits 

Another key difference is that very few Medigap plans offer benefits like dental, vision, and hearing. But with most Medicare Advantage plans, you get all of that together with other benefits such as fitness, acupuncture, transportation, meals, and a growing list of flex card and rewards programs as well as Part B premium rebates.

Out-of-pocket Cap

Medicare Advantage plans have generally maximum out-of-pocket limits. But only Medigap plans K and L have out-of-pocket limits.

Comparing the costs

One of the main differences between these two options is cost.

Medicare Advantage costs

With most Medicare Advantage plans (Part C), you pay a monthly premium to the private insurance company in addition to your Medicare Part B premium. Some Medicare Advantage plans have $0 monthly premiums, but most plans require a monthly premium. The estimated premium average for plans in 2024 is $18.50, but depending on the insurer, premiums may be as low as $0 or as high as $200 monthly. 

Deductibles and coinsurance under Medicare Advantage may vary significantly across plans. While some plans can have zero annual medical and drug deductibles, others can have up to a $1000 annual medical deductible and somewhere between $150 to $550 drug deductible. 

However, all Part C plans have a maximum out-of-pocket-spending limit, i.e., the most you have to pay yourself through deductible, copayments or coinsurance. In 2024, the highest limit will be $8,850, but depending on the plan you choose your maximum out-of-pocket could be as low as $4,500 or less. So even if you suffer a serious injury that results in high costs, once you meet the limit for a year, you won’t be required to pay any more.

Medigap costs

With a Medigap policy, you also pay a monthly premium to the private insurance company for your Medigap policy in addition to your Medicare Part B premium. The cost of Medigap varies depending on the insurance company and the specific policy you choose. The premium can be anywhere from $35 to over $400 per month depending on your age, state, and plan benefits.

Generally speaking, Medigap policies are more expensive than Medicare Advantage plans. 

Example: Original Medicare + Medigap + Medicare Part D costs

John pays more than $1,500 a year for his letter G Medigap plan. This is on top of his Part B monthly premium which in 2024 is $174.70 a month, or about $2,096 a year. 

He also pays for a Part D drug plan. Those premiums vary a lot from plan to plan, but the national average Part D premium is $55.50 a month in 2024, or nearly $666 a year. 

Add it all up, and John is laying out more than $4,200 a year before he can even file a claim. 

If he does need medical care, however, he will face little additional in the way of out-of-pocket costs for covered care – his Medigap plan G will take care of it.

Example: Medicare Advantage costs

The typical Medicare Advantage plan has a monthly premium of about $18.50 in 2024 and includes Part D coverage. However, nearly half of all Medicare Advantage enrollees are in plans that charge no premium whatsoever. Plus Advantage plans limit your out-of-pocket medical expenses at a maximum of $8,850 in 2024. 

John’s plan has limited dental, vision, and hearing coverage, so he has a separate dental plan that charges him about $750 a year in premiums. But even with a separate dental plan, he still pays less with Medicare Advantage compared to what he would have paid with Medigap.

Is Medigap the same as Medicare Advantage? 

No, Medigap and Medicare Advantage are not the same. As we’ve discussed, they have different costs, coverages, and eligibility requirements. Medigap is a Supplement to Original Medicare that will close coverage gaps. Medicare Advantage adds benefits that go beyond Medicare Part A and Part B. To get wither of these plans, you have to go through a private health insurance company that is approved by Medicare. 

Do you need a Medicare Supplement plan with Medicare Advantage? 

Generally, Medicare Advantage plans are more comprehensive than Medicare Supplement plans as they are meant to offer you more coverage than the Original Medicare at a very low or zero cost. If you have Medicare Advantage, it is unlikely you will need a Medicare Supplement. Moreover, you cannot have both at the same time according to the rules.

Is it better to have Medicare Advantage or Medigap? 

The two options have different costs, coverages, and eligibility requirements. The answer to this question depends on your individual situation and needs. If you’re looking for comprehensive coverage with low out-of-pocket costs, then a Medicare Advantage plan might be a good option for you. However, if you’re looking for more flexibility in choosing your doctors and providers, then a Medigap policy might be the better choice. 

Also, while Medicare Advantage may seem to offer more at first glance, there are some specific questions you need to consider for choosing between the two. 

How to choose between Medigap and Medicare Advantage? 

There are several key factors to consider when making your choice: 

• Costs: How much will you pay in premiums, deductibles, and other out-of-pocket costs? 
• Coverage: What does each plan cover? Are there any extra benefits that are important to you? Examples include transportation to medical appointments, a couple of weeks of meals delivered to your home when you’ve recently been released from the hospital, and home safety devices such as bathroom grab bars. Original Medicare is not allowed to cover these items.
• Provider network: If you choose Medicare Advantage and have a doctor that you really like and want to keep seeing, make sure that he or she is in the network for the plan you’re considering. Medicare Advantage HMO plans generally do not cover out-of-network care, while PPO plans do cover it but you might end up paying a bit more. With few medical claims, you will come out ahead with Medicare Advantage plans. This may not be the case for people with multiple chronic medical conditions who require lots of care. 
• Convenience for treatment and local options: How easy is it for you to get the care and treatment you need with each plan? Note that with many Medicare Advantage plans you are restricted to the plan’s service area. If you travel frequently or if you know that your preferred hospital is not covered, you might want to consider Original Medicare + Medigap.
• Eligibility for special programs: If you’re eligible for a Medicare Advantage Special Needs Plan (SNP), this might be your best option. 
• Your Personal Health: If you have specific health needs, one plan might be better suited to your needs than the other. 

When Should I Enroll for Medigap or Medicare Advantage

When to buy a Medigap policy depends on a number of factors, so we’ll consider different scenarios:

• If you are under 65 with a disability: Your state law may allow you to buy a Medigap policy, if you are naturally eligible for Medicare as a result of the disability
• If you are under 65 with no disability: You have to sign up for Medicare Part B before buying a Medigap Policy. 
• If you are turning 65 soon: You can only buy a Medigap policy once you sign up for Medicare. Find out the best time to sign up for Medicare here. 
• If you are over 65 with original Medicare that you got less than 6 months ago: You are in the optimal period to purchase a Medigap policy.

For more details or peculiarities that may apply to your unique situation, check out this page.

To buy Medicare Advantage, you can enroll in it during the open enrollment period between October 15 and December 7. Your Medical Advantage coverage will then begin on the 1st of January of the following year. You can also take advantage of the Medicare Advantage Open Enrollment Period (January 1 to March 31) to either switch Medicare Advantage plans or opt to return to Original Medicare. 

Can I switch from Medicare Advantage to Medigap? 

Yes, you can switch from a Medicare Advantage plan to a Medigap policy, but only during certain times of the year. There is an Annual Election period every year that goes from October 15th to December 7th (also known as the Open Enrollment Period). One of the things you’ll have to consider is that if you have switched to regular Medicare, it’s possible you may not be able to enroll in Medigap. 

This is because Medigap insurance companies are usually obligated to also sell a policy to you at the moment you sign up for Part A and Part B Medicare. They have to do this no matter your current health condition. However, in the future, they are not obligated, and they could charge you more or even elect not to sell a policy to you if they deem you to be a risk due to health problems after you undergo a process of medical health screening (also known as medical underwriting). 

Switching from Medigap to Medicare Advantage 

You can also switch from a Medigap policy to a Medicare Advantage plan, but again, only during certain times of the year. See this calendar.

Shopping Medicare in the digital age is as simple as you make it.

Find your plan

Article updated on October 25, 2023