Free Guide to Choosing Your Medicare Plan

Understanding Medicare Coverage Types and How They Work

Medicare is a federal health insurance program designed primarily for people age 65 and older, regardless of income or medical history. The program has several distinct parts, and understanding each one is essential before making decisions about your coverage.

Medicare Part A covers hospital insurance. This includes inpatient hospital stays, skilled nursing facility care, hospice care, and some home health services. When you're admitted to a hospital, Part A helps pay for your room, meals, nursing care, and other hospital services. For example, if you need surgery and stay in the hospital for five days, Part A would cover the hospital portion of that care. However, Part A does not cover doctor visits during your hospital stay—that's where Part B comes in.

Medicare Part B covers medical insurance and outpatient services. This includes doctor visits, outpatient hospital care, medical equipment, and preventive services. Part B is how your annual wellness visit, flu shots, and mammograms are covered. Unlike Part A, which most people receive automatically at age 65, you must sign up for Part B. There is a monthly premium for Part B, which in 2024 ranges from $164.90 to $560.50 per month depending on your income level.

Medicare Part D provides prescription drug coverage. This part helps pay for medications you take at home. Different insurance companies offer different Part D plans with different drugs on their formulary—the list of covered medications. Some drugs may be covered with no cost-sharing, while others require you to pay a portion of the cost. Part D is optional, but if you don't enroll when first eligible and go without creditable coverage, you may face a permanent penalty.

Medicare Part C, also called Medicare Advantage, is an alternative way to receive your Medicare benefits. Instead of getting Part A and Part B coverage directly from Medicare, you enroll in a plan offered by a private insurance company that contracts with Medicare. These plans must cover everything that Original Medicare covers, but they often include additional benefits like dental, vision, or hearing coverage. However, they typically have networks—meaning you may need to see doctors within that network for lower costs.

Practical Takeaway: Create a simple chart listing the four parts of Medicare and what each covers. This reference tool will help you understand gaps in coverage and determine whether additional insurance might be right for you.

Original Medicare vs. Medicare Advantage: Key Differences Explained

When you first become eligible for Medicare, you face a fundamental choice: stay with Original Medicare (Parts A and B) or switch to a Medicare Advantage plan. This decision affects how you receive care, what you pay, and which doctors and hospitals you can visit.

Original Medicare is the traditional fee-for-service program run directly by the federal government. You receive a red, white, and blue Medicare card, and you can visit any doctor or hospital in the United States that accepts Medicare—which is the vast majority of providers. You pay a monthly premium for Part B, and you pay out-of-pocket costs when you use services. These out-of-pocket costs include a deductible (the amount you pay before Medicare starts helping) and coinsurance (a percentage of the cost you pay after the deductible). For 2024, the Part B deductible is $240 per year. After you meet your deductible, you typically pay 20% of the cost for doctor services and outpatient care.

Medicare Advantage plans are offered by private insurance companies like United Healthcare, Humana, Anthem, and others. These plans bundle Part A, Part B, and usually Part D coverage into one plan. The monthly premium for Medicare Advantage is often lower than Original Medicare, and some plans charge zero premium. However, you'll typically have a smaller network of doctors and hospitals, and you may need referrals to see specialists. The out-of-pocket costs—deductibles, copayments, and coinsurance—can vary significantly between plans and can sometimes be higher than Original Medicare.

Here's a concrete example: Sarah is 67 and has arthritis. Under Original Medicare, she can visit any rheumatologist in her city without a referral and pay 20% after her deductible. Under a Medicare Advantage plan with a $30 specialist copay, she must choose a rheumatologist within the plan's network and may need a referral from her primary care doctor. If her specialist isn't in the network, she pays full price out of pocket. However, Sarah's Medicare Advantage plan includes dental coverage (Original Medicare does not), which helps offset costs for her regular dental care.

Another key difference is supplemental insurance. People with Original Medicare often purchase Medigap (Supplement) insurance to cover the gaps—the deductibles, coinsurance, and copayments that Medicare doesn't pay. Medigap plans are standardized by the federal government, so Plan G from one insurance company covers the same benefits as Plan G from another company. With Medicare Advantage, you typically cannot purchase Medigap because the coverage overlaps.

Practical Takeaway: Write down your current doctors' names and the hospitals you use. Then contact a few Medicare Advantage plans in your area to learn whether those providers are in their networks. This comparison will show you immediately whether switching to Medicare Advantage would limit your access to current care.

Supplemental Insurance (Medigap) and How It Fills Coverage Gaps

Original Medicare leaves you responsible for significant out-of-pocket costs. Medigap (Medicare Supplement) insurance is private insurance sold by companies like Aetna, Cigna, and AARP that covers many of these gaps. Understanding what Medigap does and does not cover is crucial for planning your healthcare budget.

The federal government has standardized Medigap plans into 10 different options, labeled Plan A through Plan N. Each plan is identical regardless of which insurance company sells it—meaning Plan G from Cigna provides the same coverage as Plan G from any other company. The main differences between plans are which gaps they cover and how much they cost.

Here's what the gaps are: Original Medicare Part A covers most hospital costs, but you pay a deductible of $1,632 per hospital stay (2024). You also pay coinsurance for hospital stays lasting more than 60 days. For Part B, you pay a $240 annual deductible, then 20% of most services. You also pay 100% for some services Medicare doesn't cover at all, such as vision exams, hearing aids, and dental care. Most Medigap plans cover the Part A and Part B deductibles and coinsurance, which significantly reduces your out-of-pocket responsibility.

For example, consider David, age 72, who has Original Medicare and Plan G Medigap. David goes to the hospital for five days. His Part A bill is $2,500. Normally, David would pay the $1,632 deductible plus coinsurance for the remaining days. But his Medigap Plan G covers this deductible and coinsurance, so David pays nothing out of pocket. If David then visits his cardiologist three times that year, and each visit costs $200, he would normally pay $240 (his Part B deductible) then 20% of each visit ($12 per visit). His Plan G Medigap covers the deductible and the 20% coinsurance, so David pays nothing for these doctor visits.

However, Medigap does not cover prescription drugs, long-term care, vision care, dental care, hearing aids, or most medical equipment like walkers and wheelchairs. You must purchase Part D coverage separately for prescriptions, and you can purchase vision and dental coverage through other private plans if you want that protection.

Choosing a Medigap plan involves balancing premium costs against coverage. Plan F and Plan G offer the most comprehensive coverage but cost more monthly. Plans A, B, and D offer less coverage but lower premiums. There is no single "best" plan—the right choice depends on your health status, healthcare usage patterns, and budget.

Practical Takeaway: Request quotes for at least three different Medigap plans (such as Plans A, G, and N) from at least two different insurance companies. Compare the monthly premiums and what each plan covers, then calculate your estimated annual out-of-pocket costs under each scenario. This exercise will show you the real-dollar trade-offs between different plans.

Prescription Drug Coverage: Part D Plans and Formularies

Prescription medications are expensive