Medicare Advantage vs. Medigap: The Difference That Actually Matters

At first glance, choosing between Medicare Advantage and Original Medicare with Medigap can look like a question of monthly premiums.

One option may have a very low — sometimes $0 — additional monthly plan premium. The other requires paying for supplemental insurance every month.

So why would someone voluntarily choose the option with the additional premium?

Because the real decision isn't simply about which option costs less today.

It's about how you want to pay for healthcare, how much predictability you want, and how much freedom you want when choosing where you receive care.

Understanding that tradeoff can make one of Medicare's most confusing decisions considerably easier.

First, an Important Clarification

"Medicare Advantage vs. Medigap" is how this question is commonly phrased, but technically these aren't two equivalent types of insurance.

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

Medigap works differently. A Medigap policy supplements Original Medicare. It helps pay certain out-of-pocket costs that Original Medicare doesn't cover.

So the comparison we're really making is:

And if you want prescription drug coverage with Original Medicare, you'll generally need to consider a separate Part D plan as well.

Meet Robert

Let's make the differences easier to understand.

Imagine Robert.

He's 65, generally healthy, takes a couple of prescriptions, and travels several times a year.

As Robert enters Medicare, he could consider two very different paths.

Path 1: Medicare Advantage

Robert could enroll in a Medicare Advantage plan, also known as Medicare Part C.

Medicare Advantage plans are offered by private insurance companies approved by Medicare and provide Medicare Part A and Part B benefits.

Many Medicare Advantage plans also include Part D prescription drug coverage, and some offer additional benefits that Original Medicare doesn't cover.

Some Medicare Advantage plans have a $0 additional monthly plan premium.

That can sound very attractive.

But "$0 premium" doesn't mean "$0 healthcare."

Robert must still pay his Medicare Part B premium, and depending on his plan and the healthcare he uses, he may have deductibles, copayments, coinsurance, or other out-of-pocket expenses.

Medicare Advantage plans do, however, have an annual limit on what a member pays out of pocket for covered Part A and Part B services.

Once the plan's limit is reached, the member generally doesn't pay additional costs for covered Part A and Part B services for the remainder of that year.

Provider Networks Matter

Many Medicare Advantage plans use provider networks.

Depending on the type of plan, Robert may need to use doctors, specialists, hospitals, or other providers within that network to receive the plan's lowest costs or, in some cases, to receive non-emergency coverage at all.

Plans can also have their own rules for services, including referrals or prior authorization requirements.

For someone whose preferred doctors participate in the plan and who is comfortable working within a network, that may be perfectly acceptable.

For someone who travels frequently or wants broader flexibility in choosing providers, it deserves careful consideration.

Path 2: Original Medicare + Medigap

Robert's other path is to remain with Original Medicare and purchase a Medicare Supplement Insurance policy, commonly called Medigap.

Original Medicare consists primarily of:

• Part A — hospital insurance
• Part B — medical insurance

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

There generally isn't a Medicare Advantage-style provider network.

That flexibility is one of the major reasons some beneficiaries prefer Original Medicare.

What Does Medigap Do?

Original Medicare doesn't pay 100% of covered healthcare costs.

Depending on the service, Robert can still be responsible for deductibles, coinsurance, and other expenses.

Medigap policies are sold by private insurance companies and are designed to help pay certain costs left by Original Medicare.

Exactly which costs are covered depends on the standardized Medigap plan Robert chooses.

Unlike many Medicare Advantage plans, however, Medigap generally means paying an additional monthly premium whether Robert uses significant healthcare that month or not.

If Robert wants prescription drug coverage, he'll generally need a separate Medicare Part D plan because Medigap policies sold today don't include prescription drug coverage.

The Real Difference: When and How Do You Want to Pay?

This is where the comparison becomes more useful.

A person looking only at monthly premiums might conclude that a Medicare Advantage plan with a $0 additional premium is obviously less expensive than paying a Medigap premium every month.

But that's only part of the equation.

With Medicare Advantage, you may pay less in additional premiums but incur more costs as you actually use healthcare, subject to the plan's rules and annual out-of-pocket limit.

With Original Medicare plus Medigap, you're paying an additional premium for supplemental coverage that can reduce certain costs when medical care is needed.

In simplified terms, the decision can sometimes look like this:

This isn't simply a question of "cheap versus expensive."

It's a question of:

Cost + Predictability + Provider Access + Plan Rules

Now Let's Change One Thing About Robert

At 65, Robert is healthy.

His immediate healthcare expenses aren't particularly concerning.

But imagine Robert again at 72.

This time, he has developed a serious medical condition.

He may need specialists. He may receive more frequent treatment. He may care considerably more about which hospitals and physicians he can use.

The factors that seemed relatively unimportant when Robert was healthy can suddenly become much more important.

This doesn't mean Robert would have been wrong to choose Medicare Advantage.

It illustrates something more important:

A Medicare decision should be evaluated not only for the healthcare you're using today, but also for how the coverage could work if your needs change.

Can You Switch From Medicare Advantage to Medigap Later?

This is where an important distinction needs to be understood.

There are opportunities to leave Medicare Advantage and return to Original Medicare.

But returning to Original Medicare does not necessarily mean you're guaranteed the ability to purchase any Medigap policy you want.

Federal Medigap protections are particularly strong during your initial Medigap Open Enrollment Period.

The Six-Month Medigap Open Enrollment Period

Your Medigap Open Enrollment Period generally begins the first month you're both:

• 65 or older, and
• enrolled in Medicare Part B.

It lasts six months.

During this period, an insurance company generally can't use medical underwriting to deny you a Medigap policy it sells because of your health.

This federal Medigap Open Enrollment Period does not simply repeat every year.

After that initial period, your ability to purchase Medigap can depend on your circumstances.

Federal law provides guaranteed-issue protections in certain situations. Medicare also provides certain trial rights involving Medicare Advantage, and some states provide additional Medigap protections beyond federal requirements.

But outside a protected situation, an insurer may be allowed to use medical underwriting, charge more based on health, or deny an application, depending on applicable rules.

That's why it's dangerous to think:

"I'll just choose Medicare Advantage now and buy Medigap later if my health gets worse."

That may be possible.

But it should not be assumed.

So Which Is Better: Medicare Advantage or Medigap?

There isn't a universal winner.

And anyone telling you that one option is always better is ignoring the fact that Medicare beneficiaries have very different healthcare needs, finances, doctors, travel patterns, and preferences.

Instead, ask yourself four questions.

1. How Important Is a Low Monthly Premium?

If minimizing fixed monthly insurance expenses is important, some Medicare Advantage plans can be attractive.

But compare total potential healthcare spending rather than premium alone.

2. How Important Is Predictable Medical Spending?

Some people prefer paying an additional monthly Medigap premium in exchange for reducing certain unpredictable Original Medicare cost-sharing expenses.

Others prefer paying less upfront and accepting more pay-as-you-use costs.

3. How Important Is Provider Choice?

If you have specific doctors or hospitals you want to use — or frequently receive care in different parts of the country — compare provider access carefully.

Don't assume a physician who "takes Medicare" necessarily participates in every Medicare Advantage plan.

4. How Comfortable Are You With Networks and Plan Rules?

Some people are perfectly comfortable with managed-care networks.

Others strongly prefer the flexibility of Original Medicare.

Neither preference is inherently right or wrong.

Don't Compare Benefits You Won't Actually Use

Medicare Advantage plans sometimes advertise additional benefits such as dental, vision, hearing, fitness, transportation, or other services.

Those benefits can have real value.

But don't allow an attractive extra benefit to overshadow the core healthcare coverage decision.

Ask:

• Will I actually use the benefit?
• What exactly does it cover?
• Are there limits?
• Which providers participate?
• What would I otherwise pay for it myself?

An extra benefit is valuable only if it's valuable to you.

The Health Almanac Takeaway

The mistake isn't choosing Medicare Advantage.

The mistake isn't choosing Original Medicare with Medigap.

The mistake is making the decision based on today's premium without understanding the tradeoffs you're making for tomorrow.

Before choosing, compare:

That's a much more useful comparison than simply asking which option has the lowest advertised premium.

Sources & Further Reading

• Medicare.gov — Compare Original Medicare & Medicare Advantage
• Medicare.gov — Medigap Basics
• Medicare.gov — When Can I Buy Medigap?
• Medicare.gov — Guaranteed Issue Rights
• Medicare.gov — Joining a Plan

Common questions

Is Medigap an alternative to Medicare?

No. Medigap is a Medicare Supplement Insurance policy sold by private insurers that supplements Original Medicare by helping pay certain costs Original Medicare doesn't cover. The real comparison is Medicare Advantage versus Original Medicare paired with a Medigap policy.

Does a $0 premium Medicare Advantage plan mean $0 healthcare costs?

No. Some Medicare Advantage plans have a $0 additional monthly plan premium, but you must still pay your Medicare Part B premium, and depending on the plan and the care you use, you may have deductibles, copayments, coinsurance, or other out-of-pocket costs. Medicare Advantage plans do have an annual limit on what a member pays out of pocket for covered Part A and Part B services.

Do Medigap policies include prescription drug coverage?

Medigap policies sold today don't include prescription drug coverage. If you want drug coverage with Original Medicare, you'll generally need to consider a separate Medicare Part D plan.

Can I switch from Medicare Advantage to Medigap later?

There are opportunities to leave Medicare Advantage and return to Original Medicare, but returning does not necessarily guarantee that you can buy any Medigap policy you want. Federal protections are strongest during your six-month Medigap Open Enrollment Period; outside a protected situation, an insurer may be allowed to use medical underwriting, charge more based on health, or deny an application, depending on applicable rules.

When is the Medigap Open Enrollment Period?

Your Medigap Open Enrollment Period generally begins the first month you are both 65 or older and enrolled in Medicare Part B, and it lasts six months. During that period an insurance company generally can't use medical underwriting to deny you a Medigap policy it sells because of your health. This federal period does not simply repeat every year.

Do I have to use a network with Medicare Advantage?

Many Medicare Advantage plans use provider networks. Depending on the type of plan, you may need to use in-network doctors, specialists, hospitals or other providers to receive the plan's lowest costs or, in some cases, to receive non-emergency coverage at all. Plans can also have rules such as referrals or prior authorization.

Keep reading

• Medicare Advantage, explained
• Medigap, explained
• Medicare Part D, explained
• Medicare enrollment windows
• Using the Medicare Plan Finder