The Complete Guide to Medicare, Medicare Advantage, and Medicare Supplement (Medigap)

Medicare, Medicare Advantage and Medigap: A Complete Guide

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As you approach your golden years, planning for healthcare becomes increasingly important–and oftentimes, more financially burdensome. While traditional Medicare provides a foundational level of coverage once you turn 65, it doesn’t cover everything.

Consequently, many people choose to enroll in Medicare Advantage or purchase supplemental health insurance (Medigap) to help minimize their out-of-pocket expenses. But how do you know which one is right for you, especially if you’re new to the Medicare game?

The decision to enroll in Medicare Advantage or purchase a Medigap policy often depends on your lifestyle goals, budget, and healthcare needs. Indeed, what’s right for one retiree may not be right for the next.

The good news is there are guideposts you can follow to help you craft a retirement healthcare plan that works for you. In this blog article, we’ll explore these guideposts, so you can make an informed decision about your healthcare coverage post-retirement.

Medicare: The Foundation of Healthcare Coverage Post-65

Medicare is a federal health insurance program primarily designed for individuals aged 65 and older. Although it tends to be the bedrock of healthcare coverage for many retirees, understanding its various components can be challenging.

Here’s a brief overview of what traditional Medicare includes:

  • Part A (Hospital Insurance): Medicare Part A covers inpatient hospital stays, skilled nursing facility care, hospice care, and limited home healthcare services.
  • Part B (Medical Insurance): Medicare Part B handles outpatient care, doctor’s visits, preventive services, and some home healthcare services. In 2023, the standard monthly premium for Medicare Part B is $164.90; however, you may pay more if your income exceeds a certain threshold.
  • Part D (Prescription Drug Coverage): Medicare Part D is designed to lower the costs of prescription drugs for beneficiaries. The cost of Medicare Part D depends on the plan you select and your income.

Medicare provides a broad spectrum of coverage, but it doesn’t cover everything. For example, Original Medicare (Parts A and B) doesn’t cover routine vision and dental care, hearing aids, or long-term care.

Additionally, beneficiaries are often responsible for deductibles, copayments, and coinsurance. These out-of-pocket costs can be unpredictable and significant, inflating your overall cost of living in retirement.

Due to the gaps in Medicare’s coverage and the potential for unexpected healthcare costs, Medicare beneficiaries often seek additional protection–namely, Medicare Advantage or Medigap.

Both are designed to provide more comprehensive coverage than Original Medicare while alleviating the financial burden of unpredictable out-of-pocket expenses. But because they do so in different ways, careful consideration and planning are paramount.

Medicare Advantage (Part C): A Comprehensive Alternative to Original Medicare

Medicare Advantage, also known as Part C, is an alternative to Original Medicare that provides beneficiaries with comprehensive healthcare coverage.

While these plans come in various forms–for example, Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs)–most combine the benefits of Parts A and B. Meanwhile, many Medicare Advantage plans go a step further by including prescription drug coverage (Part D).

One of the distinguishing features of Medicare Advantage is its administration by private insurance companies. However, it’s crucial to note that these aren’t just any insurance companies operating without oversight.

In fact, Medicare must approve and regulate every Medicare Advantage plan, ensuring that beneficiaries receive a standard of care and coverage that aligns with the program’s objectives. This unique blend of private sector efficiency with public sector oversight often results in a diverse range of plans that adhere to Medicare’s quality standards.

Furthermore, many Medicare Advantage plans offer additional benefits that Original Medicare typically doesn’t cover. These benefits may include:

  • Routine Vision Care: From eye exams to discounts on glasses or contact lenses, these benefits can be crucial for maintaining good eye health.
  • Dental Services: Medicare Advantage may also cover regular dental check-ups, cleanings, and sometimes even more extensive procedures.
  • Hearing Aids and Exams: As we age, hearing can diminish, and the inclusion of hearing services is an advantage for many.
  • Wellness Programs: Some plans offer gym memberships, fitness programs, or even nutrition counseling, emphasizing preventive health and well-being.

Ultimately, Medicare Advantage seeks to offer Medicare beneficiaries a more streamlined, holistic approach to their healthcare. By bundling various services under one umbrella and offering additional benefits not found in Original Medicare, it provides a compelling alternative for many looking for comprehensive coverage without the hassle of managing multiple plans.

Benefits of Medicare Advantage

Medicare Advantage has grown in popularity in recent years due to its enhanced coverage and cost structure. According to data from CMS, the share of Medicare beneficiaries enrolled in Medicare Advantage has increased from 19% in 2007 to 50% in 2023.

Comprehensive Coverage

One of the standout features of Medicare Advantage is its all-encompassing nature. Instead of having to manage separate plans for hospital care (Part A), medical services (Part B), and prescription drugs (Part D), Medicare Advantage enrollees can combine these benefits in one consolidated plan, simplifying the overall healthcare experience.

Extra Benefits

Beyond the foundational coverage that mirrors Original Medicare, many Medicare Advantage plans go the extra mile by offering benefits that aren’t standard in Original Medicare. These benefits may include routine vision care, dental services, hearing aids, and wellness programs. Some plans have even begun to offer non-medical benefits, including meals, non-medical transportation, resources addressing social needs, and pest control.

Cost Structure

Many Medicare Advantage plans come with lower monthly premiums compared to the combined costs of Original Medicare and supplemental plans. In some cases, you may even find plans with $0 monthly premiums, though it’s essential to note that this doesn’t mean there are no other out-of-pocket costs.

Medicare Advantage Drawbacks

Despite its advantages, Medicare Advantage also comes with a unique set of potential drawbacks, including network limitations, referral requirements, and travel restrictions.

Network Limitations

Depending on the type of plan you select, you may be limited to a specific list of doctors or hospitals. This can be restrictive, especially if you have long standing relationships with healthcare providers outside of your plan’s network or value a broader choice in your healthcare decisions.

Referral Requirements

Some Medicare Advantage plans, especially HMOs, require a referral from your primary care doctor to see a specialist. This can be an additional hurdle that adds an administrative layer to the healthcare process and potentially delays care.

Travel Restrictions

If you plan to travel frequently or split your time between locations, Medicare Advantage may not meet your insurance needs. Many plans have defined service areas, leading to potential coverage gaps if you receive care outside of this area.

Enrolling in Medicare Advantage

Enrolling in Medicare Advantage (Part C) is a multi-step process that requires careful planning and timely action. But first, it’s important to note that before you can enroll in a Medicare Advantage plan, you must be enrolled in both Medicare Part A and Part B.

In addition, you must live in the service area of the Medicare Advantage plan you want to join. You can use the Medicare Plan Finder on the official Medicare website to compare available Medicare Advantage plans in your area.

As you assess your options, look for plans that cover your current medical needs, medications, and preferred healthcare providers or pharmacies. The Medicare Plan Finder also provides star ratings for each plan, which can give you an idea of the plan’s quality and performance.

Once you choose your plan, you can enroll during one of the following enrollment windows:

  • Initial Enrollment Period (IEP): This is a 7-month window that begins 3 months before the month you turn 65, includes your birthday month, and continues for 3 months after your birthday month.
  • Annual Election Period (AEP): This takes place every year from October 15th to December 7th. During this time, you can switch from Original Medicare to a Medicare Advantage plan, change from one Medicare Advantage plan to another, or switch back to Original Medicare.
  • Medicare Advantage Open Enrollment Period: From January 1st to March 31st, those already in a Medicare Advantage plan can switch to a different Medicare Advantage plan or switch back to Original Medicare.

Many plans allow you to enroll directly through their website. You can also call 1-800-MEDICARE if you prefer to speak with a Medicare representative. Once you enroll in a Medicare Advantage plan, be on the lookout for a confirmation letter from the plan provider and your membership materials.

Lastly, healthcare needs and plan offerings can change over time. It’s a good idea to review your plan annually, especially during the Annual Election Period, to ensure it still meets your needs.

Medigap: Picking Up Where Original Medicare Leaves Off

Whereas Medicare Advantage replaces Original Medicare, Medicare Supplement Insurance (Medigap) is an additional policy you can purchase to complement Original Medicare.

Unlike Original Medicare, the federal government doesn’t provide these policies. Instead, private insurance companies offer Medigap policies, allowing for a variety of plan options and pricing structures.

Here’s a closer look at what Medigap policies typically cover:

  • Copayments: When visiting a doctor or specialist under Original Medicare, you’re typically responsible for a copayment. These fees can add up, especially if you tend to require frequent medical attention. Medigap assists by covering these copayments, so routine doctor visits don’t become a financial strain.
  • Coinsurance: While a copayment is generally a fixed amount, coinsurance is a percentage of the cost of a service. For instance, after meeting your deductible, Original Medicare may cover 80% of a service, leaving you to cover the remaining 20%. Medigap policies can step in to cover this percentage, or a portion of it, reducing your out-of-pocket expenses.
  • Deductibles: Most types of insuance require you to pay an out-of-pocket deductible before coverage kicks in. Medigap policies can cover the deductibles associated with Original Medicare, so you don’t have to bear the full brunt of initial medical expenses in a given period.
  • Medical Care Outside the U.S.: While Original Medicare typically doesn’t cover healthcare services outside the U.S., some Medigap policies offer coverage for emergency medical care during travel, providing peace of mind for globe-trotting retirees.

For many retirees, Medigap serves as a financial safety net, enhancing Original Medicare by covering many of the costs that they’d otherwise have to pay out of pocket and bringing more predictability to their healthcare expenses.

Benefits of Medigap

Medigap offers Medicare beneficiaries several potential advantages, including flexibility, predictability, and enhanced coverage while traveling.


Unlike some insurance plans that restrict patients to a specific network of doctors or specialists, Medigap allows you to visit any doctor or specialist that accepts Medicare. This can be especially valuable if you have longstanding relationships with your doctors or require specialized care and want the freedom to choose the best in the field without being constrained by network limitations.


Since Medigap policies come with fixed monthly premiums, it makes it easier to budget for your healthcare expenses. Additionally, the clear coverage provided by Medigap policies means fewer unexpected out-of-pocket costs.

Travel Coverage

While Original Medicare typically doesn’t cover healthcare services outside the U.S., certain Medigap policies provide coverage for emergency medical care during international travels. This benefit can be incredibly valuable if you plan to travel frequently post-retirement.

Medigap Drawbacks

While Medigap offers several potential benefits, it’s not right for everyone. Before purchasing a policy, you may want to consider the following drawbacks.


Medigap can bring more predictability to your healthcare expenses, but it often comes at an increased cost. Whereas Medicare Advantage plans typically cost between $0 and $100 a month, Medigap policies can vary between $50 and $1,000 per month.

Drug Coverage

Unlike Medicare Advantage plans, which often roll drug coverage into their offerings, Medigap policies don’t inherently cover prescriptions. That means you’ll need to purchase a separate Part D plan to cover your medication costs.

Limited Extras

Services like dental check-ups, vision tests, and hearing aids play a crucial role in overall health and well-being. Unfortunately, Medigap policies typically don’t offer coverage for these “extra” services.

Enrolling in Medigap

Like Medicare Advantage, you must be enrolled in Medicare Parts A and B before you can purchase a Medigap policy. Medigap policies are standardized across most states, identified by letters A through N.

However, Massachusetts, Minnesota, and Wisconsin standardize their plans differently, so it’s important to review your plan details carefully if you live in one of these states. You can use the Medigap policy search tool on the official Medicare website to compare plans in your area.

Once you choose your plan, you can enroll during one of the following enrollment windows:

  • Medigap Open Enrollment Period: This is a 6-month period that starts the month you turn 65 and are enrolled in Medicare Part B. During this time, insurance companies can’t use medical underwriting, which means they can’t charge you more based on health problems or deny you a Medigap policy. In general, it’s the best time to buy a Medigap policy.
  • Outside Open Enrollment: If you try to enroll outside of your open enrollment period, insurance companies can use medical underwriting. This may result in higher premiums or denial of coverage based on health status.

Keep in mind if you and a spouse or partner both want Medigap coverage, you’ll need to buy separate policies as Medigap doesn’t offer family or couple plans. You can contact the insurance company directly to make the purchase.

After purchasing, you’ll receive policy documentation from the insurance company. Also, be sure to hold onto your red, white, and blue Medicare card. You’ll need both this and your Medigap policy card when receiving services.

Choosing Between Medigap and Medicare Advantage

Choosing between Medicare Advantage and Medigap is a pivotal decision that can shape your healthcare experience and financial plan during your golden years. Your choice will depend on several factors, including your financial situation, healthcare needs, and lifestyle.

Financial Considerations

To determine your budget, begin by taking a comprehensive look at your financial situation. How much can you allocate monthly or annually towards healthcare without straining your other financial obligations or compromising your quality of life?

Keep in mind that while the upfront costs of Medigap may be higher than Medicare Advantage, it also shields you from unexpected medical bills, especially if you require extensive medical care. Meanwhile, Medicare Advantage often appears more budget-friendly due to its lower premiums, but out-of-pocket costs can add up, especially if unforeseen medical issues arise.

Healthcare Considerations

Your anticipated healthcare needs will also affect your decision. While predicting the future is impossible, consider any hereditary conditions in your family or any ongoing health issues that might require continued attention.

As you weigh your options, also take a moment to reflect on your past medical needs. Have you frequently needed specialized care or undergone surgeries?

If you have a history of specialized care or a need for various medical services, Medigap offers the flexibility to choose any doctor or specialist who accepts Medicare, ensuring you’re not limited in your healthcare choices. Medicare Advantage, on the other hand, may limit your access to certain healthcare providers.

Lifestyle Considerations

Lastly, consider your lifestyle goals in retirement. For example, your travel habits–both domestic and international–can significantly influence your insurance choice.

If you’re a frequent traveler, especially to foreign countries, the broader coverage of some Medigap plans can be invaluable. However, if you tend to stay close to home and have a robust local healthcare network, Medicare Advantage may make more sense.

Align Financial Can Help You Navigate the Medicare Maze

Navigating the intricacies of Medicare, Medigap, and Medicare Advantage can feel like a maze. But with the right information and a clear understanding of your needs, you can make a choice that suits both your healthcare needs and financial well-being.

In addition, don’t discount the value of expert advice as you explore your healthcare options. An experienced financial advisor like Align Financial who specializes in retirement planning can help you and your insurance advisor navigate the complexities of Medicare, Medicare Advantage, and supplemental insurance while helping you prepare financially for the rising cost of healthcare in retirement.

To learn more about how we help our clients retire successfully and see if we’re the right fit for your financial planning needs, please contact us. We’d love to hear from you.

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Tanya Nichols, CFP®
Tanya Nichols is a fee-based CERTIFIED FINANCIAL PLANNER™ professional located in Duluth, MN and serving clients across the country. Align Financial takes a simple but deeply impactful approach to wealth management, connecting your money to your life in a way that feels right to you.

Because Align Financial is independent of Raymond James, the expressed written opinions above are our own and not necessarily reflective of Raymond James’ opinions. Read our full disclosure here.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and CFP® in the U.S.