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What’s Better, Medicare Advantage or Medicare With Medigap Supplement?

You can pick traditional Medicare with Medigap coverage when you turn 65, or you could opt for Medicare Advantage.

If you’ve watched even 15 minutes of television recently, you’ve probably seen commercials for Medicare Advantage, the private Medicare plans often referred to as Medicare Part C. Medicare essentially bankrolls these companies to cover your benefits.

The numbers tell a pretty good story about Medicare Advantage, but they don’t tell you everything. When faced with the choice between a Medigap Supplement, additional insurance to cover out-of-pocket costs that you can purchase directly from a private health insurance carrier, you may assume Medicare Advantage is the better choice.

But that’s not necessarily true.

Is Medicare Advantage Preferable to Medigap Supplement?

The answer depends on your circumstances. In many cases, Medicare Advantage is a smart choice. According to a report from the Employee Benefit Research Institute, a couple with Medigap supplements must have $351,000 available to have a 90% chance of being able to meet their medical expenses when they retire.

On the other hand, if a couple enrolls in Medicare Advantage, they only need barely half as much, $189,000.

So it would seem Medicare Advantage is the obvious better answer, right? Well, not so fast.

The report doesn’t include cost estimates for long-term care (only about 3% to 4% of Americans over 50 pay for long-term care insurance, so it’s an expense most will bear in retirement). Plus, it doesn’t include the costs of home health aides or assisted living, which are not picked up by Medicare. Suddenly, what you’re potentially paying out jumps a lot higher if you have those needs.

Comparing Medicare Advantage and Medigap Supplement

Another thing to keep in mind is that a traditional Medicare with Medigap option does cost more than Medicare Advantage—but almost all of your medical costs will be covered, and that’s nothing to sneeze at as you age.

Medigap supplement is responsible for the 20% of medical costs that Medicare Part B leaves out. The EBRI’s estimates include:

·        Premiums

·        Part D prescription drug costs

·        Out-of-pocket outpatient prescription costs

·        Part B deductible

In 2024, the out-of-pocket maximum for Medicare Advantage plan in-network care is almost $9,000, and if you seek out-of-network care, you may end up paying for it entirely out of pocket. Plus, copays on uncommon but sometimes necessary procedures like MRIs can be exorbitant.

Picking the Best Option for the Future

Unfortunately, no one has a crystal ball to see what our health will be like down the road. You could feel great rolling into retirement and have no significant health issues, yet something could still pop up in a short amount of time.

Alas, a Medicare Advantage plan may not be cost-effective for someone with serious health issues, and you probably won’t have the option to switch your plan while you seek treatment. You can only enroll during the open enrollment period.

If you need guidance on what type of Medicare to choose, reach out to Jay. He can provide the information you need to make an informed decision.


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