Medigap Vs. Medicare Advantage Plans

by Jackie Lohrey ; Updated July 27, 2017
Medigap is supplemental insurance and Medicare Advantage is replacement insurance.

Original Medicare is an 80/20 health care insurance plan with deductible and coinsurance requirements. For 2015, Medicare Part A hospital insurance has a $1,260 deductible for each hospital stay and a per-day coinsurance payment if you stay more than 60 days. With Medicare Part B medical insurance, you pay 20 percent of most outpatient treatments. Medigap and Medicare Advantage plans are two drastically different options for limiting these out-of-pocket costs. However, they do not work together, and you cannot enroll in both plans at the same time.

Medigap Insurance

Medigap is supplemental insurance sold by insurance companies. Its objective is to work in conjunction with original Medicare. As of 2015, there are 10 standardized plans, each of which provides the same basic benefits. Medigap covers deductibles, coinsurance and co-payments that you would otherwise be responsible for paying. Some plans also cover expenses that original Medicare does not address, such as medical care when you travel abroad. Medigap does not pay for prescription drugs, vision or dental care, hearing aids, a private-duty nurse or nursing home care.

Medicare Advantage Plans

Insurance companies also sell Medicare Advantage plans. However, unlike Medigap, Medicare Advantage plans replace rather than supplement Medicare insurance. Although all plans must provide at least the same benefits as original Medicare, some offer additional benefits, such as dental and vision care, which Medicare does not provide. Medicare Advantage plans have deductibles and co-pays, but they also have yearly out-of-pocket spending limits, unlike Medicare.

Major Differences

The differences between Medigap and Medicare Advantage plans are important to consider when deciding which is your best option. Medigap has no hospital or doctor restrictions, other than that they must accept Medicare insurance. Medicare Advantage plans not only often restrict when and how you get care but also require that you use the company’s network of doctors and hospitals. Out-of-pocket cost protection is another major difference. As supplemental insurance, Medigap will help cover out-of-pocket expenses, which Medicare does not limit, but if you choose a Medicare Advantage plan, you’ll be responsible for paying all out-of-pocket expenses up to the annual limit.

Cost Considerations

There is a significant cost difference between Medigap and Medicare Advantage. Of the two, Medigap is often much more expensive. Although your geographic location and the plan you choose play a role, according to MedicareRights.org, monthly premiums can run into the hundreds of dollars. In addition, you’ll also be responsible for paying original Medicare and drug coverage premiums. In contrast, a Medicare Advantage plan is usually the same price as original Medicare, unless you also purchase prescription drug coverage.

About the Author

Based in Green Bay, Wisc., Jackie Lohrey has been writing professionally since 2009. In addition to writing web content and training manuals for small business clients and nonprofit organizations, including ERA Realtors and the Bay Area Humane Society, Lohrey also works as a finance data analyst for a global business outsourcing company.

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