Start with what you already know about your health

The first step in choosing a Medicare plan is to think honestly about how you use healthcare. Do you see the same doctor regularly? Do you take prescription medications? Do you expect to need surgery or specialist care in the next year? Write down the doctors, hospitals, and pharmacies you use now — you will need this list when you compare plans.

Your health needs today are the best guide to what you will need tomorrow. If you have chronic conditions like diabetes or heart disease, you will want a plan that covers your regular medications and lets you see your specialists without jumping through extra hoops. If you are generally healthy and rarely see a doctor, a plan with lower monthly costs and higher out-of-pocket costs might make more sense.

Key Takeaways

  • Original Medicare (Part A and Part B) covers hospital and doctor visits but requires you to pay a percentage of costs; Medicare Advantage and Medigap are two different ways to add coverage on top.
  • Medicare Advantage plans have networks — your doctors and hospitals must be in-network or you pay more — while Original Medicare lets you see any doctor who accepts Medicare.
  • Medigap plans work only with Original Medicare and cover the costs Medicare does not, but they cost more per month and do not cover prescription drugs.
  • You can compare plans free using Medicare.gov's plan finder tool, which shows you costs, coverage, and which of your doctors are in each plan's network.
  • Your choices change every year during Open Enrollment (October 15 to December 7), so review your plan annually even if you were happy with it last year.

Understand the two main paths: Original Medicare or Medicare Advantage

Medicare comes in two basic structures, and choosing between them shapes everything else. Original Medicare is run by the federal government and covers hospital care (Part A) and doctor visits (Part B). You can see any doctor in the country who accepts Medicare, and there are no networks. However, you pay a percentage of costs — typically 20 percent of doctor bills and a daily copay for hospital stays — and you have no cap on how much you spend out of pocket in a given year.

Medicare Advantage (Part C) is sold by private insurance companies and bundles hospital, doctor, and prescription drug coverage into one plan. Most Advantage plans have networks, meaning you must use doctors and hospitals in that network or pay a penalty. Many Advantage plans have $0 monthly premiums, but they often have higher copays per visit and annual limits on out-of-pocket costs. Advantage plans also include prescription drug coverage automatically, whereas Original Medicare does not.

If you choose Original Medicare, you must then decide whether to buy Medigap (also called Supplemental Insurance) to cover the costs Medicare leaves behind. Medigap plans are sold by private insurers and come in lettered versions (Plan A, Plan B, Plan C, and so on), each covering a different set of costs. Medigap is more expensive per month than most Advantage plans, but it works with any doctor who accepts Medicare and has no network restrictions.

Compare what your doctors and medications cost under each plan

The real cost of a plan is not the monthly premium — it is the monthly premium plus what you actually pay when you use care. A plan with a $0 premium might cost you hundreds of dollars per visit if your doctors are out of network or if your medications are not covered well.

Use the Medicare Plan Finder tool at Medicare.gov. Enter your zip code, the medications you take (by name and dose), and the doctors and hospitals you use. The tool will show you which plans include each of your doctors in-network, what your copays would be, and what your medications would cost under each plan's drug formulary. Write down the total estimated cost for a year under each plan you are considering — that is the number that matters.

If a doctor you see regularly is not in a plan's network, call that plan directly and ask whether the doctor is in-network. Networks change, and the online tool is sometimes out of date. If your doctor is out of network, ask what you would pay for a visit — it is usually much higher than an in-network copay.

Know the difference between HMO, PPO, and POS plans

Medicare Advantage plans come in different network types, and the type affects how much freedom you have and what you pay.

HMO (Health Maintenance Organization) plans have the tightest networks. You must use doctors and hospitals in the plan's network, and you usually need a referral from your primary care doctor to see a specialist. If you go out of network, the plan typically will not pay at all (except emergencies). HMO plans usually have the lowest monthly premiums and lowest copays.

PPO (Preferred Provider Organization) plans let you see any doctor, but you pay less if you stay in-network. You do not need a referral to see a specialist. PPO plans cost more per month than HMO plans but give you more flexibility. POS (Point of Service) plans are a hybrid: they work like an HMO for in-network care (you need referrals) but let you go out of network for a higher cost, like a PPO.

Handle prescription drugs carefully

If you take medications, the plan's drug coverage can make or break your choice. Medicare Advantage plans include prescription drug coverage (Part D) automatically. Original Medicare does not cover drugs, so if you choose Original Medicare, you must buy a separate Part D plan from a private insurer.

Every plan has a formulary — a list of which drugs it covers and at what cost. Some drugs are covered at a lower cost (Tier 1 or Tier 2), while others are more expensive (Tier 3 or higher) or not covered at all. Use the Medicare Plan Finder to check each of your medications. If a plan does not cover a drug you need, ask whether the plan will make an exception or whether a similar drug is covered at a lower tier.

Drug costs also change throughout the year. In the early part of the year, you pay a copay. Once you have spent a certain amount out of pocket (the "donut hole"), your costs change. Once you spend enough to reach catastrophic coverage, the plan pays most costs. Understanding where your medications fall in this structure helps you predict your real costs.

Review your plan every year during Open Enrollment

Your plan choice is not permanent. Every year from October 15 to December 7, Medicare holds Open Enrollment, when you can switch to a different plan or make changes. Plans change their networks, costs, and drug coverage every year, so a plan that was perfect last year might not be this year.

Set a reminder in October to review your plan. Check whether your doctors are still in-network, whether your medications are still covered at the same cost, and whether the plan's monthly premium or copays have changed. If something has changed for the worse, use the Medicare Plan Finder again to compare other plans. You can switch plans as many times as you want during Open Enrollment, but you can only make changes outside of Open Enrollment if you have a may have access to life event (like moving, losing other coverage, or getting married).

Understand costs you will see on every plan

No matter which plan you choose, Medicare has some costs that explore across the board. Part A (hospital insurance) has a deductible you pay once per benefit period if you are admitted to the hospital. Part B (doctor insurance) has a monthly premium, an annual deductible, and then you pay 20 percent of most doctor bills. These costs vary by year.

If you choose Medigap, you avoid most of these costs because Medigap covers what Medicare does not. If you choose Medicare Advantage, the plan's copays and coinsurance replace the percentage costs of Original Medicare, but you still have an annual out-of-pocket maximum — once you hit that number, the plan pays everything for the rest of the year.

Frequently Asked Questions

Can I switch plans if I realize I chose wrong?

You can switch during Open Enrollment (October 15 to December 7) every year, no matter what. Outside of Open Enrollment, you can switch only if you have a may have access to life event, such as moving to a new state, losing other health coverage, or getting married. If you made a mistake during your initial enrollment, contact Medicare to ask whether you may have access to for a Special Enrollment Period.

What happens if my doctor leaves the plan's network?

If your doctor leaves mid-year, you can usually switch to a different plan outside of Open Enrollment without waiting. Contact the plan when ready to report the change. You may also be able to continue seeing that doctor out-of-network for the rest of the year while you wait for Open Enrollment to switch plans.

Do I have to choose a plan right away when I turn 65?

You have a seven-month Initial Enrollment Period centered on your 65th birthday month. If you miss this window, you may face a permanent penalty on your premiums. If you are still working and covered by your employer's health plan, you may be able to delay enrollment without penalty — contact Medicare to confirm your situation.

What if I cannot afford any of the plans?

If your income is low, you may be able to get help paying premiums and out-of-pocket costs through the Medicare Savings Program or Low-Income Subsidy program. Contact your state Medicaid office or call 1-800-MEDICARE to learn whether you may have access to.

Should I buy Medigap or Medicare Advantage?

Medigap is better if you want to see any doctor without restrictions and do not mind paying higher monthly premiums. Medicare Advantage is better if you want lower monthly costs and do not mind using a network. If you are healthy and rarely see doctors, Advantage's lower premiums may save you money. If you see many specialists or travel frequently, Medigap's flexibility may be worth the cost.