Medigap vs Medicare Advantage

When you become eligible for Medicare at age 65, you face a fundamental choice: stay with Original Medicare and add supplemental coverage (Medigap), or switch to a Medicare Advantage plan. Each path has distinct cost structures, coverage rules, and trade-offs.

Understanding the Two Paths

Path 1: Original Medicare + Medigap

Original Medicare includes:

• Part A (hospital insurance): Usually premium-free if you paid Medicare taxes for 10+ years
• Part B (medical insurance): $174.70/month standard premium in 2024

What Original Medicare Doesn't Cover:

• Part A deductible: $1,632 per benefit period (2024)
• Part B deductible: $240/year
• Part B coinsurance: 20% of approved amounts with no cap
• Prescription drugs: Requires separate Part D plan

Medigap (Medicare Supplement Insurance) fills these gaps. Private insurers sell standardized plans labeled A through N. Medigap policies:

• Pay some or all of Original Medicare's cost-sharing
• Allow you to see any provider who accepts Medicare nationwide
• Require monthly premiums in addition to Part B premium
• Do not include prescription drug coverage

Path 2: Medicare Advantage (Part C)

Medicare Advantage plans are offered by private insurers and replace Original Medicare. These plans:

• Must cover everything Original Medicare covers
• Often include Part D drug coverage
• Usually include extra benefits (dental, vision, hearing, fitness)
• Use provider networks (HMO, PPO, or hybrid)
• Have annual out-of-pocket maximums
• May have lower premiums but charge copays and coinsurance

Medigap Plan Options

Ten standardized Medigap plans exist (A, B, C, D, F, G, K, L, M, N). Plan G has become the most popular since Plan F became unavailable to new Medicare enrollees after January 1, 2020.

Plan G Coverage:

• Part A coinsurance and hospital costs (365 additional days after Medicare benefits exhausted)
• Part B coinsurance or copayment (generally 20% of approved amount)
• Blood (first 3 pints)
• Part A hospice care coinsurance or copayment
• Skilled nursing facility coinsurance
• Part A deductible ($1,632 in 2024)
• Part B excess charges (amounts above Medicare-approved charges)
• 80% of foreign travel emergency care

Plan G Does NOT Cover:

• Part B deductible ($240 in 2024)
• Prescription drugs
• Dental, vision, or hearing services
• Long-term care

Plan N is a lower-cost alternative that requires copays ($20 for some office visits, $50 for ER visits not resulting in admission) and doesn't cover Part B excess charges.

Premium Comparison

Medigap Premiums

Medigap premiums vary significantly by:

• Geographic location
• Age at purchase
• Tobacco use
• Gender (in some states)
• Rating method (attained-age, issue-age, or community-rated)

Typical Monthly Medigap Plan G Premiums (non-smoker):

Attained-age policies (most common) increase premiums as you age. Issue-age policies lock in a rate based on your age at purchase. Community-rated policies charge the same rate regardless of age.

Medicare Advantage Premiums

Many Medicare Advantage plans charge $0 monthly premium beyond the Part B premium. Others charge $20-150/month for enhanced benefits.

Typical Medicare Advantage Costs:

Annual Cost Comparison

Costs depend heavily on how much healthcare you use. Here's a comparison framework:

Low Healthcare Usage

Minimal doctor visits, no hospitalizations, few prescriptions.

Original Medicare + Medigap:

• Part B premium: $2,096/year
• Medigap Plan G: $2,100/year (at $175/month)
• Part D premium: $420/year (average basic plan)
• Part B deductible: $240
• Total: $4,856/year

Medicare Advantage:

• Part B premium: $2,096/year
• Plan premium: $0-360/year
• Part D: Included
• Copays: $100-300/year
• Total: $2,196-2,756/year

Advantage: Medicare Advantage saves $2,000-2,600/year with low usage

High Healthcare Usage

Multiple specialist visits, hospitalization, expensive medications.

Original Medicare + Medigap:

• Part B premium: $2,096/year
• Medigap Plan G: $2,100/year
• Part D premium: $420/year
• Part B deductible: $240
• Part D drug costs: $1,500-3,000/year
• Total: $6,356-7,856/year

Medicare Advantage:

• Part B premium: $2,096/year
• Plan premium: $0-360/year
• Copays and coinsurance: $2,000-6,000/year
• Drug costs: $1,500-3,000/year
• Maximum out-of-pocket cap protects against higher costs
• Total: $5,596-11,456/year (capped at out-of-pocket maximum)

Advantage: Medigap provides more predictable costs; Medicare Advantage has wider range

Worked Example: 67-Year-Old Retiree

Margaret, 67, lives in suburban Ohio. She has well-controlled diabetes, takes two generic medications, and sees her primary care doctor 4 times per year and an endocrinologist twice per year.

Option 1: Original Medicare + Medigap Plan G + Part D

Margaret can see any doctor in the US who accepts Medicare. If she travels to Florida for winter, she has full coverage.

Option 2: Medicare Advantage HMO (Humana Gold Plus)

Margaret must use in-network doctors. The plan covers Ohio but not Florida.

Annual Savings with Medicare Advantage: $2,540

But Consider:

If Margaret is hospitalized, Medicare Advantage costs rise significantly:

• Hospital copays: $350-400/day for days 1-6, varying amounts after
• Potential costs for 5-day hospital stay: $1,500-2,000

With Medigap Plan G, the same hospitalization adds zero additional cost (Part A deductible is covered).

Key Decision Factors

Choose Original Medicare + Medigap If:

• You want freedom to see any Medicare-accepting provider
• You travel frequently or live part-time in different states
• You prefer predictable costs regardless of health changes
• You can afford higher monthly premiums for peace of mind
• You have chronic conditions requiring frequent specialist care
• You anticipate potential hospitalizations

Choose Medicare Advantage If:

• You're comfortable using network providers
• You rarely travel or have providers in multiple locations
• You want lower monthly premiums and can handle copays
• You're generally healthy with predictable, modest healthcare needs
• You value included extras (dental, vision, fitness programs)
• The annual out-of-pocket maximum provides adequate protection

Switching Considerations

Medigap to Medicare Advantage:

• Can switch during annual enrollment (October 15 - December 7)
• Consider: You may not be able to return to Medigap without underwriting

Medicare Advantage to Medigap:

• Can switch during annual enrollment, but...
• May face medical underwriting for Medigap
• Could be denied or charged higher rates based on health
• Some states have guaranteed issue periods; most don't

Critical Warning: If you leave Medigap for Medicare Advantage, returning later may require passing medical underwriting. Health conditions developed in the interim could result in denial or significantly higher premiums.

Pre-Decision Checklist

Before choosing between Medigap and Medicare Advantage:

• List all your current doctors and verify which accept Original Medicare
• If considering Medicare Advantage, confirm your doctors are in-network
• Calculate your typical annual healthcare usage (visits, procedures, prescriptions)
• Estimate total costs under each option using the Medicare Plan Finder tool
• Consider your travel patterns and need for out-of-area coverage
• Review your prescription drugs on each plan's formulary
• Check the out-of-pocket maximum on Medicare Advantage plans
• Understand the Medigap pricing method (attained-age vs. issue-age)
• Research Medicare Advantage plan ratings (aim for 4+ stars)
• Consider future health changes and their cost impact under each option
• Understand that switching from Medigap to Medicare Advantage may be one-way
• If buying Medigap, do so during your initial enrollment period to avoid underwriting
• Compare at least 3 Medigap insurers if going that route
• Review what extra benefits (dental, vision) Medicare Advantage includes
• Verify Part D drug coverage is adequate under either path