Confused about Medicare-Based Health Insurance Options?

Congratulations, you are turning 65. Now you are eligible for Medicare…and suddenly, you are knee-deep in insurance decisions you have to make with little or no information to guide you. What is Medicare Advantage? Do you need a Medigap? Do you need a Part D plan, and if so, how do you choose? Why are you paying premiums to Medicare and an outside insurance company? These are all the questions that keep people confused about Medicare.

Let’s start with a short history of Medicare. In the beginning, upon retirement or disability, there was no affordable insurance option available to most people.

Medicare started as a government-based insurance plan to cover the highest single cost in healthcare for the 65+ population – hospitalization. An inpatient hospital stay can quickly run $15,000.00 a day. This part of Medicare, called Medicare part A, usually has no premium requirement.

However, since many retirees have ongoing health issues and little income, Medicare added coverage for doctor visits and diagnostic testing. This coverage, called Medicare part B, has a premium that you pay to Medicare. And more recently, Medicare part D, which provides coverage for prescription drugs, has been introduced.

Still, even between Medicare’s part A for hospital costs and part B for other healthcare costs, there are significant gaps in Medicare’s coverage. So, in comes gap coverage insurance, otherwise known as Medigap.

To this day, people are still confused about Medicare Supplements and Medigap. Here’s a tip, they are the same thing. However, Medicare Advantage plans are not Medicare Supplements and not Medigap.

Medicare was becoming a massive bureaucracy by this time, and they needed to find a way to outsource this new option. At the same time, private insurance companies did not follow the same rules set down for Medicare. What could they do?

Medigap was born

Ultimately, it was decided that private insurance companies could offer gap insurance, called Medigap, and collect separate premiums for it, but they had to use Medicare’s rules. This is why Medigap plan E through one carrier will give you precisely the same coverage as Medigap plan E through another airline. This option is entirely voluntary.

Medigap plans are secondary insurance. That means the bills go to Medicare first, and after Medicare pays its share of the bills, they send them to the Medigap insurance companies.

Unfortunately, with all their premiums, these options left a good portion of the 65+ population with insurance costs beyond their means.

Medicare’s solution to this problem was Medicare Advantage, sometimes known as Medicare part C. Medicare Advantage plans offer low premium plans sold by private insurance companies.


Medicare has given broad boundaries that insurance companies must comply with for these plans. In exchange, Medicare pays part of the costs incurred by the insurance companies to offset the lowered premiums.

Medicare Advantage plans are the primary insurance. With a few exceptions, bills go to the Medicare Advantage insurance carrier, and the retiree is responsible for whatever portion of the bill the insurance company does not pay.

Still wondering which plan is best for you? Ask yourself a few questions:

* How much can you pay in premiums on top of the Medicare part B premium?

The Medigap premium you pay will depend on the coverage your plan offers. The more comprehensive the range, the higher the premium.

* How often do you need to see a health care provider?

Unless otherwise noted with Medigap plans, coverage mimics that Medicare provides. So if Medicare imposes no limits on doctor visits, the Medigap plan will also not have any limits. But Medicare Advantage plans might have limitations, but they also come at a lesser cost. So, if you usually don’t see a healthcare provider very often – say twice a month – even with a couple of more expensive months, it averages out over the year to be less expensive.

* How much do you travel?

Medigap offers you the same coverage anywhere you see a Medicare-eligible provider, whether you visit your sister in another state or at home. Most Medicare Advantage plans, on the other hand, have very reasonable rates for seeing providers that are part of their local network but have much higher costs for “out of network” providers if they offer any coverage other than emergency room services outside of their local network at all.

Medicare and its many options, plans, and rules can confuse anyone. The best thing you can do is get in touch with an experienced medicare insurance agent in your area who can help explain your options. Getting the Medicare plan that is right for you is possible. Remember, it is your right and responsibility to make an informed choice.