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Medicare Advantage vs. Medigap: Which Is the Best Choice?

By Wendy Connick - Jun 12, 2017 at 10:05AM

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Setting up Medicare involves making a ton of different decisions, but one decision in particular is critical.

Given the high cost of private insurance, especially for seniors, Medicare can be a retiree's best friend. But wading through all the information to make the right decisions about your Medicare plans can be quite a task. One of the most important Medicare-related decisions you'll face is whether to buy a Medicare Advantage plan or go with an "original Medicare plus Medigap" setup.

The pros of original Medicare plus Medigap

Original Medicare, meaning Medicare Part A and Part B, covers expenses related to hospital visits and most other medical services. However, it doesn't cover all your medical expenses. That's where Medigap comes in, offering coverage for expenses that original Medicare leaves up to you. The benefits of choosing a Medigap plan include:

  • More physicians to choose from. Most Medicare Advantage plans are network-based, whereas Medigap works for any doctor who accepts Medicare (which includes most of them).

  • You don't need to get a referral to see a specialist. In fact, you don't even need to choose a primary care physician with Medigap.

  • The options are less confusing. There are just 10 flavors of Medigap plan, and these 10 types of plan are exactly the same all across the country. That makes it a whole lot simpler to figure out which plan is best for you. Given the many other complexities involved in setting up Medicare, anything you can do to simplify the process is a blessing.

  • There is a lot less paperwork involved in using Medigap as opposed to Medicare Advantage plans. With Medigap, the program simply sends a check to the doctor or facility without your involvement. Medicare Advantage typically requires you to make co-pays directly to the provider, adding an extra level of involvement.

  • Medigap coverage typically means lower out-of-pocket expenses than a comparable Medicare Advantage plan.

Money and stethoscope

Image source: Getty images.

The pros of Medicare Advantage

Not everyone would be better off with a Medigap plan. Medicare Advantage comes with the following upsides:

  • Premiums for Medicare Advantage plans are typically lower than those of Medigap plans. Consumer Reports estimates that in 2014, the average premium for Medicare Advantage enrollees was between zero and $100 per month, while the average premium for Medigap enrollees was between $150 and $200 per month.

  • Medicare Advantage plans may include drug coverage options; Medigap plans never do, requiring you to buy a Medicare Part D plan if you want to cover your prescription costs.

  • In order to get guaranteed access to Medigap, you must enroll within six months of signing up for Medicare Part B, assuming you're at least 65 (otherwise, you must enroll within six months of your 65th birthday). After that initial enrollment period, you can be turned down for Medigap coverage due to pre-existing conditions. At the end of every year, Medicare Advantage plans have open enrollment periods during which you can freely change plans.

How do you decide which is better?

Cost-wise, someone with significant and expensive health problems is better off with Medigap. The premiums are higher, but out-of-pocket costs are typically much lower than Medicare Advantage costs, so if you have lots of medical expenses, the higher Medigap premium ends up being a better deal. On the other hand, if you're in good health and don't anticipate lots of medical expenses in the near future, you can save quite a bit with Medicare Advantage's lower premiums. Someone with lots of prescription costs should look for a Medicare Advantage plan with drug coverage, which could save you some money on premiums compared to getting Medicare Part D. Before you decide which way to go, review the Medicare Advantage plans available in your area and compare them to the Medigap options. You may find the perfect Medicare Advantage plan for you.

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