Medicare comes in four main types, and which one you choose affects your costs, doctors, and prescriptions

Original Medicare (Part A and Part B) is run directly by the federal government. Medicare Advantage (Part C) is sold by private insurance companies but must cover everything Original Medicare does. Medigap (supplemental insurance) works alongside Original Medicare to cover costs that Medicare doesn't pay. Medicare Part D is prescription drug coverage, which you add to either Original Medicare or Medicare Advantage.

Most people have either Original Medicare plus Medigap and Part D, or Medicare Advantage with Part D built in. The choice comes down to whether you want the flexibility of Original Medicare with higher out-of-pocket costs, or the lower premiums and predictable costs of Medicare Advantage with a narrower network of doctors.

Key Takeaways

  • Original Medicare (Parts A and B) is government-run and covers hospital care and doctor visits, but you pay a percentage of costs and have no annual spending cap.
  • Medicare Advantage (Part C) is sold by private insurers and includes hospital, doctor, and usually prescription coverage in one plan, with lower premiums but a limited network of providers.
  • Medigap is supplemental insurance sold by private companies that pays some or all of the costs Original Medicare doesn't cover, such as copayments and coinsurance.
  • Medicare Part D is prescription drug coverage that you must add separately if you have Original Medicare, or it may be included in your Medicare Advantage plan.
  • You can switch plans during the annual enrollment period (October 15 to December 7) or if you have a may have access to life event.

Original Medicare: How Parts A and B Work Together

Original Medicare has two parts. Part A covers hospital stays, skilled nursing care after a hospital stay, hospice, and some home health care. Part B covers doctor visits, outpatient care, lab tests, imaging, and medical equipment. You pay a monthly premium for Part B (the amount varies by income), and you also pay deductibles and coinsurance when you use services.

With Original Medicare, you can see any doctor or hospital in the United States that accepts Medicare — there is no network restriction. However, you are responsible for a portion of every bill. For example, Part A has a deductible per hospital stay, and Part B has an annual deductible plus 20 percent coinsurance for most services. There is no annual cap on what you pay out of pocket, which is why many people add Medigap coverage.

Original Medicare does not cover prescription drugs, dental, vision, or hearing aids. You must purchase Part D separately for prescriptions, and you can buy vision and dental plans on the private market if you want that coverage.

Medicare Advantage: Private Plans with Built-In Coverage

Medicare Advantage plans are sold by private insurance companies like UnitedHealthcare, Humana, and Anthem. These plans must cover everything Original Medicare covers, but they do it through a private insurer's network. Most Medicare Advantage plans also include prescription drug coverage (Part D), dental, vision, and hearing benefits — things Original Medicare does not cover.

The trade-off is that you must use doctors and hospitals in the plan's network, except in emergencies. If you see an out-of-network provider, you will pay more or the plan may not cover it at all. Many Medicare Advantage plans have $0 premiums (you still pay the Part B premium to Medicare), but they have copayments and coinsurance when you use services. Most plans have an annual out-of-pocket maximum, which means once you hit that limit, the plan pays 100 percent of covered services for the rest of the year.

Medicare Advantage plans vary widely by region. The plans available to you depend on where you live, and the benefits and costs differ from plan to plan. You can compare plans available in your zip code on Medicare.gov during open enrollment.

Medigap: Filling the Gaps in Original Medicare

Medigap (also called supplemental insurance) is sold by private insurance companies and is designed to pay some or all of the costs that Original Medicare leaves you responsible for — such as copayments, coinsurance, and deductibles. Medigap is only used with Original Medicare, not with Medicare Advantage.

There are ten standardized Medigap plans, labeled A through N. Each plan covers a different combination of costs. For example, Plan G covers the Part B deductible, coinsurance, and copayments, while Plan N covers most of the same but requires you to pay a copayment for some doctor visits and emergency room visits. The benefits are the same no matter which insurance company sells the plan — the difference is the monthly premium, which varies by company and location.

You have the best chance of being approved for Medigap without medical underwriting during your Medigap open enrollment period, which is six months starting the month you turn 65 and enroll in Part B. After that window, insurers can deny you or charge more based on your health history. If you miss this window, you can still purchase Medigap, but the process is harder and more expensive.

Medicare Part D: Prescription Drug Coverage

Medicare Part D is prescription drug coverage sold by private insurance companies. If you have Original Medicare, you must purchase Part D separately during your initial enrollment period or during the annual open enrollment period. If you have Medicare Advantage, Part D is usually included, though some plans do not cover prescriptions and you would need to add a separate Part D plan.

Part D plans vary in which drugs they cover and how much you pay. Each plan has a formulary — a list of covered medications — and drugs are placed in different tiers with different copayments. A generic drug might cost $5, a brand-name drug on the preferred tier might cost $35, and a non-preferred brand might cost $75 or more. You can review formularies on Medicare.gov to see whether your current medications are covered and at what cost.

Part D has a coverage gap called the "donut hole." Once you and your plan have spent a certain amount on drugs in a year, you enter the gap and pay a higher percentage of drug costs until you reach catastrophic coverage, when the plan pays most of the cost. The income thresholds and percentages change each year, so check your plan's details annually.

Comparing Costs: Premiums, Deductibles, and Out-of-Pocket Limits

Original Medicare has a monthly Part B premium (the amount depends on your income), an annual Part A deductible, an annual Part B deductible, and then 20 percent coinsurance for most services. There is no annual cap on what you pay. If you add Medigap, you pay an additional monthly premium for that plan, but Medigap covers most of your out-of-pocket costs. If you add Part D, you pay another monthly premium.

Medicare Advantage plans often have $0 monthly premiums (though you still pay Part B to Medicare), but they have copayments and coinsurance when you use services. Most plans have an annual out-of-pocket maximum — typically between $3,000 and $7,000 — which limits your total spending in a year. Once you hit that limit, the plan pays 100 percent of covered services.

The lowest-cost option is not always the best choice. A plan with a $0 premium but high copayments might cost more over the year if you see doctors frequently. Conversely, a plan with a higher premium but lower copayments might save you money if you have ongoing health needs. Use the plan comparison tool on Medicare.gov to estimate your costs under different plans based on your actual medications and doctors.

When You Can Change Your Plan

The main opportunity to change plans is during the annual open enrollment period, which runs from October 15 to December 7 each year. Changes take effect on January 1. During this window, you can switch from Original Medicare to Medicare Advantage, from Medicare Advantage to Original Medicare, change from one Medicare Advantage plan to another, or change your Part D plan.

You can also change plans if you have a may have access to life event, such as moving to a new state, losing employer coverage, or becoming may be able to access for Medicaid. You typically have 60 days from the event to make a change. Some people also have a Special Enrollment Period if they are in a Medicare Advantage plan that is being discontinued in their area.

If you miss the open enrollment period and do not have a may have access to event, you are locked into your current plan until the next October. This is why it is important to review your plan each year and make changes during the enrollment window if your needs have changed.

Frequently Asked Questions

Can I have both Original Medicare and Medicare Advantage at the same time?

No. You must choose one or the other. If you enroll in Medicare Advantage, your Original Medicare coverage ends. If you later switch back to Original Medicare, you lose your Medicare Advantage coverage. You can only have both during a brief overlap period when you are switching between them.

Do I have to choose a plan when I first turn 65?

You have an initial enrollment period of seven months centered on your 65th birthday month. If you do not enroll during this window and you do not have other may have access to coverage, you may face late enrollment penalties on your premiums for as long as you have Medicare. It is best to enroll as soon as you are may be able to access.

What happens if I move to a different state?

Medicare Advantage plans are regional, so your current plan may not be available in your new state. When you move, you have a Special Enrollment Period to switch to a different plan. Original Medicare works everywhere in the United States, so if you have Original Medicare with Medigap, you can keep your coverage, though your Medigap premium may change.

How do I know which plan is cheapest for me?

Use the plan comparison tool on Medicare.gov. Enter your zip code, the medications you take, and the doctors you see. The tool will show you estimated costs under each available plan so you can compare premiums, copayments, and total out-of-pocket costs based on your actual health needs.

Can I switch from Medicare Advantage back to Original Medicare anytime?

You can switch during the annual open enrollment period (October 15 to December 7) or if you have a may have access to life event such as moving or losing employer coverage. Outside these windows, you are locked into your Medicare Advantage plan. If you switch back to Original Medicare, you may want to enroll in Medigap during your Medigap open enrollment period to avoid higher premiums later.