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How to choose between Medicare Advantage, Medigap and Part D

Original Medicare coverage alone doesn't cut it? Here are ten factors to help you decide which private insurance options you might need.

Louise Norris | July 20, 2023

Once you’ve decided that you want more coverage than Original Medicare alone, the next step is figuring out which of the many private insurance options will best fit your needs and budget.

Your options …

You can either opt for Original Medicare and supplement it with a Medigap plan and/or a Part D prescription plan, or you can choose a Medicare Advantage plan.

A Medigap plan will pick up the tab for varying amounts of your deductibles and coinsurance under Original Medicare (the level of coverage you get depends on the Medigap plan you choose), and a Part D plan will provide prescription coverage. A Medicare Advantage plan wraps everything all in one policy: It includes all of the benefits of Original Medicare, has a cap on out-of-pocket costs, and most Medicare Advantage plans also include prescription coverage.

… and ten ways to decide

There’s no right or wrong choice – Medicare Advantage and Original Medicare plus supplemental coverage both work well. But there are numerous factors to keep in mind when you’re making the decision:

1. Medical conditions

Would you qualify for a Medicare Advantage Special Needs Plan (SNP)? SNPs are geared to the needs of very specific populations, and can be a good choice for people with certain medical conditions, as well as those who are institutionalized or who are Medicare-Medicaid dual eligible.

2. Disability

Are you under 65 and on Medicare because of a disability? If so, you may not have access to a Medigap plan. Federal law doesn’t require Medigap coverage to be guaranteed issue for under-65 enrollees. About two-thirds of the states have some sort of guaranteed-issue provisions for disabled Medigap enrollees, but many of those states still allow carriers to charge higher premiums and/or only offer one plan when enrollees are under the age of 65 (you can click on your state on this map to see how Medigap plans are regulated).

Although Medigap can be difficult or expensive to obtain if you’re under 65, you can get a Medicare Advantage plan if you’re Medicare-eligible, even if you’re under 65. Even enrollees with ESRD can sign up for Medicare Advantage; this was not the case prior to 2021 unless the Advantage plan was an ESRD Special Needs Plan.

3. Missed enrollment

Are you enrolled in only Original Medicare and your Medigap initial enrollment window has already passed? If so, a Medicare Advantage plan might make more sense, since there’s an annual open enrollment period for Medicare Advantage.

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With Medigap, if you apply after your original open enrollment period has ended, insurers in most states can use medical underwriting to determine your premium and eligibility for coverage. Depending on your health, that could make a Medigap plan expensive or impossible to get.

The limited window of opportunity for a guaranteed-issue Medigap plan is also an important consideration if you’re planning to enroll in a Medicare Advantage plan. Be aware that after your trial right period ends, and assuming you don’t qualify for one of the other limited guaranteed-issue circumstances, you will probably not have an opportunity to enroll in a Medigap plan without medical underwriting in the future (it depends on where you live, but most states do not have ongoing guaranteed-issue rights for Medigap plans).

Switching from Medicare Advantage back to Original Medicare is easy during open enrollment or the Medicare Advantage open enrollment window. But if your health is poor and you don’t have a guaranteed-issue right, adding a Medigap plan may be expensive or impossible.

4. Extra benefits

Do you care about extra benefits like dental, vision, hearing aids, and gym memberships? These are often covered on Medicare Advantage plans, but not Medigap.

And the federal government relaxed the rules starting in 2019 and 2020, to allow Medicare Advantage insurers to offer additional supplemental benefits. Insurers have gradually started doing so. These include things like assistance with transportation, household chores, and utility bills, as well as stipends to help purchase nutritious food. If this type of supplemental coverage is important to you, check to see what the Medicare Advantage plans in your area are offering.

(Note that some supplemental benefits are offered to chronically ill enrollees with specific medical conditions, while others can be offered to all enrollees; be sure you understand the specifics of the plan you’re considering.)

Do you want included prescription coverage? Most Medicare Advantage plans (89% in 2023) offer prescription coverage via integrated Part D coverage. But if you opt for Original Medicare and a Medigap plan, you’ll need to also purchase a Medicare Part D plan in order to have prescription coverage – Medigap plans sold since 2006 do not include prescription coverage.

5. Premiums

Here’s a big one: premium cost. In most areas, there are “zero-premium” Medicare Advantage plans available (although you still have to pay for Medicare Part B; the 2023 premium for Part B is $164.90/month for most enrollees). According to the Kaiser Family Foundation, 99% of Medicare beneficiaries had access to at least one zero-premium Medicare Advantage plan for 2023.

But while there are zero-premium Medicare Advantage plans available (and those are the most popular option, selected by the majority of enrollees), the average premium for Medicare Advantage plans in 2023 is about $18/month (in addition to the cost for Part B). And that’s after accounting for the fact that the majority of enrollees pay $0 for their Advantage plan.

For people who opt for Original Medicare with supplemental coverage (assuming they don’t have supplemental coverage from Medicaid or an employer-sponsored plan), the cost of a Medicare Part D plan and a Medigap (Medicare Supplement) plan will need to be added to the cost of Part B to determine how much you’ll spend in total monthly premiums.

The average premium for a basic, standard stand-alone Part D plan in 2023 is less than $32/month. But there is significant variation from one plan to another. It’s common to see stand-alone Part D plans range from less than $5/month to more than $100/month.

The premiums for Medigap/Medicare Supplement plans vary considerably depending on which plan you select, where you live, and how old you are. You might see plans priced from as low as $30/month to as high as $300/month

Clearly, the average total premium for Medicare Advantage (including prescription coverage and Part B) is less than the average total premium for Original Medicare plus Medigap plus Part D, although this has to be considered in conjunction with the fact that an enrollee with Original Medicare + Medigap will generally have lower out-of-pocket costs, if and when they need medical care, than an enrollee with Medicare Advantage (see the next section about out-of-pocket costs).

But it’s important to remember that these are just averages, and there’s wide variation in premiums from one plan to another and from one state to another. Not surprisingly, in states where Medigap plans tend to be more expensive than the average, Medicare Advantage tends to be more popular.

Looking for 2023 Medicare coverage with lower premiums? Talk with a licensed advisor now. Call 1-844-309-3504.

6. Out-of-pocket exposure

On the other hand, how important is out-of-pocket exposure? With most Medicare Advantage plans, you’ll pay coinsurance and copays, and the out-of-pocket maximum can be as high as $8,300 in 2023 for services that would be covered under Medicare Part A and B (that cap is increasing to $8,850 in 2024). Medicare Advantage enrollees will incur additional out-of-pocket costs for the prescription drug component of their coverage, since that’s not a benefit that would be covered by Medicare Parts A and B.

But with Medigap, there are plans available that pay nearly first-dollar coverage for all Original Medicare-covered services, leaving you with little to no out-of-pocket exposure (for people who became eligible for Medicare prior to 2020, there are still plans available that cover all of the out-of-pocket costs for Medicare-covered services; for people who became eligible in 2020 or later, the most comprehensive Medigap plans do still require the beneficiary to pay the Part B deductible — $226 in 2023, down from $233 in 2022 — out of their own pockets). The most comprehensive Medigap plans tend to be among the more expensive options; less expensive options leave enrollees with varying amounts of out-of-pocket costs for services that are covered by Original Medicare.

Note that there’s a separate out-of-pocket for prescription coverage (and it’s not capped), regardless of whether you’ve got a Medicare Advantage plan with prescription coverage, or a stand-alone Part D plan.

7. Plans to travel

Do you plan to travel outside the United States during retirement? Original Medicare doesn’t cover foreign travel except for a few rare circumstances, but most Medigap plans provide some coverage for foreign travel (80% of the cost of emergency care received in the first two months of a trip, limited to a $50,000 lifetime cap, and with a $250 annual deductible).

Medicare Advantage plans can cover foreign travel beyond Original Medicare’s limited situations, but unlike standardized Medigap policies, each Medicare Advantage plan is different, and it’s imperative that you check the plan details regarding foreign travel before enrolling.

8. Network size

Do you care how big your network is? Eighty-nine percent of non-pediatric primary care physicians are accepting new Medicare patients. If you enroll in Original Medicare + Medigap, you can see any medical providers, nationwide, as long as they accept Medicare. With Medicare Advantage, each plan has its own network, and you may be limited to a much more local or regional area.

Original Medicare paired with a Medigap plan and Part D coverage might be the better choice if network size is a concern, or if you expect to travel widely within the U.S. during your retirement. But if you have a specific provider in mind, do your homework before you pick a coverage option. In some rare cases, physicians are contracted with certain Medicare Advantage plans, but are not participating providers with Original Medicare.

9. Plan availability

Before you decide on the best solution for your health insurance needs, you’ll want to see what’s available in your area. Although most Medicare beneficiaries have access to a wide range of Medicare Advantage, Medigap, and Part D plans, the options vary considerably from one area to another.

There are Part D and Medigap plans available nationwide, but there are some areas of the country where no Medicare Advantage plans are available (mostly rural areas in the western part of the U.S.).

10. Plan change flexibility

Although Medigap, Part D, and Medicare Advantage are all guaranteed issue for all enrollees during their initial enrollment period, Medigap plans aren’t guaranteed issue after that in most states. So while Medicare Advantage and Part D have an annual open enrollment period that lets enrollees switch plans, Medigap issuers can use your medical history to determine eligibility and premiums if you’re enrolling after your initial enrollment period and don’t have a guaranteed-issue right

If the ability to easily switch back and forth among plans is important to you, a Medicare Advantage plan will give you that flexibility. But on the other hand, your ability to switch away from Medicare Advantage altogether (and enroll in Original Medicare) at some point in the future could be hindered by the fact that you may find that you can’t enroll in a Medigap plan at that point due to your medical history. 

11. Having Medicaid or a Medicare Savings Program

Medicare covers many services, but it doesn’t cover long-term care benefits and can leave its enrollees with large cost-sharing expenses. Medicaid pays for some services that Medicare doesn’t cover for enrollees whose incomes and assets make them eligible. If you have Medicaid or a Medicare Savings Program (MSP) – a program where Medicaid pays for Medicare premiums and cost-sharing – your enrollment options are different than if you only had Medicare.

Some Medicare Advantage plans specialize in covering low-income Medicare beneficiaries. These are known as Dual Eligible Special Needs Plans (D-SNPs), and are available in every state. If you have Medicare and Medicaid, you should have few out-of-pocket expenses if you see providers enrolled in both programs – regardless of whether you enroll in a D-SNP. Receiving coverage through a D-SNP requires you to see only providers who participate with the D-SNP.

Some D-SNPs offer additional services, such as home care, dental or vision benefits. D-SNPs can also help coordinate all of the health services you receive. But low-income Medicare beneficiaries may find that they’re better off with Original Medicare paired with regular (i.e., fee-for-service) Medicaid as secondary coverage, if their providers accept those programs but not D-SNP plans. In many states, the fee-for-service Medicaid benefit also covers dental or vision care.

Here is more information about programs available to Medicare beneficiaries with limited incomes and assets.

There’s no “right” answer

We work with a broker in Colorado who explains that there’s no one-size-fits-all when it comes to Medicare plan options. Two of her clients are siblings who live in the same town; one has a zero-premium Medicare Advantage plan, while the other has Original Medicare plus a comprehensive Medigap plan and a Part D prescription plan.

The one with the Medicare Advantage plan would rather save money on premiums, and doesn’t mind the higher out-of-pocket exposure and limited provider network. The other sibling, on the other hand, is willing to pay higher premiums in trade for the lower out-of-pocket costs and nationwide provider choice that comes with Original Medicare.

Ultimately, the choice between Medicare Advantage and Original Medicare with supplements is a personal one that reflects each applicant’s health, risk tolerance, and approach to personal finances.

And there are varying degrees of coverage within each type of plan. Medicare Advantage plans include extra benefits that aren’t available with Original Medicare + supplemental coverage, and some Medicare Advantage plans have out-of-pocket maximums well below the federally-allowed limit. And while some Medigap plans, like Plans C and D (as well as F and G, for people who were eligible for Medicare prior to 2020), cover most of an enrollee’s out-of-pocket costs under Original Medicare, other Medigap plans, like Plan N, for example, are less robust.

Neither option is universally better or worse than the other, and a good broker will help you determine which option is best for you. Here are a few points to keep in mind when you’re working with a broker:

  • Depending on the state in which you live, and the carriers that offer plans in your area, total broker commissions could vary considerably between Medicare Advantage and Medigap + Part D coverage. Keep that in mind if your broker seems unwilling to discuss a range of plan options with you.
  • Broker commission amounts are capped for Medicare Advantage and Part D plans, but not for Medigap plans, although commissions for Medigap plans also tend to be lower. (Data on the commission amounts that insurers pay brokers for Medicare Advantage and Part D plans are available here.)
  • A good broker will work to understand your specific needs and goals, show you multiple plan options, and will devote sufficient time to answering your questions. The process shouldn’t make you feel pressured.

Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.

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