Medicare Advantage vs. Medigap (Supplement)
Key Takeaways
- Medicare Advantage plans offer all-in-one coverage options that include Medicare Part A, Part B and often also include Part D (prescription drug) coverage and other benefits.
- Medigap plans are designed to help people on Original Medicare pay out-of-pocket costs such as deductibles, copayments and coinsurance.
- You cannot pair a Medigap plan with a Medicare Advantage plan, although all Medicare Advantage plans control costs with the protection of an out-of-pocket maximum.
- After your Initial Enrollment Period, insurance providers may not always offer you Medigap coverage.
- When deciding between Medicare Advantage versus Medigap, look at your annual healthcare needs and costs to decide the right plan for you.
Medicare Advantage and Medigap plans offer distinct types of healthcare coverage. Deciding which plan is right for you depends on your annual out-of-pocket costs, your budget and the coverage options that are important to you.
In this article we’ll take a closer look at the key differences between these two popular plans.
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Medicare Advantage Coverage
Medicare Advantage, often referred to as Medicare Part C, offers Medicare coverage through private insurance companies approved by Medicare. Plans cover Part A (hospital services) and Part B (outpatient medical services) of Original Medicare along with several other benefits. For example, about 90% of Medicare Advantage plans offer Part D prescription drug coverage.
Many Medicare Advantage plans also offer:
- Dental
- Vision
- Hearing
- Telehealth
- Over-the-counter products
- Wellness or fitness services
There are many different Medicare Advantage plans, and coverage can vary based on the plan and where you live. This is why it’s important to carefully review and compare coverage and costs of the plans available in your area.
Medicare Plus Medigap Supplement Plans
If you opt to get Medicare coverage through Original Medicare instead of Medicare Advantage, there are cost factors you should take into consideration. For example, most people on Original Medicare will need to pay a Part B monthly premium and a Part A and B deductible (you also must continue to pay your Part B premium if you switch to Medicare Advantage, but other costs related to Parts A and B coverage will vary by plan.)
In addition, you’ll need to pay certain out-of-pocket costs like copayments and coinsurance. The coinsurance for Original Medicare is 20%, and there is no out-of-pocket maximum. While all Medicare Advantage plans feature the protection of an out-of-pocket maximum, the lack of one with Original Medicare means if you have high medical care needs in a given year, your healthcare costs may be high.
That is one reason why some people choose additional coverage with a Medigap supplemental insurance plan. Medigap helps you pay out-of-pockets costs.
When deciding on adding a Medigap plan to Original Medicare, carefully consider your out-of-pocket costs versus the Medigap plan’s premium and benefits. There are 10 different Medigap plans which offer different levels of benefits and monthly premiums based on coverage. They are letter-based plans from A to N.
Benefits offered by Medigap plans include:
- Part A coinsurance and hospital costs.
- Hospice copayments and coinsurance.
- Part B coinsurance and copays.
- Three pints of blood for a medical procedure.
In addition, some plans may cover:
- Part A and Part B deductible.
- International travel emergency healthcare.
- Skilled nursing facility coinsurance.
- Part B excess charges.
Original Medicare and Medigap plans do not have the network restrictions that some Medicare Advantage plans do. This can be helpful if you travel or live in different locations during the year.
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Medicare Advantage Plans
Depending on where you live, there may be several types of Medicare Advantage plans to choose from to fit your needs.- Health Maintenance Organizations (HMO plans): The most popular type of Medicare Advantage plan, HMOs have network restrictions but may offer $0 premiums and other cost savings.
- Preferred Partner Organization (PPO plans): These are the second-most popular type of Medicare Advantage plan. They offer more flexibility with providers but may be more expensive than HMO plans.
- Special Needs Plan (SNP plans): These plans are restricted to only qualified individuals who are institutionalized, have certain chronic conditions or for dual-eligible individuals (Medicaid and Medicare).
- Private Fee-For-Service (PFFS plans): These types of plans may be more expensive than HMO or PPO plans because providers have the option not to accept Medicare established payments.
How Are Medicare Advantage and Medigap Medicare Supplement Plans Different?
There are some significant differences between Medicare Advantage and Medigap plans. Medicare Advantage plans are considered all-in-one plans that offer the health coverage provided by Part A and B of Original Medicare and often Part D prescription drug coverage. Many also offer additional benefits. On the other hand, Medigap plans can be added to your Original Medicare Part A and B coverage to help offset costs. You cannot buy a Medigap plan unless you have Original Medicare (Parts A and B). You also cannot have both a Medicare Advantage plan and a Medigap plan.Medicare Advantage
- Most plans offer Parts A, B and D coverage.
- Plans have a network of providers.
- Additional benefits like dental, vision, hearing.
- There may be out-of-pocket costs.
- Numerous plans offer $0 premium.
- Some plans cover emergency care with international travel if it’s within plan benefit.
- Eligibility is based on plan availability and Medicare eligibility guidelines.
Medigap
- Plans are used to help with Original Medicare Parts A and B costs.
- No network (can go to any Medicare-approved provider).
- No additional benefits (except in rare occasions).
- Helps pay some out-of-pocket costs.
- Premiums vary based on plan benefits.
- International emergency coverage offered by most within 60 days of joining a plan.
- Eligibility after initial enrollment is based on plan (you may not be offered a plan).
Let’s find your ideal Medicare Advantage plan.
- A Medicare Advantage that includes prescription drug coverage
- Original Medicare along with a Part D drug plan and/or a Medigap plan
The best plan for you depends on which type of plan better suits your individual needs.
Can you switch between Medicare Advantage and Medigap?
Yes. You can switch between Medicare Advantage and Original Medicare with Medigap coverage during specific times in a year. Remember, Medigap does not provide the additional benefits offered by Medicare Advantage plans, like dental, vision and hearing.
If you have a Medicare Advantage plan but want to switch back to Original Medicare and add a Medigap plan, you can do so only during certain enrollment periods. You should also know, if you choose not to join a Medigap plan when you’re first eligible for Original Medicare, you may not be able to join a Medigap plan later and it may be more expensive than it would have been when you were first eligible. Medigap plans may review your health history in a process known as underwriting to determine if you are eligible for coverage. However, if you apply during your Initial Enrollment Period, underwriting will not apply.
You can join Medicare Advantage:
- During your Initial Enrollment Period after you sign up with Original Medicare (from three months before you turn 65 to three months after your birth month).
- During the Annual Enrollment Period (October 15 to December 7).
You can join a Medigap plan:
- During your Initial Enrollment Period after you sign up with Original Medicare (from three months before you turn 65 to three months after your birth month).
- During the Medigap Open Enrollment Period, which starts the first day you are both 65 and enrolled in Medicare Part B. This period lasts six months.
- Anytime if you are enrolled in Parts A and B of Original Medicare, but you may have to go through the process of medical underwriting. There are some exceptions, called Guaranteed Issue Rights, that allow applicants to enroll into Medigap plans without underwriting.
Medicare Part D
Whether you’re on Medicare Advantage, Medigap plan, or Original Medicare, Medicare Part D is another benefit offered by private insurance companies worth considering.
You are not required to have Part D prescription drug coverage with Medicare, but if you don’t add Part D when you first become eligible, you may have to pay a late enrollment penalty. This may be permanent for as long as you have Medicare.
Medicare Part D plans feature a drug formulary that lists covered drugs and puts them in tiers based on costs. Part D plans also have a coverage gap, commonly known as the “donut hole”. During the coverage gap, you’re responsible for paying 25% of the cost of your covered drugs. Once your costs reach a certain threshold, which changes annually, you’ll be eligible for Medicare catastrophic coverage. Under this coverage, you’ll be responsible for paying only 5% for covered drug costs for the rest of the year.
Before adding Medicare Part D, consider:
- Are all your drugs covered by the plan?
- What are your copays, deductibles and other out-of-pocket costs?
- What other restrictions might affect your drug coverage?
Sources
- A Dozen Facts About Medicare Advantage in 2020. Kaiser Family Foundation.
- Understanding Medicare Advantage Plans. CMS.gov.
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