Written By: Richard Stockton
Page Reviewed / Updated – February 07, 2020

Medicare provides health insurance for over 44 million Americans, a number that’s set to rise to over 79 million by 2030. Coverage for these beneficiaries is extensive, but there can be gaps in seniors’ plans that leave them with out of pocket expenses in the event of a serious health issue. To prevent this kind of financial burden, many seniors opt to pay for supplemental coverage. The most common options for this coverage are known as Medicare Advantage and Medigap. These policies are mutually exclusive, and seniors are not allowed to have both, so choosing the right one for your needs is important for getting the coverage you need.

This guide explains some of the key differences between Medigap and Medicare Advantage plans for seniors and their loved ones, who may be wondering what their options are for supplemental health insurance. Next, you’ll find the basics of each type of coverage, along with many of the pros and cons of what they offer. Finally, the guide explains how to sign up for Medicare Advantage and Medigap supplementals, along with giving information about enrollment periods and plan limits.

The Basics of Medicare Advantage

Medicare Advantage is the common name for private Medicare supplemental plans that meet all the coverage requirements of Original Medicare. Basic Medicare is split into several parts, designated by the letters A, B, C, D, F, G, K, L, M, and N. The details of these can get confusing, but Part A is inpatient care, Part B is outpatient services, and Part D is the prescription drug benefit. Part A is free to almost all recipients, and it covers the cost of stays in the hospital. Parts B and D generally cost a monthly premium, along with out-of-pocket costs at the point of service, so many seniors opt for a Medicare Advantage plan that combines their Parts A, B, and D coverage. This is sometimes called Medicare Part C, and the private companies that offer it usually charge a single monthly premium.

One of the major advantages of comprehensive Part C coverage through Medicare Advantage is that it’s simple. Seniors who make use of Original Medicare only may be faced with a bewildering variety of letters and plan limitations, where some medications cost a lot of money under Part D, while others are less expensive under Part B, and still others are free under Part A. Having a single plan to cover the benefits recipients need greatly reduces the complexity. Medicare Advantage plans are also required to cover services provided by Original Medicare, so seniors on one of these plans know they have more coverage than they would have had under the federal program alone.Cost is the major disadvantage of a comprehensive Medicare Advantage plan. Grouping multiple levels of coverage under one umbrella often costs more than Original Medicare does, though many seniors are willing to pay an average of $29 more a month for this convenience. It does, however, include significant co-pays or possibly a sizable annual share-of-cost commitment before benefits kick in.

The Basics of Medigap

Medigap is a supplemental insurance policy that, unlike Medicare Advantage, doesn’t take the place of Original Medicare coverage. Instead, a Medigap plan plugs the gap in coverage between what Original Medicare can pay for and the maximum out-of-pocket costs allowed under your main Medicare supplement.

Having a Medigap policy can benefit seniors who frequently use healthcare for specific conditions, such as managing chronic conditions like diabetes, but who rarely need major interventions, such as physical therapy or outpatient surgery. By picking up the gap between Original Medicare coverage and the catastrophic care plan that helps after the annual share of cost has been met, Medigap plans help to simplify and reduce the regular costs Medicare beneficiaries must pay.

A major downside of Medigap plans is that they are not all-inclusive. When you sign up for Medigap, you still have your Medicare Parts A-through-whichever coverage, and these elements keep charging the monthly premiums they did before. Having Medigap coverage also doesn’t reduce whatever out-of-pocket costs you are liable for through your main supplement, though it can help you get to that threshold at less expense to yourself.

When is Medicare Advantage Better than Traditional Medigap?

Medicare Advantage is an alternative to Original Medicare that carries the same benefits, plus a la carte options that include vision care, orthopedic devices, and medical transportation costs. For seniors who have low- to medium-level healthcare costs, or who would like for all their premiums to be combined into a single monthly bill, Medicare Advantage offers real benefits.

Medigap plans may often charge more in monthly premiums than Medicare Advantage plans, but they can result in significantly lower out-of-pocket costs at the point of service. This is especially true for seniors with high care expenses, who need something to cover them in-between their no-cost Original Medicare coverage and their high share-of-cost supplement.

Medigap policies are also typically attractive to customers who would like some flexibility in how their care is delivered. While a Medicare Advantage plan is very often structured as a traditional HMO or PPO, which limits options for where and how to receive services, Medigap is accepted everywhere Original Medicare is. This means that a person with a Medigap policy can seek treatment at any facility, doctor’s office, or pharmacy that takes Medicare payments, but they are still free to shop around for a provider they like. Many Medicare Advantage plans restrict members to a single network, or they impose requirements to see a primary provider before visiting a specialist.

Medigap can also be appealing to seniors who travel a lot, but whose local Medicare Advantage providers are limited in scope. Typical Medicare Advantage plans are offered in just one state or a limited number of counties inside of a single state. Seeking care while traveling can make payments problematic, or at least more complicated than necessary under Medicare Advantage. Because Medigap is accepted everywhere in the nation, it is not limited to a single location for care.

When to Enroll

New beneficiaries can enroll in either Medicare Advantage or Medigap before turning 65 and becoming eligible for Medicare coverage. This is done to allow time for your new benefits to activate, which helps prevent a gap in coverage. For both Original Medicare and Medicare Advantage, the enrollment period begins on the first day of the month three months before you turn 65, and it ends on the last day of the third month after that. For example, if your 65th birthday is June 15, 2020, then your enrollment period begins on March 1, 2020, and ends on September 30 of the same year. During this window of time, you can pick the kind of Medicare coverage you need and sign up for it without any penalty rates for late enrollment. It is strongly advised that you sign up for your prescription drug coverage, either Part D or Medicare Advantage, as early as possible, since Part D benefits take an extra three months to activate after signup.

If you already have Original Medicare, but you want to switch to a Medicare Advantage plan, the window to do that opens on October 15 each year and closes on December 7. During this time, you can cancel your Original Medicare policy and seamlessly switch to the Medicare Advantage plan of your choice. There is no penalty for doing this during the open enrollment period. If you already have a Medicare Advantage plan and wish to switch to another, the open window for that runs from January 1 to March 31 each year. You cannot use this period to switch to Medicare Advantage from Original Medicare, but transfers between Medicare Advantage plans are allowed without penalty.

Medigap enrollment windows are somewhat different from those for Medicare Advantage and Original Medicare. Your window to enroll in a Medigap policy begins in the month when you turn 65, and the initial open enrollment period lasts six months. Thus, if you turn 65 on June 15, 2020, your window for Medigap begins on June 1 and runs out to November 30, 2020. In some states, you can switch your Medigap plan or change to a Medicare Advantage plan for up to 12 months after the initial signup without a late enrollment penalty. During the initial signup, you may buy any Medigap policy offered in your state. You aren’t penalized for pre-existing conditions and cannot be refused coverage during this period. If, however, you apply for Medigap coverage outside of the open enrollment window, the insurer is generally allowed to use normal underwriting practices to determine your costs, and it can even deny coverage like any other insurance plan. Three states, Massachusetts, Minnesota, and Wisconsin, do not allow Medigap providers to charge individual rates based on health information, but they must assign monthly premiums based solely on geographic area.

For both Medicare Advantage and Medigap, you can sometimes switch plans outside of the normal open enrollment periods. These special enrollment periods usually vary with your circumstances. Conditions that can trigger a special enrollment period for you include:

  • You lose your previous group plan due to the end of employment
  • Your previous provider went bankrupt, lost certification, or is otherwise no longer offering coverage
  • You have moved out of your Medicare Advantage coverage area
  • You have returned from overseas outside of the open enrollment period
  • You have just been released from prison
  • Your spouse’s insurance no longer covers you due to loss of benefits, divorce, or another reason
  • You have canceled your Medicare Advantage plan within 12 months of buying it

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Can I combine Medicare Advantage with Medigap?

No. It is illegal for insurance companies to offer customers both types of coverage. You can only have one or the other.

Can I be denied for pre-existing conditions?

If you buy Medigap during the open enrollment period, you cannot be denied for a pre-existing condition. After that period, you may be denied. Medicare Advantage doesn’t deny for pre-existing conditions.

Do Medicare Advantage plans include prescription drugs?

Some Medicare Advantage plans offer prescription drug coverage (Part D), while others do not. It is important to check at the time of signup to make sure you are covered.

Which costs more, Medigap or Medicare Advantage?

Medicare Advantage typically costs less per month than Medigap, with some plans costing $0 a month. Medigap, however, may result in lower out-of-pocket costs.

Who can I ask for more information about Medicare Advantage and Medigap?

Questions about any kind of Medicare coverage can be answered by calling 1 (800) MEDICARE (633-4227) during normal business hours. Have your Medicare card and ID number ready to give the agent if you have plan-specific questions.