Recently in our popular New-to-Medicare webinar, several people asked some version of this question in our chat box: Medicare Advantage vs Medigap – how do you choose? I’ve answered this same question hundreds of times in my career, so in this post I’ll guide you to the answer. This post has been updated in June of 2020.
As you may know by now, Medicare alone doesn’t cover everything. Most people buy additional insurance to bridge the gaps. When considering Medicare Advantage vs Medigap plans, it’s important to understand that both types of plans will help to reduce your out of pocket spending.
After all, who wants to come up with a $1300+ deductible each time you enter the hospital? Or shell out 20% of the cost of an expensive MRI?
So the two main types coverage that you can buy to help with this are Medicare Advantage vs Medigap (Medicare Supplement). It’s important that you know how each type of coverage, so that you can select the right plan for you.
Medicare Advantage vs Medigap (Medicare Supplement): Choosing a Winner
Though both policies help you cover your gaps in Medicare, they are designed very differently.
Medicare supplements pay as a secondary insurance to Medicare itself. This means they pay after Medicare first pays its portion of the bill. You stay enrolled in Original Medicare, and Medicare sends the remainder of your bills to your Medicare supplement company. Then the supplement company pays its share according to which plan you are enrolled in.
Medicare Advantage plans, on the other hand, are entirely separate from Medicare. When you enroll into a Medicare Advantage policy, you get your benefits from the plan, not Medicare. You agree to use the plan’s network of providers except in emergencies. You’ll pay copays for your health care treatment as you go along.
Think of these plans as an alternative to Original Medicare.
Let’s explore a bit more about each type of plan.
About Medicare Supplement Plans
Medicare supplement plans are also called Medigap plans. Having a Medigap plan means you are still enrolled in Original Medicare as your primary insurance.
You can see any provider that participates in Medicare, regardless of which supplement company you choose. You have access to all the Medicare providers nationwide – no referrals necessary. If you enroll in a comprehensive plan like Plan F or Plan G, you will have very little out of pocket. Not even doctor copays!
When you enroll, your Medicare supplement insurance company notifies Medicare that you have purchased a policy. Thereafter, as we described earlier, when Medicare pays its portion of your bills, it will automatically send the remainder of your bill to your Medicare supplement company.
It’s seamless, with no claims forms for you to file.
Freedom of Access & No Referrals Necessary
Medicare supplements also offer you the most freedom of access to providers. You have freedom to choose your own doctors and hospitals from among the 800,000+ Medicare providers in the nation. No referrals are necessary to see a specialist on this type of coverage.
Because these plans offer you the most freedom and flexibility, they have higher premiums than Medicare Advantage plans. In the DFW area,for example, a female, non-tobacco user turning 65 might pay around $100 – $130/month for Plan G in 2020.
It depends on which Medigap plan is chosen and whether that individual uses tobacco. Plans and rates also vary by region, age and sometimes gender, but our agency can quote over 30 insurance carriers in 48 states. We can also check to see which carriers offer household discounts that might help to reduce your monthly premiums.
Your Retail Drug Coverage is Separate
Medigap plans cover medications administered in a hospital setting, such as injectables or chemotherapy drugs. They do not cover retail medications though, so most beneficiaries will enroll in a separate Part D drug card. There are plans available in every state starting around $15/month.
If you enroll into a Medigap plan during your one-time open enrollment window (within 6 months of your Part B effective date), there are no health questions. The insurance company will approve your application.
There are also no waiting periods or pre-existing condition exclusions when you apply during this window. If you miss this window and apply later on, then you will usually be required to answer medical questions and be underwritten. The underwriter at the insurance company can accept or decline you based on your medical history.
About Medicare Advantage
About 33% of beneficiaries choose to enroll into Medicare Advantage policies, which are private insurance plans. They usually have lower premiums than Medigap plans….sometimes even a $0 premium on some plans in some areas.
When a plan has a $0 premium, it means that you will pay no additional premiums for the plan itself. You will still pay for your Part B premiums monthly though. You must be enrolled in both Medicare Parts A and B to be eligible for a Medicare Advantage plan.
Why would any company offer a $0 premium plan? Because you agree to use the plan’s network providers to get your care. This means you’ll have substantially fewer doctors to choose from than if you chose a Medigap plan. The insurance company has more control over your choice of providers, with whom they negotiate contracted rates.
Check Your Doctors
It’s important to check with your doctors first to see if they are in the plan’s network. This is especially important if the Advantage plan you are considering is an HMO plan, which often have the smallest networks. I have seen HMO plans with networks as small as 250 doctors, which is tiny, so you must do your homework on this.
Look for one with a network that has plenty of providers in your area.
Your Medicare Advantage insurance company will pay your healthcare bills instead of Medicare paying them. You will pay copays for the services you obtain from providers in the plan’s network as you go along. Generally the copays are reasonable, but you’ll want to review them before you enroll to make sure.
These copays can vary from plan to plan as well. One plan might charge $40 for a specialist visit while another plan charges $50. These copays can add up while you are using medical services so think about your medical usage when selecting a plan.
There is only one health question about End Stage Renal Disease (ESRD) on each Medicare Advantage application. People with ESRD do not qualify for Medicare Advantage. No other conditions will prevent you from enrolling as long as you are enrolling during a valid election period – there are certain times of year that are designate for enrolling in, dis-enrolling from or changing your Advantage plan.
Check the Drug Formulary
A lot of Medicare Advantage plans also include Part D coverage, so there is often no need to buy a separate drug plan. Some people enjoy the convenience of this.
Over the years however, I’ve seen a few people devastated by this when they weren’t careful to check whether their plan includes the medications they take. They checked all their doctors but didn’t check to see if the built-in drug plan included their meds. Then they find out they are stuck in a plan that doesn’t offer an important and usually expensive medication.
You see, Medicare Advantage plans have specific enrollment periods. If you enroll in a plan, Medicare locks you into that plan through December 31st. You can change mid-year only if a circumstance gives you a special election period, such as moving out of state. This makes it very important that you choose a plan wisely.
Do your homework on this! (or call us, and we’ll do it for you)
Keep in mind, too, that you must be enrolled in both Medicare Parts A and B to be eligible for Medicare Advantage. Enrolling in Medicare Advantage does NOT mean you get to skip the premiums that you are already paying for Part B. You will continue to pay for Part B.
Check Your Rainy Day Fund
All Medicare Advantage policies have an Out-of-Pocket (OOP) Maximum Cap to protect you. Currently Medicare has declared that this maximum cannot be any higher than $6700. However, $6700 is a lot of money for people on fixed incomes. There will be many years where you won’t come near this, but if you develop a serious illness, like cancer, you can reach it very quickly.
Check the plan’s summary of benefits to find out what the OOP Maximum is on the plan you are considering. Then ask yourself- “Do I have enough savings for a rainy day? Can I meet this OOP Maximum if I had to in a year of bad health?”
If the answer is yes, then Medicare Advantage may work fine for you. If the answer is no, then Medigap may be a better fit since the back-end expenses on Medigap plans are minimal and therefore far more predictable.
Changing Between Medicare Advantage vs Medicare Supplement Plans
Many people ask me whether they can start with Medicare Advantage and change to Medigap later if they get sick or need more coverage. That sounds great, right? Just buy the cheapest insurance now until you get sick and then switch back to the more comprehensive insurance?
This is important. It doesn’t work that way. If you leave a Medigap plan to go on Medicare Advantage coverage instead, you may not be able to get back into a Medigap plan later.
You might be outside of your one-time initial enrollment window by then, and that means Medigap plan insurance companies can ask health questions on your application. The insurance carriers can decline you for certain health conditions or even medications that you take, so be aware of this before changing to Medicare Advantage.
An exception: There is a trial period for people who try Medicare Advantage for the first time. If you decide to dis-enroll from the plan and go back to Original Medicare within the first 12 months of Medicare Advantage coverage, then you can return to your Medigap plan with no underwriting. After the 12 months is up, then you are subject to underwriting.
Another exception is for people under age 65 who got Medicare early due to a disability. When that person turns 65 and now is eligible for Medicare based on age instead of disability, that person will get an second open enrollment window. They can then change from Medicare Advantage to Medicare supplement without underwriting.
My Best Tips After Helping 20,000+ People
We’ve worked with thousands of people over the years, and here is my best tip. Plan for a rainy day. Medicare Advantage plans can be quite expensive if you treat for something serious, like cancer. You may pay 20% of chemotherapy or radiation costs up to the plan’s annual out of pocket maximum.
That maximum can be as high as $6700 out of your own pocket – per year! If you have funds set aside for this, then Medicare Advantage may work well for you. If you don’t, then investing in a fuller coverage Medigap plan is wise.
Every situation is different. Contact a Boomer Benefits agent to help you decide. Our service is free.
Get Help Choosing Between Medicare Advantage vs Medigap
Still asking yourself “Should I get Medigap or Medicare Advantage?” It’s critical to compare the costs and benefits of each type of plan in relation to your personal healthcare needs and budget. Some of the key factors for comparison are:
- Monthly premiums
- Deductibles, if any
- Expected costs of healthcare services on each plan
- How often you use healthcare services
- Areas where you will need access to care
- Expected copays for your medications
- Potential out of pocket spending for you on each plan type
- Remember, you get what you pay for
Finally, we know that checking the provider networks and drug formularies for each plan can take many hours. Simplify your search by having a Boomer Benefits licensed agent do this for you. We’ve helped tens of thousands of people like you with their options. We can search Medicare Advantage vs Medigap plans in your area.
We’ll be able to quickly tell you which plans your doctors take and whether your medications are covered. Working with an agent also gives you back end policy support. If your plan ever denies a bill. We help you resolve things like that and that’s why we have hundreds of five-star reviews online here, on Google, on Facebook and other places.
Call 855-732-9055 for help today!