MEDICARE INSURANCE BASICS: WHAT YOU SHOULD KNOW BEFORE PICKING YOUR PLAN

by: Remie Longbrake | published: November 3, 2025

Navigating the complex world of Medicare can feel like deciphering a secret code, especially when the Annual Election Period (AEP) rolls around each year. For 2026 Medicare plans, understanding your options and making the right choice for your healthcare needs is more important than ever. The AEP, which runs from October 15th to December 7th, is your once-a-year opportunity to switch or enroll in Medicare plans. So, let’s break down the key players: Medicare Advantage (Part C), Medigap (Supplement Insurance), and Prescription Drug Plans (Part D).

First, let’s clarify what Original Medicare entails. It consists of Part A (hospital insurance) and Part B (medical insurance). While Original Medicare covers a significant portion of healthcare costs, it doesn’t cover everything. There are deductibles, coinsurance, and copayments, and it notably lacks prescription drug coverage and routine vision, dental, and hearing care.

Medicare Advantage, also known as Medicare Part C, is an “all-in-one” alternative to Original Medicare. These plans are offered by private insurance companies that contract with Medicare. They bundle Part A and Part B benefits, and most also include prescription drug coverage (Part D). This means you get your hospital, medical, and prescription drug coverage all through one plan, often with additional benefits like vision, dental, and hearing.

The appeal of Medicare Advantage lies in its convenience and often lower monthly premiums compared to Original Medicare plus a separate Medigap plan and Part D plan. Many Medicare Advantage plans have $0 or very low monthly premiums, although you will still need to pay your Part B premium. However, it’s crucial to understand that Medicare Advantage plans typically have a network of doctors and hospitals. You’ll usually need to use providers within this network to get the full benefit of the plan, though most plans offer some coverage for out-of-network care, albeit at a higher cost. These plans also have an annual out-of-pocket maximum, which protects you from catastrophic healthcare costs. Once you reach this limit, the plan pays 100% of your covered healthcare costs for the rest of the year.

On the other hand, Medigap plans, also known as Medicare Supplement Insurance, work alongside Original Medicare (Part A and Part B). Medigap plans are also sold by private insurance companies. They are designed to fill the “gaps” in Original Medicare coverage, such as deductibles (in cases), coinsurance, and copayments. Medigap plans do not include prescription drug coverage; you’ll need a separate Part D plan for that. And you cannot have both a Medicare Advantage plan and a Medigap plan at the same time!

There are standardized Medigap plans, meaning they offer the same basic benefits regardless of which insurance company sells them. These plans are identified by letters A, B, C, D, F, G, K, L, M, and N. For example, Plan G is a very popular option because it covers most of the out-of-pocket costs that Original Medicare doesn’t, including the Part B coinsurance, deductibles, and emergency care. The primary trade-off with Medigap is that you generally have higher monthly premiums compared to Medicare Advantage plans. However, the significant advantage is that you can see any doctor or any hospital in the U.S. that accepts Medicare – there are no networks to worry about. This freedom of choice is a major draw for many beneficiaries, especially those who travel often. Medicare Advantage of the other hand, you’ll need to go to their network of providers, which can likely be much more limited.

Now, let’s talk about Prescription Drug Plans (PDPs), also known as Medicare Part D. These plans are specifically designed to help cover the costs of prescription medications. They are offered by private insurance companies and are standalone plans, meaning you can enroll in a Part D plan even if you have Original Medicare and a Medigap policy. If you have a Medicare Advantage plan that doesn’t include prescription drug coverage, or if you have a PPO or HMO plan that excludes drug coverage, you should then enroll in a standalone Part D plan. However, many Medicare Advantage plans, as mentioned earlier, bundle drug coverage. It is important to mention that even if you are not on medications, you’ll want to enroll in a plan that has drug coverage; this is because you’ll be charged a penalty every month that you go without drug coverage if you decide to enroll later on.

When choosing a Part D plan (or a Medicare Advantage plan with drug coverage), it’s essential to look at the formulary, which is the list of covered drugs. You’ll want to ensure your regular medications are on the formulary and check the cost-sharing (copays and coinsurance) for each tier of medication. Part D plans also have deductibles, copayments, and coinsurance, and a catastrophic coverage phase. The costs within these phases can vary significantly between plans, so it’s best to not overlook this and not solely look at the premium alone.

In contrast to Medicare Advantage and Medigap, Medicare Advantage plans often have lower monthly premiums but can have higher out-of-pocket costs when you use healthcare services, due to copays and coinsurance, and you are typically restricted to a network of providers. Medigap plans generally have higher monthly premiums but offer predictable out-of-pocket costs and the freedom to see any doctor who accepts Medicare. Your choice often boils down to your personal preferences: do you value lower monthly costs and convenience, or do you prioritize freedom of choice and predictable, lower out-of-pocket expenses when you utilize care?

It’s also important to remember that during AEP, you can make changes to your existing Medicare coverage. If you are currently in Original Medicare and want to switch to a Medicare Advantage plan, you can do so. If you have a Medicare Advantage plan and want to switch back to Original Medicare and enroll in a Medigap and Part D plan, you can also do that. However, if you have Original Medicare and want to enroll in a Medigap plan, you may only be able to do so if you have a guaranteed issue right. If you don’t have a guaranteed issue right, you may have to go through medical underwriting, which means the insurance company can deny you coverage or charge you more based on your health conditions. This is why the initial enrollment period when you turn 65 or become eligible for Medicare is so critical for Medigap, because during this period you do have a guaranteed issue right.

As you prepare for AEP, take stock of your current healthcare needs and your budget. Are you generally healthy and don’t anticipate many doctor visits or hospital stays? A Medicare Advantage plan with a low premium might be appealing. Do you have chronic conditions, take multiple medications, or want the flexibility to see any specialist without worrying about referrals or networks? A Medigap plan paired with a Part D plan might be a better fit.

Consider the following questions when making your decision:

What are my current and anticipated healthcare needs? Do you have any chronic conditions? Do you anticipate needing specialized care?
What medications do I take regularly? It’s crucial to compare the formularies and costs of Part D plans or Medicare Advantage plans with drug coverage.
What is my budget for healthcare costs? Consider both monthly premiums and potential out-of-pocket expenses like deductibles, copays, and coinsurance.
Do I want the freedom to see any doctor or go to any hospital, or am I comfortable using a network of providers?
Do I travel frequently? If you travel, especially internationally, a Medigap plan may offer more comprehensive coverage than many Medicare Advantage plans.

AEP is your opportunity to ensure your Medicare coverage aligns with your life. Don’t hesitate to use the resources available to you. Medicare.gov provides a plan finder tool that allows you to compare different Medicare Advantage and Part D plans in your area. You can also contact Medicare directly by calling 1-800-MEDICARE. Additionally, many states have State Health Insurance Assistance Programs (SHIPs) that offer free, unbiased counseling to Medicare beneficiaries. You can also choose to work with an insurance agent who can help you make the proper decision for your needs. Just be sure an agent gives you impartial advice and lets you make the decision.

Taking the time to research and understand your options during the 2026 AEP will help you secure the healthcare coverage that best suits your needs and provides you with peace of mind throughout the year.

It is our recommendation to always consult with a licensed representative when deciding on your insurance and financial needs. This educational article is not specific advice. We strive to present quality, effective content. For specific references to our content please use our contact page.