Medigap vs. Medicare Advantage: The Structural Differences That Matter Most

Once you have Medicare Parts A and B, the biggest choice is how to handle the rest: keep Original Medicare and add a Medicare Supplement (Medigap) policy and a Part D drug plan, or join a Medicare Advantage plan. They work very differently. The choice affects which doctors you can see, how predictable your costs are, and whether you can change your mind later.

The short version

• Medigap works alongside Original Medicare and pays some or most of your share of costs, such as deductibles and the 20% Part B coinsurance. You can generally see any provider nationwide that accepts Medicare. Premiums are higher, but out-of-pocket costs are low and predictable.
• Medicare Advantage replaces Original Medicare with a private plan. Premiums are often low, many plans include drug coverage and extras, and there's an annual out-of-pocket maximum. Most use networks, and many require prior authorization for some services.
• You can't have both at the same time.
• In most states, buying Medigap later can require medical underwriting, so switching from Medicare Advantage back to Original Medicare with Medigap isn't always possible on good terms.

Side by side

How costs compare at different levels of use

A hypothetical comparison for one person's annual costs beyond the Part B premium, which everyone pays. Numbers are illustrative; real premiums and plan designs vary widely by location, age, and plan.

• Medigap path: a Medigap plan at $160 a month, a Part D plan at $40 a month, and a hypothetical $260 Part B deductible that this Medigap plan doesn't cover. About $2,660 a year regardless of how much care is used (drug copays aside).
• Medicare Advantage path: $0 premium, copays and coinsurance as care is used, with a hypothetical $6,000 annual out-of-pocket maximum for medical services.

In low-use years, Medicare Advantage often costs less. In high-use years, Medigap's predictability can cost less. The comparison is partly about money and partly about which risk you prefer: steady premiums or variable costs with a cap.

Medigap plan letters

In most states, Medigap plans are standardized by letter, such as Plan G or Plan N. A Plan G from one insurer has the same basic benefits as a Plan G from another; premiums, customer service, and pricing methods differ. Three states standardize plans differently. Some plan letters aren't available to people who became eligible for Medicare after a certain date.

Insurers price Medigap in different ways (community-rated, issue-age-rated, or attained-age-rated), which affects how premiums change as you age.

The switching problem

This is the most important structural difference for many people.

• During your Medigap open enrollment period, a one-time six-month window that starts when you're 65 or older and enrolled in Part B, insurers generally must sell you any Medigap plan they offer without medical underwriting.
• After that window, in most states, insurers can use medical underwriting: they can charge more or decline coverage based on health, unless you have a specific guaranteed issue right.
• That means someone who chooses Medicare Advantage at 65 and later wants Original Medicare with Medigap may not be able to buy Medigap at a reasonable price, or at all, depending on health and state law.

Federal rules provide some guaranteed issue rights, including a trial right for people who join a Medicare Advantage plan when first eligible, or who drop Medigap to try Medicare Advantage for the first time, and leave within a limited period. A few states provide broader protections. See Medigap underwriting rules.

Questions that help decide

1. Do you want to see specific doctors or hospitals? Are they in the plan's network?
2. Do you travel or live in more than one state during the year?
3. Would you rather pay higher, predictable premiums or lower premiums with variable costs?
4. How much could you comfortably pay in a bad year?
5. How do you feel about prior authorization and referrals?
6. What are the drug costs for your prescriptions under each option?
7. What do your state's Medigap rules allow if you want to switch later?

The takeaway

Medigap pairs broad provider access with predictable, low out-of-pocket costs at higher premiums. Medicare Advantage offers lower premiums, bundled benefits, and an out-of-pocket cap, with networks and plan rules. The decision you make when first eligible matters more than it seems, because buying Medigap later can be difficult in most states.

Sources

• Medicare.gov: Understanding Medicare Advantage Plans (official booklet)
• Medicare.gov: Joining a plan
• Medicare.gov: Medicare & You handbook