Most Americans qualify to use Medicare for their health insurance when they turn 65. But many don’t fully understand the coverage. You may automatically qualify for certain benefits, but you might have to pay premiums for others. Finding the best Medicare plan for your needs involves knowing your options and establishing your goals.

Understanding the Parts of Medicare

Medicare has the following parts:

• Part A – Coverage for inpatient care, including hospitals, nursing facilities, home health care and hospice
• Part B – Coverage for outpatient care, including doctors’ visits, home health care, preventative services and durable medical equipment
• Part C – A plan from a private insurance company that bundles parts A, B and D
• Part D – Medicare drug coverage that helps pay for prescription medications

What Are Your Options for Coverage?

You can bundle the different parts of Medicare by signing up for distinct plans as follows.

Original Medicare

Original Medicare covers parts A and B. Part A is free for most people who paid Medicare taxes for at least 10 years. If you don’t qualify for free premiums for part A, you can purchase a plan. Everyone is required to pay a monthly premium for part B, which is set yearly by the federal government.

Although Original Medicare covers a large portion of most of your medical care, it requires you to pay a deductible and coinsurance.

Original Medicare is a good option for you if:

• You want access to Medicare’s wide network – this plan allows you to visit any provider that accepts Medicare.
• You want flexibility – you don’t have to designate a primary care provider or get referrals for specialists.
• You don’t need prescription drug coverage – although you can add it with part D.
• You don’t mind paying a deductible and coinsurance – although you can minimize those costs with Medigap coverage.

Medigap

Medigap policies cover the deductibles and coinsurance that Original Medicare doesn’t pay for. Also known as Medicare supplement insurance, these policies are offered by private insurance companies to round out your Medicare coverage. They may also cover services that Original Medicare doesn’t, such as dental and vision exams.

Adding Medigap to your Original Medicare is a good option for you if:

• You want to minimize excessive out-of-pocket costs, such as copayments, deductibles and coinsurance.
• You want to add coverage for expenses that Medicare doesn’t pay for.
• You want to minimize or eliminate the mounting coinsurance costs of long-term hospitalization or medical care.

Medicare Advantage

Medicare Advantage is an alternative to Original Medicare. It offers privatized insurance through a network and operates like many group health insurance plans that people have while they’re employed. Even though the coverage comes from private companies instead of the federal government, this is still a component of Medicare. The companies that administer the plans must follow certain federal guidelines.

You’ll get the same benefits from Medicare Advantage as you would from Original Medicare parts A and B. In fact, you need to hold Original Medicare parts A and B before applying for Medicare Advantage. However, the premiums and provider networks vary. But Medicare Advantage plans typically offer additional benefits, such as prescription drug and dental coverage.

Some Medicare Advantage plans have deductibles. Most require copayments for office visits, preventative care and prescriptions. However, if your medical costs are extreme, you may be able to take advantage of the yearly out-of-pocket limit. In 2022, the mandatory maximum out-of-pocket limit was $7,550. However, many Medicare Advantage plans have much lower limits.

Medicare Advantage is a good option for you if:

• You expect your medical expenses to be high and want to limit your out-of-pocket expenses.
• You don’t mind copayments and possible deductibles.
• You’re looking for coverage that Original Medicare parts A and B don’t provide.
• You want to minimize your accounting and pay more predictable medical costs.

Optional Prescription Drug Coverage

Original Medicare parts A and B don’t include prescription drug coverage. You can buy a part D plan separately. Whether the prescription drug plan is a supplement to Original Medicare or included in your Medicare Advantage plan, it must provide a standard level of coverage as set forth by the federal government. Beyond that, however, plans range in their premiums, deductibles and copayments.

Some people select Original Medicare without adding part D if they don’t take any medications. They can add it on at any time while they maintain a Medicare health plan. However, because drug coverage is often bundled with Medicare Advantage plans, many people with this type of insurance are already covered.

Prescription Drug Coverage is a good option for you if:

• You want to minimize costs of your medications.
• You choose a plan that fits your budget.
• It makes sense to pay one premium for a Medicare Advantage plan that covers prescriptions anyway.

How to Decide Which Medicare Plan is Right for You

Most people base their Medicare plan decisions on their budget and medical needs. Original Medicare with Medigap may minimize regular payments for routine care, but the costs could rise significantly if you need long-term or intensive medical care. You may pay more for a Medical Advantage plan, but it may cover additional services and give you financial peace of mind if a catastrophic event occurs.

Your choice of providers may also be important when choosing a plan. If you travel regularly and want freedom of access to any provider that accepts Medicare, Original Medicare may be your best bet. However, the doctors that you prefer to visit may be in the Medicare Advantage network of a plan that works for you, making that an ideal choice.

In most cases, you’ll trade price for flexibility and predictability. Minimizing up-front costs can save you money. However, you may spend more time looking for a doctor in your network. Moreover, your costs could rise exponentially if unanticipated health problems occur.

Paying more up front often gives you access to more flexible, wide-ranging coverage. While your monthly costs may be higher, they’re predictable. Stable premiums with maximum limits help you budget for medical expenses no matter what happens.

Checklist for Choosing a Medicare Plan

You’ll likely want to shop around when looking for Medigap or Medicare Advantage coverage. Each insurance company should have a website with information about these offerings. Look for companies that offer several plans that cover your needs. Many provide comparison charts, which help you make an informed decision.

Use the following checklist to compare the details from different plans yourself:

• What is the premium?
• When are premiums due?
• What is the deductible?
• What are the copayment/coinsurance costs?
• What doctors can I visit?
• Are there any exclusions?
• Will I need to pay out of pocket for non-covered expenses?
• Is there a maximum out-of-pocket limit?

Working with a certified insurance consultant or broker can also help you understand the benefits of different plans and learn which one is right for you.