Advantage vs Supplement: 5 Surprising Differences in Medicare Plan Options

Key Takeaways:

1. Medicare Advantage and Medicare Supplement (Medigap) plans offer different types of coverage, cost structures, and provider flexibility, making it essential to understand the trade-offs before choosing one.

2. While Medicare Advantage plans often include additional benefits like dental and vision, Medigap plans focus on covering out-of-pocket expenses left by Original Medicare.

Understanding Medicare Plan Options

When it comes to Medicare, you have two main paths for additional coverage beyond Original Medicare (Parts A and B): Medicare Advantage (Part C) and Medicare Supplement (Medigap). Both aim to help you manage healthcare costs, but they do so in very different ways. Before making a choice, you should understand the major differences between them—some of which might surprise you.

Let’s dive into five key distinctions that could impact your decision.

1. Coverage Structure: Bundled vs. Gap-Filling

Medicare Advantage: All-in-One Plans

Medicare Advantage plans bundle your Medicare Part A (hospital insurance), Part B (medical insurance), and often Part D (prescription drug coverage) into one plan. These plans may also include additional benefits like dental, vision, and wellness programs. However, you must follow the plan’s network rules and may need referrals to see specialists. Some plans may also have regional restrictions, meaning you could face higher costs if you seek care outside of your coverage area.

Medigap: Filling in the Gaps

Medicare Supplement plans, on the other hand, do not replace Original Medicare but work alongside it. Medigap helps pay for out-of-pocket costs that Original Medicare doesn’t fully cover, such as deductibles, copayments, and coinsurance. It doesn’t include prescription drug coverage, so you may need a separate Part D plan. Because Medigap doesn’t bundle benefits, you have the flexibility to choose a separate plan for prescription drugs and additional services such as vision and dental coverage.

2. Provider Flexibility: Networks vs. Any Doctor That Accepts Medicare

Medicare Advantage: Network Restrictions

With a Medicare Advantage plan, you typically need to use doctors, hospitals, and specialists within the plan’s network. Some plans may require referrals for specialists, which can limit your flexibility when seeking care. Additionally, if you visit an out-of-network provider, you may face significantly higher costs or find that the services aren’t covered at all.

Medigap: Nationwide Coverage

If you prefer more freedom in choosing healthcare providers, Medigap may be the better option. Medigap allows you to visit any doctor or hospital that accepts Medicare, without worrying about networks or referrals. This can be a major advantage for those who travel frequently or live in multiple locations throughout the year. Additionally, some Medigap policies cover foreign travel emergency care, which is beneficial for those who spend extended periods abroad.

3. Costs: Predictable Copays vs. Higher Monthly Premiums

Medicare Advantage: Lower Monthly Premiums, Higher Out-of-Pocket Costs

Medicare Advantage plans often have lower monthly premiums compared to Medigap, but they come with additional out-of-pocket expenses when you receive care. These costs can include copayments, deductibles, and coinsurance. You’ll also have a maximum out-of-pocket limit, which varies by plan but can be thousands of dollars per year. While this cap provides some protection, the variable costs may be unpredictable for those with frequent medical needs.

Medigap: Higher Premiums, Lower Out-of-Pocket Expenses

Medigap plans generally have higher monthly premiums, but in return, they reduce or eliminate many of the out-of-pocket costs associated with Original Medicare. If you require frequent medical care or want the financial predictability of knowing most expenses are covered, Medigap can be a more cost-effective choice in the long run. Unlike Medicare Advantage plans, which often adjust benefits annually, Medigap policies remain stable, ensuring long-term financial predictability.

4. Prescription Drug Coverage: Included vs. Separate Plans

Medicare Advantage: Often Includes Part D

Many Medicare Advantage plans include built-in prescription drug coverage, which simplifies your plan selection since you don’t need to enroll in a separate Part D plan. However, formularies (the list of covered drugs) vary by plan, so you’ll need to ensure your medications are covered. If you take multiple prescriptions, reviewing a plan’s formulary is essential to avoid unexpected costs.

Medigap: No Drug Coverage Included

Medigap does not include prescription drug coverage, so if you choose a Medigap plan, you’ll need to enroll in a standalone Medicare Part D plan. While this adds an extra step, it gives you more flexibility in selecting a drug plan that best fits your medication needs. Because Part D plans also have different formularies, it’s crucial to evaluate which plan covers your specific prescriptions at the lowest cost.

5. Enrollment and Switching: Limited Periods vs. Guaranteed Issue Rights

Medicare Advantage: Annual Enrollment Windows

You can enroll in a Medicare Advantage plan during specific enrollment periods:

• Initial Enrollment Period (IEP): When you first become eligible for Medicare (usually at age 65).

• Annual Enrollment Period (AEP): October 15 – December 7 each year, allowing you to switch plans.

• Medicare Advantage Open Enrollment (January 1 – March 31): If you already have a Medicare Advantage plan, you can switch to another or return to Original Medicare.

Medigap: Limited Enrollment but More Stability

Medigap enrollment rules differ. If you sign up during your Medigap Open Enrollment Period (a six-month period starting when you first enroll in Part B at age 65 or older), you get guaranteed issue rights—meaning you can enroll without medical underwriting. Outside of this period, insurers may deny coverage or charge higher premiums based on health conditions. Unlike Medicare Advantage, Medigap plans do not require annual renewals or changes, offering long-term stability.

Which One Is Right for You?

The choice between Medicare Advantage and Medigap depends on your personal healthcare needs, budget, and lifestyle preferences. Here are a few things to consider:

• If you want an all-in-one plan with extra benefits and don’t mind network restrictions, Medicare Advantage may be a good fit.

• If you prefer flexibility in choosing doctors and want predictable out-of-pocket costs, a Medigap plan might be better.

• If you travel frequently within the U.S., Medigap offers nationwide provider access.

• If you take prescription medications, Medicare Advantage may simplify coverage, while Medigap requires a separate Part D plan.

• If you plan to stay in one location and have minimal medical expenses, a Medicare Advantage plan could be a cost-effective solution.

Making an Informed Choice

Choosing a Medicare plan is a big decision that impacts your healthcare experience and costs for years to come. It’s important to evaluate your health needs, budget, and future plans before enrolling.

If you’re still unsure about which option best suits your situation, speaking with a licensed agent can help. Agents listed on this website can provide personalized guidance, explain plan details, and assist you in selecting the coverage that aligns with your needs.