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  • Writer's pictureBrad Gunning

Medigap v. Medicare Advantage

If you watch television, Medicare Advantage advertisements are almost unavoidable. Retired football players and sitcom actors want to make sure you don't "miss out" on the "amazing benefits available to you." Just call and "check your zip code!" So let's explore whether switching from a Medigap (also known as Medicare Supplement) plan to a Medicare Advantage plan makes sense.

What are the Disadvantages of a Medicare Advantage Plan?

Medicare Advantage plans are an alternative to Medigap. One of the main disadvantages with Medicare Advantage is you're giving up some freedom. With a Medigap plan, you can go to any doctor that accepts Medicare (almost all of them). With Medicare Advantage, you'll be in a network (usually an HMO or PPO). If you want to see a specialist, you'll likely need a referral.

In many ways, a Medicare Advantage plan will remind you of your employer plan. You have your network of doctors and there are associated deductibles and copays with various medical services.

It's also worth noting that you cannot be enrolled in both a Medicare Advantage plan and a Medigap plan at the same time.

What are the Advantages of a Medicare Advantage Plan?

They don't call it Medicare "Advantage" for nothing. There are some appealing aspects to these plans. Two advantages Medicare Advantage plans have over Medigap plans are the low monthly premium costs and "extra" benefits.

Often plans with $0 monthly premiums are available (note that the Part B premium must still be paid). Additionally, the plans have a maximum out-of-pocket protection, after which the plan pays for all approved medical expenses.

Medicare Advantage plans also usually combine benefits beyond what's offered by a Medigap plan. For example, prescription drug coverage, dental and vision coverage, discounts on gym memberships, transportation, and home care can all be part of a robust Medicare Advantage plan. Ultimately, these benefits are a great addition to a Medicare Advantage plan, however, one potential con is focusing on the fringe benefits over the core health benefits.

Should you Choose a Medicare Advantage Plan or Medigap Plan?

At the top of the Medicare Advantage comparison checklist should be the max out-of-pocket, the network, how well the plan handles your prescriptions, and the various co-pays and deductibles.

While there are hundreds of unique Medicare Advantage plans, there is a smaller set of federally standardized Medigap plans, with an even smaller subset that are actually popular. While Plan F used to be the "Cadillac plan", it's now only available to those who were already Medicare eligible prior to January 2020 (usually meaning you were age 65 before this year). Now Plan G offers the most comprehensive coverage with the only out-of-pocket medical expense being the Part B deductible.

Unlike Medicare Advantage plans, your Medigap plan will provide identical coverage regardless of insurance carrier. A Plan G is a Plan G, regardless of which insurance company provides it to you.

While Medigap plans tend to offer superior medical coverage compared to Medicare Advantage plans, they come at a cost. Premiums for Plan G can range from about $70 per month to nearly $200 per month depending on county. Additionally, some carriers take into account an enrollee's age, so a 70 year old may pay more than a 65 year old.

Unlike most Medicare Advantage plans, Medigap plans do not include any prescription drug coverage or dental and vision benefits. Most enrolling in a Medigap plan will also purchase a Part D plan, which can cost between about $7 to $70 per month.

At the end of the day, the TV commercial advice to "call to check your zip code" isn't a bad idea. Some areas of the country have superior Medicare Advantage plans and it really does make sense to consider them over a pricier Medigap policy, whereas other counties have no Medicare Advantage options at all or fairly subpar choices. A competent Medicare insurance agent should be able to run quotes for you and compile a comparison chart to help you with the decision.

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