If you want to cover healthcare costs that Medicare doesn’t, you have two main options to consider: Medigap and Medicare Advantage. Each of these options comes with its own unique set of benefits and drawbacks that you must weigh against each other.

After you choose one of these options, you cannot pursue the other. In other words, you cannot have Medigap and Medicare Advantage coverage at the same time. This makes it all the more important to understand the full implications of each.

Essential Differences Between Medigap and Medicare Advantage

While they are both popular coverage options for people who qualify for Medicare, Medigap and Medicare Advantage are different programs with different benefits that cannot be combined. First and foremost, they have very different relationships to the federally funded and operated Medicare program. True to its name, Medigap policies act as a supplement Medicare by filling in critical overage gaps. Medicare Advantage, by contrast, uses government money to fund private insurance coverage as an alternative to Medicare. Medicaid and Medicare Advantage are separate and distinct programs, and you cannot be enrolled in both simultaneously.

To qualify for Medigap, you must be enrolled in Original Medicare, which includes Part A (hospital care) and Part B (physician/outpatient care) coverage. Medicare recipients often choose to buy Medigap insurance to offset other healthcare costs. Alternatively, US residents can turn to Medicare Advantage to expand their coverage. However, it is important to note that Medigap and Medicare Advantage offer different kinds of coverage using different operational structures.

Medigap and Medicare Advantage Coverage Benefits

Medigap supplements Original Medicare by helping pay for common out-of-pocket healthcare expenses such as deductibles, copayments, coinsurance, and hospital fees. To help people get the specific coverage they need without paying for coverage they don’t need, Medigap offers a range of standardized plans that are clearly identified by the letters “A” through “N.” Unfortunately, Medigap doesn’t provide coverage for prescription drugs, vision care, dental care, or hearing aids. But as long as you restrict your search to providers who participate in the Medicare program, you can use the physicians and facilities of your choice with Medigap.

As an alternative to standard Medicare, Medicare Advantage allows participants to purchase a bundled plan from a private insurance provider outside the Medicare system. However, these plans tend to provide all Original Medicare (Part A and Part B) benefits and might also cover prescription drugs, vision care, dental care, and hearing aids. As your particular bundled Medicare Advantage coverage increases or expands, you will face higher financial costs. However, Medicare Advantage’s monthly premiums are generally lower than Medigap’s. The primary drawback of Medicare Advantage is its lack of versatility. The program typically requires participants to seek care within a limited network of preferred providers.

Medigap and Medicare Advantage Cost Structures

As discussed in the “coverage benefits” section above, Medigap works by reimbursing participants for specified out-of-pocket expenses including certain deductibles, copayments, coinsurance, and hospital fees. So participants in this program typically encounter lower costs when they use medical services. And because they can use any provider that accepts Medicare, Medigap participants have considerable flexibility when seeking medical care. However, the monthly premiums for Medigap plans are often significantly higher than those for Medicare Advantage plans.

Medicare Advantage’s lower premiums can give your monthly budget a boost, but you will be paying more for healthcare as you use it. This is because Medicare Advantage commonly requires participants to pay deductibles, copayments, and coinsurance. While some Medicare Advantage plans come without deductibles, these plans generally come with considerably higher monthly premiums such as those associated with Medigap plans. Before signing up for Medicare Advantage, you should also take a close look at its provider restrictions.

Medigap vs. Medicare Advantage Comparison Table

Medigap

Medicare Advantage

• Medigap supplements Original Medicare (Plan A for hospital care and Plan B for physican/outpatient care) by helping pay for common out-of-pocket healthcare expenses. These expenses include deductibles, copayments, coinsurance, and hospital fees.
• An alternative to standard Medicare, Medicare Advantage allows participants to purchase a bundled plan (similar to Original Medicare at a minimum) from a private insurance provider outside the Medicare system. These plans generally come with deductibles, copayments, and other out-of-pocket healthcare expenses.
• Medigap generally has higher monthly premiums than Medicare Advantage.
• Medicare Advantage generally has lower monthly premiums than Medigap.
• Medigap typically allows participants to seek care from any provider that participates in the Medicare program.
• Medicare Advantage typically requires participants to seek care within a defined network of preferred providers.
• Medigap plans do not include coverage for prescription drugs, vision care, dental care, or hearing aids.
• Medicare Advantage plans can include coverage for prescription drugs, vision care, dental care, and hearing aids.
• Medigap cannot extend coverage to individuals enrolled in the Medicare Advantage program.
• Medicare Advantage cannot extend coverage to individuals enrolled in the Medigap program.