Medigap Vs. Advantage plans

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One of the retirement planning decisions most people have to make when they turn 65 is whether to choose traditional Medicare or a Medicare Advantage plan.

Traditional Medicare includes Part A hospital insurance and Part B, which covers doctor visits, tests and other care. Both Part A and Part B have limitations and deductibles, so many people with traditional Medicare opt for supplemental insurance, known as Medigap. They also buy Part D prescription drug coverage separately.

Medicare Advantage plans are an alternative. These plans offer everything that traditional Medicare and Medigap plans do for a flat fee that is often less. Some Medicare Advantage plans also include things that aren’t covered by traditional Medicare/Medigap plans, such as dental insurance, which can be a big expense for people living in retirement.

All of this makes Medicare Advantage plans sound much more attractive than traditional Medicare, but the reality is lots of people don’t like the access to care they get from Medicare Advantage plans. Researchers from the Commonwealth Fund, a nonprofit foundation that promotes better health care, found that 15 percent of  people with Medicare Advantage policies rated their insurance as fair or poor. That is more than double the number of dissatisfied Medicare/Medigap plan participants — just 6 percent of those with traditional Medicare coverage and Medigap plans rated their coverage as fair or poor.

The study also found that although Medicare Advantage enrollees were likely to spend less on premiums and on out-of-pocket costs than those with traditional Medicare/Medigap, they were more likely to report cost-related access problems. Thirty-two percent of beneficiaries with Medicare Advantage reported at least one access problem due to cost, compared with 23 percent of those with traditional coverage.

Kristof Stremikis, senior researcher and co-author of the study, says these access problems may stem from the private health maintenance organization plans whose business model forces patients to accept a smaller network of health care providers in return for lower premiums.

It has actually cost taxpayers more to offer Medicare Advantage plans than it has to provide traditional Medicare/Medigap, but the Affordable Care Act will end that by phasing out then eliminating subsidies the government offers to Medicare Advantage providers. By 2017, the Government Accounting Office calculates that trimming these subsidies will have saved $132 billion.

Stremikis says Medicare recipients should study the options and think hard about which kind of plan is the best for them. Under most circumstances, the time to switch from Medicare Advantage to traditional Medicare — and vice versa — runs from Oct. 1 through Dec. 7, so there’s plenty of time to review the features of each and decide.