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Is it Better to Have Medicare Advantage or Medigap?

Is it Better to Have Medicare Advantage or Medigap?

November 15, 2021
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With health insurance open enrollment well underway, many are registering to receive Medicare for the first time. Medicare, which is a federally funded health insurance program, offers subsidized healthcare services to individuals that meet specific eligibility criteria:

  • Adults 65 or older
  • Under 65 and have received social security disability insurance for a certain amount of time
  • Under 65 and have End-Stage Renal Disease (ESRD)

Medicare is divided into four different options to cover a variety of unique needs and to offer consumers more flexibility in terms of price and coverage. These categories, Part A, Part B, Part C (also called Medicare Advantage), and Part D cover different medical programs and services:

  • Part A: Part A is hospital insurance and is included in general Medicare. This part covers most medically necessary hospital, skilled nursing facility, home health, and hospice care.
  • Part B: Part B is medical insurance and, like Part A, is included in a general, federally funded Medicare program. This part covers most medically necessary doctor services, preventative care, durable medical equipment, hospital outpatient services, laboratory tests, x-rays, mental health care, and some home health and ambulance services.
  • Part C: Part C, unlike Parts A and B is not included in general Medicare coverage. Part C, which is often referred to as Medicare Advantage allows eligible adults to get their coverage through private, Medicare-approved insurance companies so long as that company provides at least the same Medicare benefits as Parts A and B.
  • Part D: Part D of Medicare provides outpatient prescription drug coverage. This coverage is provided only through private insurance companies that have contracts with the federal government.

A traditional Medicare plan without any supplemental coverage is made up of parts A and B. Though these categories provide good basic health coverage, they tend to only cover 80% of approved costs and leave a significant amount of coverage gaps, including common needs like prescription drugs, hearing aids, eyeglasses, and dental care.

There are two ways individuals with Medicare insurance can address the coverage gaps left by traditional Medicare:

  • Medicare plus Medigap supplemental insurance policies
  • Medicare Advantage Plans (Part C)

Individuals who want to supplement their Medicare coverage need to consider their lifestyle, finances, and their health condition to determine whether Medigap or Medicare Advantage makes the most sense for their unique situation. This choice will not only affect how an individual will receive their benefits, but will also change their out-of-pocket costs, who they can visit, and where they can get care.

Benefits of Medigap

Medigap supplemental insurance plans are private plans designed specifically to address Medicare Part A and Part B coverage gaps. Medigap plans are labeled as Plans A, B, C, D, F, G, K, L, M, and N. Each one of these plans is a unique standardized coverage set.

There are three main advantages of Medigap:

  • its range of tiered plan options
  • its wide network of providers
  • Fewer out-of-pocket expenses compared to other supplementary insurance

With Medigap, individuals can craft an insurance policy that meets their exact needs, whether it be medical care in foreign countries, or frequent emergency visits. Medigap individuals can also go to any doctor or hospital that accepts Medicare, which is the vast majority of providers. Together, these advantages give enrollees significant freedom of choice.

It is recommended that individuals who wish to enroll in a Medigap plan sit down with a trusted Medicare Advisor to evaluate and compare each plan to identify what it covers, what it doesn’t, and whether additional coverage would be needed.

Disadvantages of Medigap

Medigap, like any insurance plan, doesn’t cover everything. Just like original Medicare, there are distinct drawbacks to Medigap insurance that are worth keeping in mind:

  • If you want to enroll in a Medigap plan, you must have Medicare Parts A and B.
  • Individuals who choose a Medigap plan will have to pay a monthly premium

in addition to the Part B premium they already pay.

  • Medigap policies do not include prescription drug coverage. If an individual wants prescription drug coverage, they need to enroll in Medicare Part D, the Prescription Drug Plan.
  • Medigap policies typically do not cover long-term care, vision, dental care, hearing aids, eyeglasses, or private-duty nursing.

Benefits of Medicare Advantage

Like Medigap, Medicare Advantage plans are designed to fill in the “gaps” original Medicare does not cover. The main differences between Medicare Advantage plans and Medigap plans boils down to price and coverage.

Medicare Advantage plans tend to have lower premiums than Medigap plans and offer unique coverage options like gym memberships, long-term care, and disability equipment.

Medicare Advantage also streamlines health insurance, offering all-in-one plans that cover vision, dental, disability services, home health, and other health care needs not covered by original Medicare Part A and B or Medigap, like prescription drug coverage.

Disadvantages of Medicare Advantage

There are distinct disadvantages to Medicare Advantage plans that individuals need to be aware of before choosing a plan to enroll in:

  • Medicare Advantage has network restrictions, meaning individuals may be more limited in where they can go and who they can see.
    • Most Medicare Advantage plans operate as a health maintenance organization (HMO) or preferred provider organization (PPO) insurance. HMOs limit members to using the doctors and hospitals in their networks while PPOs will let members get care outside the plan's network, but at an additional price.
  • Medicare Advantage plans do not offer any coverage while traveling.
  • Medicare Advantage plans will most likely have higher out-of-pocket and emergency costs than Medigap.

Which is better, Medigap or Medicare Advantage?

The answer is: it depends. The most noteworthy difference between Medigap and Medicare Advantage comes down to the way they work. Medigap is designed specifically to cover some of the cost-sharing gaps—coinsurance, copayments and deductibles—that original Medicare does not pay. Medicare Advantage on the other hand, covers everything original Medicare does but with the addition of extra benefits like dental and vision care. You are not allowed to have Medicare Advantage and Medigap at the same time, so speaking with a Medicare Advisor about your particular health history and needs can help you make an informed decision about which plan is best for you.

If you need help navigating your insurance policy, contact us. Our Medicare experts here at JL Smith will help prioritize what options are most important to you and find a plan that you can feel confident about.