Medicare, Medicare Advantage & Medigap
Why It Matters
Medicare is the federal health insurance program primarily for individuals age 65 and older, as well as certain younger individuals with disabilities. Understanding the structure of Medicare—including Original Medicare, Medicare Advantage, and Medigap—is essential for making informed coverage decisions and avoiding costly gaps.
Understanding Medicare: A Practical Guide
Medicare is one of the most important and complex insurance programs in the United States. It is not a single insurance policy, but rather a structured system made up of multiple components that work together—or separately—to provide healthcare coverage.
This guide explains how Medicare works, the difference between Original Medicare and Medicare Advantage, the role of Medigap, and how prescription drug coverage fits into the system.
What Is Medicare?
Medicare is a federally administered health insurance program that primarily serves:
- Individuals age 65 and older
- Certain younger individuals with qualifying disabilities
- Individuals with End-Stage Renal Disease (ESRD) or ALS
Medicare coverage is divided into distinct “parts.”
The Four Parts of Medicare
Part A — Hospital Insurance
Covers:
- Inpatient hospital stays
- Skilled nursing facility care (limited)
- Hospice care
- Some home health services
Most individuals do not pay a premium for Part A if they have sufficient work history.
Part B — Medical Insurance
Covers:
- Physician services
- Outpatient care
- Preventive services
- Durable medical equipment
Part B requires a monthly premium and includes deductibles and coinsurance.
Part C — Medicare Advantage
Offered by private insurers approved by Medicare.
Medicare Advantage plans:
- Replace Original Medicare (Parts A & B)
- Often include prescription drug coverage
- May include dental, vision, and hearing benefits
- Operate through provider networks (HMO or PPO)
Medicare Advantage plans must cover at least what Original Medicare covers.
Part D — Prescription Drug Coverage
Provides:
- Coverage for prescription medications
- Coverage through private insurers
- Formulary-based drug lists
- Monthly premiums and cost-sharing
Part D can be purchased standalone (with Original Medicare) or bundled in Medicare Advantage.
Original Medicare vs Medicare Advantage
There are two primary paths:
Option 1: Original Medicare (Parts A & B)
Often paired with:
- Standalone Part D
- Medigap (Supplemental coverage)
Offers:
- Broad provider access nationwide
- Predictable cost-sharing when paired with Medigap
Option 2: Medicare Advantage (Part C)
- Bundled coverage
- Network-based
- May include additional benefits
- Out-of-pocket maximum protections
Each option involves trade-offs between flexibility and cost structure.
What Is Medigap (Medicare Supplement Insurance)?
Medigap is private insurance that supplements Original Medicare by covering:
- Part A coinsurance
- Part B coinsurance
- Deductibles (depending on plan)
- Certain excess charges
Medigap policies:
- Are standardized by letter (e.g., Plan G, Plan N)
- Do not include prescription drug coverage
- Cannot be used with Medicare Advantage
Medigap helps reduce unpredictable out-of-pocket costs.
What Medicare Typically Does Not Cover
Medicare generally does not cover:
- Long-term custodial care
- Most dental services
- Routine vision care
- Hearing aids
- Cosmetic procedures
- Extended overseas care
Supplemental coverage may address some gaps.
Enrollment Periods
Key enrollment periods include:
- Initial Enrollment Period (IEP)
- Annual Enrollment Period (AEP)
- Medicare Advantage Open Enrollment Period
- Special Enrollment Periods (for qualifying events)
Missing enrollment deadlines may result in penalties.
What Affects Medicare Costs?
Costs depend on:
- Income (income-related premium adjustments)
- Plan type (Original Medicare vs Advantage)
- Drug plan selection
- Medigap plan choice
- Healthcare usage
Medicare includes deductibles, copayments, and coinsurance.
Medicare Advantage vs Medigap — Key Differences
| Feature | Medicare Advantage | Medigap (with Original Medicare) |
|---|---|---|
| Network Required | Yes (typically) | No |
| Drug Coverage | Often included | Separate Part D required |
| Predictability of Costs | Variable | More predictable |
| Monthly Premium | Often lower | Higher |
| Out-of-Pocket Maximum | Yes | Indirect via supplement |
| Flexibility | Limited to network | Nationwide |
Smart Questions to Ask Before Choosing
- Do I want nationwide provider flexibility?
- Am I comfortable with network restrictions?
- How important are predictable out-of-pocket costs?
- What medications do I take, and are they covered?
- Do I travel frequently?
Choosing between Advantage and Medigap depends heavily on personal preference and health usage patterns.
When Medicare Choices Matter Most
Medicare decisions are especially important if:
- You anticipate significant healthcare use
- You travel frequently
- You prefer provider flexibility
- You want predictable expenses
- You are managing chronic conditions
Decisions made during initial enrollment can impact long-term options.
Cheat Sheet
| Feature | Medicare |
|---|---|
| Administered By | Federal government |
| Primary Eligibility | Age 65+ or disability |
| Core Parts | A, B, C, D |
| Supplemental Option | Medigap |
| Private Plan Option | Medicare Advantage |
| Includes Long-Term Care | No |
| Includes Dental/Vision | Limited (Advantage may include) |
Key Takeaway
Medicare is not a single insurance policy but a structured system with multiple pathways. Understanding the differences between Original Medicare, Medicare Advantage, Part D, and Medigap is essential to selecting coverage that balances flexibility, predictability, and cost.