Medicare Advantage vs. Medicare Supplement (Medigap): How They Differ

Medicare Advantage and Medicare Supplement Insurance, commonly called Medigap, are two very different ways to manage health-care coverage and out-of-pocket costs after enrolling in Medicare.

Medicare Advantage is an alternative way to receive your Medicare Part A and Part B benefits through a Medicare-approved private plan.

Medigap works with Original Medicare. It is supplemental insurance from a private insurance company that helps pay certain out-of-pocket costs left by Original Medicare.

You cannot use Medigap to supplement a Medicare Advantage Plan.

Understanding that distinction is the starting point for comparing the two.

Medicare Advantage and Medigap at a glance

Medicare Advantage

With Medicare Advantage:

• You remain in Medicare but receive Part A and Part B benefits through a Medicare-approved private plan.
• You must have Part A and Part B to join.
• You must continue paying your Part B premium.
• Most plans include Part D drug coverage.
• Many plans use provider networks.
• Plans may use referrals, prior authorization and other coverage rules.
• Costs and benefits vary by plan.
• Plans have an annual limit on what members pay for covered Part A and Part B health services.
• Many plans offer additional benefits not covered by Original Medicare.

Original Medicare plus Medigap

With Medigap:

• Original Medicare remains your primary Medicare coverage.
• Medigap helps pay certain out-of-pocket costs for services covered by Original Medicare.
• You generally need Part A and Part B to buy Medigap.
• Medigap policies sold after 2005 do not include prescription drug coverage, so someone who wants drug coverage generally needs a separate Part D plan.
• With Original Medicare, you can use any doctor or hospital that accepts Medicare anywhere in the United States.
• Medigap policies are standardized in most states, although premiums and availability vary.
• Medigap generally does not cover routine dental, vision, hearing aids, long-term care or private-duty nursing.

Provider access

Provider access is one of the major structural differences.

With Original Medicare, you can generally use any doctor or hospital in the United States that accepts Medicare.

Many Medicare Advantage Plans use provider networks. Network requirements depend on the plan type and specific plan.

An HMO and PPO, for example, can have different rules for out-of-network care.

Before choosing Medicare Advantage, verify your important doctors, hospitals and other providers with the exact plan.

Prescription drug coverage

Most Medicare Advantage Plans include Part D prescription drug coverage.

Medigap policies sold after 2005 do not include prescription drug coverage.

Someone using Original Medicare with Medigap who wants Medicare prescription drug coverage generally enrolls in a separate Part D plan.

Drug formularies, pharmacy networks and drug costs are plan-specific, so compare your actual prescriptions separately.

Premiums and out-of-pocket costs

There is no universal answer to which approach costs less.

Medicare Advantage costs vary by plan and can include premiums, deductibles, copayments and coinsurance. You must continue paying your Medicare Part B premium.

Medigap requires its own premium in addition to the applicable Medicare premiums. The amount depends on the policy, insurer, location and other permitted rating factors.

Medigap helps pay certain cost sharing left by Original Medicare, with the amount depending on the standardized Medigap plan you buy.

Do not compare options based only on the monthly premium. Consider expected health-care use and the total structure of your coverage.

Annual out-of-pocket protection

Medicare Advantage Plans have an annual limit on what members pay for covered Part A and Part B health services. The amount varies by plan.

Original Medicare by itself does not have an annual out-of-pocket maximum for Part A and Part B services.

Medigap can help pay some of the deductibles, coinsurance and copayments that would otherwise be your responsibility under Original Medicare. Exactly what it pays depends on the Medigap plan.

Part D prescription-drug spending follows separate rules and should not be confused with Medicare Advantage’s medical out-of-pocket limit.

Extra benefits

Many Medicare Advantage Plans offer benefits that Original Medicare does not cover, which may include dental, vision, hearing or other supplemental benefits.

These benefits vary by plan, location and year.

Medigap’s primary purpose is different. It supplements Original Medicare cost sharing. Medigap generally does not cover routine dental or vision care, hearing aids, long-term care or private-duty nursing.

Do not assume that an extra benefit is available without checking the exact plan.

Medigap plans are standardized

In most states, Medigap policies are standardized and identified by letters.

Policies with the same letter provide the same standardized benefits regardless of which insurance company sells them, although premiums can differ.

Massachusetts, Minnesota and Wisconsin standardize Medigap differently.

Availability and pricing should always be checked for your state and circumstances.

Timing matters when buying Medigap

Medigap does not have the same enrollment rules as Medicare Advantage.

Your federal Medigap Open Enrollment Period generally lasts six months and begins the first month you have Medicare Part B and are 65 or older.

During that period, you can buy any Medigap policy sold in your state even if you have health problems.

After that period, federal law generally does not require an insurer to sell you a Medigap policy unless you qualify for a guaranteed-issue right or another protection applies.

States may provide additional Medigap protections.

Important warning before leaving Medicare Advantage

Do not assume you can leave Medicare Advantage and automatically buy any Medigap policy you want.

Some people have federal guaranteed-issue or trial rights, including certain people who try Medicare Advantage for the first time and return to Original Medicare within the applicable period.

Other circumstances can also create guaranteed-issue rights.

But outside a protected situation, an insurer may be allowed to use medical underwriting, deny an application or charge differently where permitted.

State protections can also differ.

Before dropping Medicare Advantage, verify your right and ability to obtain the Medigap coverage you want. Do not cancel existing coverage based solely on an assumption that a Medigap policy will be available.

Questions to consider when comparing your options

Ask yourself:

Which doctors and hospitals matter to me?

Check whether they accept Original Medicare and, if considering Medicare Advantage, whether they participate in the exact plan’s network.

What prescriptions do I take?

Compare the Medicare Advantage drug coverage or separate Part D coverage that would accompany your choice.

How do I prefer to handle medical costs?

Compare premiums, deductibles, copayments, coinsurance and potential out-of-pocket exposure rather than looking at one number.

How important is provider flexibility?

Original Medicare provides broad nationwide access to providers that accept Medicare. Medicare Advantage provider rules vary by plan.

Are extra benefits important?

If so, verify the actual benefits, limitations and availability in the Medicare Advantage plans offered in your area rather than assuming they are included.

Could I qualify for Medigap now but have difficulty buying it later?

This is an especially important question. Medigap purchase rights can change after your Medigap Open Enrollment Period ends.

Frequently asked questions

Is Medigap the same as Medicare Advantage?

No. Medicare Advantage is an alternative way to receive Medicare benefits. Medigap supplements Original Medicare.

Can I have Medicare Advantage and Medigap at the same time?

Medigap does not work with Medicare Advantage and cannot be used to pay Medicare Advantage cost sharing.

Does Medigap include Part D?

Medigap policies sold after 2005 do not include prescription drug coverage. You can generally add a separate Part D plan to Original Medicare.

Does Medicare Advantage include Part D?

Most Medicare Advantage Plans include Part D, but not all do.

Can I see any doctor with Medigap?

Medigap works with Original Medicare. With Original Medicare, you can generally see any doctor or hospital in the United States that accepts Medicare.

Can I switch from Medicare Advantage to Medigap?

You may be able to, but leaving Medicare Advantage does not automatically guarantee that you can buy the Medigap policy you want. Federal guaranteed-issue rights, Medigap Open Enrollment, trial rights and state protections can affect your options.

Which is better: Medicare Advantage or Medigap?

Neither option is universally better. The appropriate comparison depends on factors including provider access, prescriptions, premiums, expected health-care use, cost-sharing preferences, travel, plan availability and your ability to purchase Medigap.

Want help comparing the two approaches?

A licensed Wise Owl agent can help you review Medicare coverage options available in your area and explain how the structures differ.

Plan availability, premiums, benefits, networks and drug coverage vary by plan, location and year. Medigap availability and purchase rights can also depend on timing, state law and individual circumstances.