Medicare is organized around four parts and two primary coverage pathways. Original Medicare consists of Part A (hospital insurance) and Part B (medical insurance), administered by the federal government. From there, beneficiaries choose one of two routes: Medicare Advantage (Part C), which is a private insurance plan that replaces Original Medicare and typically includes prescription drug coverage and extra benefits, or a Medicare Supplement (Medigap) policy that works alongside Original Medicare to cover out-of-pocket costs, combined with a standalone Part D prescription drug plan. Medicare Advantage and Medigap are mutually exclusive — you cannot have both at the same time.
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Medicare Insurance Plans: The Complete Guide to Your Coverage Options
For most Americans, the years leading up to 65 bring a genuine reckoning with Medicare. The system is more complex than employer health insurance, the decisions carry longer-term consequences, and the enrollment windows are rigid in ways that can cost you financially for years if you mistime them. Medicare also isn’t a single thing — it’s a collection of parts, pathways, and private plan options that interact in ways that aren’t always obvious. This guide explains how Medicare insurance plans actually work, what the meaningful choices look like in practice, and how to think through the decision that’s right for your health situation, your finances, and your preferences.
The Foundation: What Medicare Is and Who It Covers
Medicare is the federal health insurance program for Americans age 65 and older, as well as certain younger individuals with qualifying disabilities or end-stage renal disease. For most people, the conversation begins when they turn 65 — though the decisions made at that threshold have implications that can follow them for decades.
Understanding Medicare begins with recognizing what Original Medicare is and what it leaves behind. The federal government directly administers two coverage components at the foundation of the program.
Medicare Part A: Hospital Insurance
Medicare Part A covers inpatient hospital care, skilled nursing facility care following a qualifying hospital stay, hospice care, and certain home health services. For the vast majority of beneficiaries — approximately 99% of those who turn 65 — Part A comes with no monthly premium because they or their spouse have at least 40 quarters (10 years) of Medicare-covered employment. Part A is, for most people, premium-free.
What Part A does require is cost-sharing when you use it. In 2026, the inpatient hospital deductible is $1,736 per benefit period — not per calendar year, but per benefit period. A benefit period begins when you’re admitted to a hospital and ends when you’ve been out of the hospital and skilled nursing facility for 60 consecutive days. This means you could pay the Part A deductible more than once in the same calendar year if you have multiple hospital stays with sufficient time between them.
For extended hospital stays beyond 60 days, daily coinsurance applies: $434 per day for days 61 through 90, and $868 per day for lifetime reserve days (you have a total of 60 lifetime reserve days). Skilled nursing facility care has its own cost structure: the first 20 days of a covered stay are fully covered, but days 21 through 100 cost $217 per day in 2026 in coinsurance.
These are significant potential costs — and they’re exactly what Medigap policies were designed to address.
Medicare Part B: Medical Insurance
Medicare Part B covers outpatient care — doctor visits, diagnostic tests and imaging, preventive services, durable medical equipment, outpatient surgery, mental health services, and most of the medical services that don’t involve an overnight hospital stay. Part B also covers certain physician-administered drugs, which is distinct from the prescription drugs covered under Part D.
Unlike Part A, Part B requires a monthly premium. The standard Part B premium in 2026 is $202.90 per month. Most beneficiaries pay this amount; those with higher incomes pay an additional Income-Related Monthly Adjustment Amount (IRMAA) surcharge. For 2026, the IRMAA threshold starts at individual income above $109,000 (up from $106,000 in 2025). If you’re a higher-income beneficiary, factoring IRMAA into your total Medicare cost picture matters significantly.
Part B also has an annual deductible — $283 in 2026, an increase of $26 from 2025. After the deductible is met, Medicare Part B typically pays 80% of approved costs, and the beneficiary pays the remaining 20% — with no out-of-pocket maximum. This 20% coinsurance, on medical bills that can run into the tens or hundreds of thousands for serious conditions, is the exposure that makes supplemental coverage such a financially compelling consideration.
Together, Part A and Part B form what’s called Original Medicare — the baseline federal program. It provides broad coverage but leaves meaningful gaps: deductibles, daily hospital coinsurance, the 20% Part B coinsurance with no ceiling, and no coverage for prescription drugs, routine dental, routine vision, or hearing aids.
The Two Pathways From Original Medicare
Once enrolled in Original Medicare, beneficiaries face the fundamental coverage decision that shapes everything else: choose Medicare Advantage or stay with Original Medicare and supplement it. These two pathways are structurally incompatible — you cannot be in Medicare Advantage and have a Medigap policy simultaneously.
Medicare Advantage (Part C): The All-in-One Alternative
Medicare Advantage plans are private insurance plans, approved and regulated by Medicare, that provide your Part A and Part B coverage as an alternative to Original Medicare. When you join a Medicare Advantage plan, the government pays the private insurer a set amount to cover your care, and the plan manages your benefits.
By law, every Medicare Advantage plan must cover everything Original Medicare covers. In practice, most plans go further: approximately 48% of Medicare beneficiaries are enrolled in Medicare Advantage as of 2026, drawn in large part by additional benefits that Original Medicare doesn’t provide — dental, vision, hearing, fitness benefits, and in some cases over-the-counter allowances and transportation to medical appointments.
Most Medicare Advantage plans also include prescription drug coverage, making them what’s called an MA-PD plan. This bundling is a significant convenience factor — one plan, one card, one set of rules.
How Medicare Advantage Plans Work
When you join a Medicare Advantage plan, you still have Medicare (you must remain enrolled in Part A and Part B and continue paying your Part B premium). The Medicare Advantage plan operates as your primary coverage, and you access care through the plan’s structure — which almost always involves a provider network.
Most Medicare Advantage plans are structured as HMOs or PPOs. An HMO requires you to use in-network providers and generally requires a primary care physician referral to see specialists. A PPO offers more flexibility — you can see out-of-network providers at higher cost, and you typically don’t need referrals. A smaller number of plans use other structures like PFFS (Private Fee-for-Service) or SNP (Special Needs Plans designed for specific populations).
The network restriction is the most significant structural difference between Medicare Advantage and Original Medicare. Original Medicare allows you to see any provider in the country who accepts Medicare — a broad pool that covers the vast majority of physicians, specialists, and hospitals. Medicare Advantage limits you to the plan’s network. For people who travel frequently, spend time in multiple states seasonally, or have established care relationships with specialists who aren’t in the plan’s network, this can be a material drawback.
Medicare Advantage Costs in 2026
Medicare Advantage plan costs are highly variable — there is no single premium, no single deductible, no standard out-of-pocket structure. Average premiums for Medicare Advantage plans that include drug coverage are projected to decrease to approximately $14 per month in 2026, and many plans are available with no additional monthly premium beyond the Part B premium you’re already paying.
However, the total cost of a Medicare Advantage plan goes beyond the monthly premium. Each plan has its own cost-sharing structure: copays for primary care visits, specialist visits, hospitalizations, and outpatient procedures; deductibles that vary by plan; and an annual maximum out-of-pocket limit, which caps your exposure for in-network care. For 2026, the maximum allowable out-of-pocket limit for in-network services in Medicare Advantage plans is $9,250, down slightly from $9,350 in 2025. The actual cap on a specific plan is often lower than the maximum allowed, but it varies considerably across plans.
The annual out-of-pocket maximum is one of Medicare Advantage’s strongest structural advantages over Original Medicare alone — Original Medicare has no out-of-pocket cap, meaning a catastrophic illness could leave a beneficiary with unlimited 20% coinsurance on Part B services. A Medicare Advantage plan’s out-of-pocket maximum puts a ceiling on that exposure, though what happens within that ceiling — the copays, the network restrictions, the prior authorization requirements — varies significantly by plan.
What to Watch for in Medicare Advantage
The single most important thing to verify before enrolling in a Medicare Advantage plan is whether your current doctors, specialists, and preferred hospitals are in the plan’s network. A plan that looks excellent on paper loses much of its value if your cardiologist, your oncologist, or the hospital where you’ve had care isn’t in-network.
Prior authorization requirements are a second significant consideration. Medicare Advantage plans can and do require prior authorization for certain procedures, specialist referrals, and medications — a layer of administrative friction that doesn’t exist with Original Medicare. Research into the plan’s prior authorization practices before enrolling is time well spent.
Drug formularies matter enormously if you take regular medications. Even within the same plan category, formularies vary. Verifying that your specific prescriptions are on the plan’s formulary — and at which tier — can significantly affect your total annual cost of care.
Original Medicare + Medigap: The Supplemental Coverage Route
The alternative to Medicare Advantage is staying in Original Medicare and purchasing a Medicare Supplement Insurance policy — commonly called Medigap — from a private insurer. Medigap fills the cost gaps that Original Medicare leaves: deductibles, coinsurance, and copayments that would otherwise be your responsibility.
There are ten standardized Medigap plans available in most states (identified by letters A through N, with some gaps in the sequence). Because Medigap plans are federally standardized, Plan G from Humana provides exactly the same benefits as Plan G from Aetna or Blue Shield — the only difference between plans with the same letter sold by different companies is the price. This standardization makes genuine comparison shopping possible in a way that Medicare Advantage plan comparison often isn’t.
The Most Popular Medigap Plans Today
Plan G is currently the most commonly chosen Medigap plan for new Medicare enrollees, and for good reason. It covers the Part A hospital deductible, Part A coinsurance, Part A hospice care coinsurance, Part B coinsurance and copayments (that 20% that has no ceiling under Original Medicare), skilled nursing facility coinsurance, and emergency care in foreign countries. The only cost it doesn’t cover is the Part B annual deductible ($283 in 2026), which the beneficiary pays directly. Beyond that deductible, Part G essentially makes Original Medicare coverage nearly comprehensive.
Plan G also covers “excess charges” — amounts above the Medicare-approved rate that non-participating physicians are legally allowed to charge (up to 15% above the Medicare-approved amount). This protection matters for beneficiaries in areas with a higher proportion of providers who don’t accept Medicare’s approved amounts as payment in full.
Plan N covers most of the same benefits as Plan G but does not cover excess charges, and includes small copays — up to $20 for office visits and up to $50 for emergency room visits that don’t result in an inpatient admission. Plan N generally carries a lower monthly premium than Plan G in exchange for these modest cost-sharing requirements.
Plans C and F, which covered the Part B deductible in addition to other costs, are no longer available to people who became newly eligible for Medicare on or after January 1, 2020. Beneficiaries enrolled before 2020 who have Plans C or F may keep them.
High-Deductible versions of Plan G offer lower monthly premiums in exchange for a larger deductible you must satisfy before Medigap benefits begin ($2,950 in 2026). These plans can be a good fit for relatively healthy beneficiaries who want catastrophic protection without paying full Medigap premiums.
The Medigap Advantage: Freedom and Predictability
Medigap’s defining structural advantages over Medicare Advantage are access and predictability. With Medigap, you can see any provider in the country who accepts Medicare — a universe of providers that covers essentially any physician, specialist, or hospital you’d want to access. There are no networks, no referral requirements, no prior authorization processes from the supplemental insurer. If Medicare covers it, your Medigap plan covers its share.
For beneficiaries who travel frequently, who live in multiple states seasonally, who have complex medical needs requiring specialist access across multiple providers, or who simply value the certainty of knowing their out-of-pocket exposure without having to parse a network directory, Medigap paired with Original Medicare offers a clarity that Medicare Advantage can’t match.
The tradeoff is cost. Medigap premiums are higher than Medicare Advantage premiums — often meaningfully higher. But the comparison isn’t just premium versus premium — it’s total expected cost of care, including the copays, deductibles, and network costs that Medicare Advantage plans impose each time you access care. For someone with significant health needs who uses the healthcare system frequently, Medigap’s predictable cost structure often delivers better financial outcomes than a lower-premium Medicare Advantage plan with variable cost-sharing.
The Medigap Enrollment Window: A Critical Deadline
This is the single most important timing consideration in the entire Medicare decision process, and it catches a surprising number of people off guard. The Medigap Open Enrollment Period is a one-time, six-month window that begins the first month you are enrolled in Medicare Part B and are age 65 or older. During this window, any private insurance company selling Medigap policies must sell you any plan they offer — at their best available price — regardless of your health history or pre-existing conditions. They cannot deny you, cannot charge you more for health reasons, and cannot impose waiting periods on pre-existing conditions.
After this six-month window closes, Medigap is medically underwritten in most states. That means an insurer can review your health history, decline your application, or charge a higher premium based on health conditions. Someone who develops diabetes, heart disease, cancer, or any number of other conditions after their initial enrollment window can find Medigap coverage either expensive or unavailable if they try to enroll later.
California has a “birthday rule” that gives existing Medigap enrollees a 60-day window each year, around their birthday, to switch to a plan with equal or lesser benefits without medical underwriting. But this applies to people switching between Medigap plans — it doesn’t restore the original open enrollment protections for someone who has been in Medicare Advantage and wants to switch to Medigap.
The practical implication is stark: if you want the flexibility that Medigap provides, the time to secure it is during your initial six-month window when you turn 65 and enroll in Part B. Waiting — even a few months — to see how Medicare Advantage works out, then trying to switch, can leave you subject to underwriting that closes the door on the plan you want.
Medicare Part D: Prescription Drug Coverage
Original Medicare does not cover most prescription drugs taken at home. Part D is the voluntary prescription drug coverage program that fills this gap. It’s available as a standalone Prescription Drug Plan (PDP) for people in Original Medicare with or without Medigap, or integrated into most Medicare Advantage plans as an MA-PD.
Why Part D matters even if you take few medications: Part D has a late enrollment penalty for people who go without creditable drug coverage after they first become eligible for Medicare. The penalty is 1% of the national base beneficiary premium per month you go without coverage — and it’s added to your Part D premium for as long as you have Part D. A few years of delay can mean a permanently higher premium.
Part D Structure for 2026
Part D plans each maintain a formulary — a list of covered drugs organized into tiers. Generic drugs on preferred tiers cost less; specialty medications on the highest tiers can be expensive even with insurance. For 2026, the maximum Part D deductible is $615 (up from $590 in 2025), though many plans offer lower or no deductible on certain tiers.
The Inflation Reduction Act introduced a significant protection that took effect in 2025: a $2,000 annual out-of-pocket cap on Part D drug spending. In 2026, that cap increases slightly to $2,100, indexed for inflation. For the many Medicare beneficiaries who take expensive specialty or brand-name medications, this cap represents genuine and meaningful financial relief — previously, there was no ceiling on what a Part D enrollee could spend on covered drugs in a year.
Insulin is capped at $35 per month under Part D regardless of whether you’ve met your deductible — a protection that remains in effect for 2026. Most recommended vaccines are also covered at no cost under Part D.
Average standalone Part D premiums are projected to decrease from $38.31 per month in 2025 to approximately $34.50 per month in 2026. However, plan-specific premiums vary widely, and the right plan for your situation depends entirely on your specific medications, their tier placement on the plan’s formulary, and your pharmacy preferences.
Medicare Enrollment Periods: Timing Is Everything
Medicare’s enrollment periods aren’t forgiving of late arrivals. Missing the right window can mean delayed coverage, late enrollment penalties, or being locked out of coverage you want. Here’s how the major enrollment periods work:
Initial Enrollment Period (IEP)
Your Initial Enrollment Period is the seven-month window surrounding your 65th birthday — the three months before the month you turn 65, the month of your 65th birthday, and the three months after. This is when you can enroll in Part A, Part B, Part C (Medicare Advantage), and Part D.
Timing your Part B enrollment within the IEP matters for when coverage begins. Enrolling in the three months before your birthday month means coverage starts the month you turn 65. Enrolling in your birthday month or the months after creates a delay in when coverage begins.
If you’re still working at 65 and have employer health coverage, you may be able to delay Part B enrollment without penalty until you retire — but the rules are specific, and the details of how your employer plan interacts with Medicare matter. If you’re retired, enrolling in Part B during your IEP is almost always the right call.
Annual Enrollment Period (AEP) / Open Enrollment Period
The Annual Enrollment Period runs from October 15 to December 7 each year, with changes taking effect January 1. During the AEP, any Medicare beneficiary can:
- Switch from Original Medicare to Medicare Advantage
- Switch from Medicare Advantage to Original Medicare
- Switch from one Medicare Advantage plan to another
- Join, switch, or drop a Part D prescription drug plan
The AEP is the primary annual opportunity to review and adjust Medicare Advantage and Part D coverage. Given that plan benefits, formularies, premiums, and networks change year to year, reviewing your current plan against available alternatives during the AEP is genuinely worthwhile — not a bureaucratic exercise.
Medicare Advantage Open Enrollment Period (OEP)
From January 1 to March 31 each year, people already enrolled in a Medicare Advantage plan can switch to a different Medicare Advantage plan or return to Original Medicare (and then enroll in Part D). This is an additional adjustment window that doesn’t exist for Part D or Medigap.
Special Enrollment Periods (SEPs)
Qualifying life events trigger Special Enrollment Periods that allow changes outside standard windows. Common triggers include losing employer health coverage, moving to a new service area, a plan leaving your area, or qualifying for Extra Help with drug costs. SEP rules are specific and time-limited — acting promptly after a qualifying event is essential.
Medicare Advantage vs. Medigap: A Framework for the Decision
The Medicare Advantage vs. Medigap decision isn’t universally one-sided — both pathways serve real consumer needs, and the right choice depends on individual circumstances. Here’s a framework for thinking through it:
Medicare Advantage tends to work better when:
- Your preferred doctors and hospitals are in the plan’s network and you’re confident they’ll remain there
- You want extra benefits — dental, vision, hearing, fitness — bundled into a single plan
- You’re relatively healthy and use healthcare services infrequently, making the plan’s copay structure manageable
- You want to minimize monthly premium costs and are comfortable with variable cost-sharing when you access care
- You live and receive all your care in one geographic area
Medigap with Original Medicare tends to work better when:
- You have established specialist care relationships and need provider flexibility
- You travel frequently or split time between locations in different states
- You have significant or complex health needs that generate frequent healthcare utilization
- You want cost predictability — knowing your maximum out-of-pocket exposure regardless of what happens
- You want to avoid prior authorization processes for medical care
- You’re in good health at 65 and want to lock in guaranteed-issue access to Medigap before your health history becomes a factor
The Cost Comparison That Many People Miss
A common mistake is comparing Medicare Advantage’s monthly premium directly to Medigap’s monthly premium and concluding Medicare Advantage is cheaper. The right comparison is total annual cost: monthly premiums plus the cost-sharing you actually experience (copays, coinsurance, and deductibles) based on your realistic anticipated healthcare use. For a beneficiary who sees multiple specialists regularly, takes brand-name medications, or has a chronic condition requiring ongoing care, a $0-premium Medicare Advantage plan can easily cost more in total annual spending than a Medigap Plan G at $200 per month.
2026 Medicare Changes Worth Knowing
Several meaningful changes took effect for 2026 that affect beneficiaries across all plan types:
The Part D out-of-pocket cap increases slightly to $2,100 (from $2,000 in 2025), with the first round of Medicare-negotiated drug prices from the Inflation Reduction Act taking effect in January 2026. The negotiated prices are expected to produce discounts of 38% to 79% on list prices for 10 widely used prescriptions, including blood thinners Eliquis and Xarelto and diabetes medications Jardiance, Januvia, and Farxiga.
Part B premium increases to $202.90 per month, with the Part B deductible rising to $283 (from $257 in 2025).
The Part A hospital deductible increases to $1,736 per benefit period (up from $1,676 in 2025).
Skilled nursing facility coinsurance increases to $217 per day for days 21 through 100 (from $209.50 in 2025).
Medicare Advantage plans with integrated Part D saw average premiums decrease slightly to approximately $14 per month, and the maximum allowable out-of-pocket limit decreased modestly to $9,250. However, some major insurers have scaled back their Medicare Advantage offerings or exited certain markets for 2026. Beneficiaries whose Medicare Advantage plans were discontinued received notice and have guaranteed-issue rights to enroll in a Medigap policy if they return to Original Medicare.
Starting in 2026, many Medicare Advantage plans that previously didn’t require a Part D drug deductible are introducing one for Tiers 3, 4, and 5 drugs — meaning some beneficiaries will face higher drug costs than in prior years even if their plan technically continues.
Get Help Navigating Medicare Insurance Plans in California
Medicare decisions are among the most consequential insurance choices anyone makes, and the window for making them optimally is narrow. At Nevin & Witt Insurance Services, we’ve been helping Northern California residents navigate Medicare insurance plans for over 75 years. As an independent insurance agency, we work with multiple Medicare Supplement and Medicare Advantage carriers — which means we’re comparing options across the market rather than steering you toward any single company’s products.
Whether you’re approaching 65 and enrolling in Medicare for the first time, reviewing your current Medicare coverage during open enrollment, or trying to understand whether switching from Medicare Advantage to Medigap makes sense for your situation — we’re here to help you work through it clearly.
Medicare’s enrollment windows are real constraints with real financial consequences. Getting good guidance before those windows close — not after — is what makes the difference.
Ready to review your Medicare insurance plan options?
- Get a quote online
- Call our team directly: (530) 894-0111
No pressure, no single-carrier agenda — just experienced, knowledgeable guidance from a team that has been helping California seniors navigate Medicare for generations.
| Question | Quick Answer |
|---|---|
| What are Medicare’s four parts? | Part A (hospital), Part B (medical), Part C (Medicare Advantage), Part D (drugs) |
| Medicare Advantage vs. Medigap — what’s the difference? | Advantage replaces Original Medicare; Medigap supplements it; you cannot have both |
| When is the Initial Enrollment Period? | 7-month window: 3 months before, month of, and 3 months after your 65th birthday |
| What is the Medigap Open Enrollment Period? | One-time 6-month window at 65 with Part B — guaranteed issue, no underwriting |
| When is Medicare Annual Open Enrollment? | October 15 – December 7 each year; changes effective January 1 |
| How much is Part B premium in 2026? | $185.00/month standard; higher for incomes above $109,000 |
| What is the Part D out-of-pocket cap in 2026? | $2,100 annually — provides real protection for high-cost drug users |
| Can I have Medicare Advantage and Medigap? | No — they are mutually exclusive; illegal to sell Medigap to an Advantage enrollee |
| Which Medigap plan is most popular? | Plan G — covers nearly all Original Medicare cost-sharing except the Part B deductible |
| Do I need Part D if I take no medications? | Yes — late enrollment penalty is permanent and based on months without coverage |
Nevin & Witt Insurance Services | License #0D26864 | Helping Northern California Seniors Navigate Medicare for Over 75 Years Get a quote: nevinandwitt.com/get_a_quote | Call: (530) 894-0111