Medicare isn't one product — it's a series of choices that each carry their own costs and trade-offs. Here's a plain-language breakdown of each setup, with real billing examples so you can see the difference in practice.
This is the foundation everyone starts with. It covers a lot — but it leaves real financial exposure because there is no annual cap on what you can owe.
*Premium-free for most people (40+ work quarters). Deductible: $1,736 per benefit period if hospitalized. Coinsurance: $434/day for days 61–90.
Plus $283 annual deductible, then 20% coinsurance on all Medicare-approved services — with no annual maximum.
Medicare-approved cost: $12,000
Medicare pays 80%: $9,600
You owe: $2,400 — with no plan to help cover it.
A Medigap plan works alongside Original Medicare — it doesn't replace it. It picks up most or all of the costs Original Medicare leaves behind. You also need a separate Part D plan for prescription drug coverage.
Medigap plans are standardized by CMS — every insurer offering Plan G must provide identical benefits. The only difference is price. This makes shopping straightforward: compare premiums for the same letter across insurers.
| Plan Letter | Part A Deductible | Part B Deductible | Part B 20% Coinsurance | Skilled Nursing Coinsurance | Foreign Travel Emergency |
|---|---|---|---|---|---|
| Plan G (most popular) | ✓ Covered | ✗ You pay $283 | ✓ Covered | ✓ Covered | ✓ 80% up to limits |
| Plan N | ✓ Covered | ✗ You pay $283 | ✓ (copays up to $20) | ✓ Covered | ✓ 80% up to limits |
| Plan K | 50% | ✗ | 50% | 50% | ✗ |
| Plan L | 75% | ✗ | 75% | 75% | ✗ |
Plans F and C (which cover the Part B deductible) are no longer available to people who became Medicare-eligible on or after January 1, 2020.
Medicare-approved cost: $12,000
Medicare pays 80%: $9,600
Medigap Plan G covers the 20% coinsurance: $2,400
You owe: $0 (only the $283 Part B annual deductible, if not yet met for the year)
Part A deductible (day 1): $1,736 — Medigap Plan G covers this.
Additional hospital coinsurance (days 2–5): $0 per day within the first 60 days.
You owe: $0
A Part D plan covers prescription drugs. It can be purchased as a stand-alone plan (paired with Original Medicare ± Medigap) or come bundled into a Medicare Advantage plan.
No plan can charge more than this in 2026. Many plans have $0 deductibles for generic drugs or lower overall.
The maximum you pay for covered drugs in 2026. Once reached, you pay $0 for covered medications for the rest of the year. This is a major improvement from prior years — the cap was $8,000 as recently as 2023.
You take a specialty drug with a list price of $8,000/month. Under 2026 Part D rules, once you've spent $2,100 out of pocket, you pay $0 for the rest of the year. Without this cap, the prior year's "catastrophic coverage" structure could cost much more over time.
A Medicare Advantage PPO replaces Original Medicare with a private plan that includes flexibility to use both in-network and out-of-network providers — at different cost levels. PPOs tend to cost more than HMOs but less than Medigap, with broader provider access.
In-network: 20% coinsurance = $2,400 (counts toward your MOOP). Once you hit your plan's annual MOOP (say $5,500), you pay nothing for the rest of the year.
Out-of-network: may be 40–50% coinsurance — e.g., $4,800–$6,000 — and a separate, higher out-of-network MOOP applies.
A Medicare Advantage HMO offers the lowest monthly cost — many plans have a $0 premium in California — but requires you to use a defined network of doctors and hospitals. Out-of-network care is generally not covered except in emergencies.
Copay or coinsurance: varies by plan. Common example: $250 copay for outpatient surgery, then $0. If you reach your plan's $4,000 MOOP, you pay nothing for the rest of the year.
Same surgery out-of-network: not covered. You would owe the full $12,000 (except in a true emergency).
| Factor | Medicare + Medigap + Part D | Medicare Advantage PPO | Medicare Advantage HMO |
|---|---|---|---|
| Monthly cost | Highest (Part B + Medigap + Part D) | Medium (Part B + plan premium + copays) | Lowest (Part B + usually $0 plan premium + copays) |
| Drug coverage | Separate Part D plan required | Usually bundled in | Usually bundled in |
| Out-of-pocket risk | Lowest — Medigap covers most costs | Capped MOOP (varies by plan) | Low MOOP (varies by plan) |
| Doctor network | Any Medicare provider, nationwide | Preferred in-network; OON at extra cost | In-network only; OON not covered |
| Specialist referrals | No referral needed | No referral needed | PCP referral usually required |
| Extra benefits | No — coverage only fills A/B gaps | Often includes dental, vision, hearing | Often includes dental, vision, hearing |
| Best if you… | Travel, have many doctors, want predictability | Want flexibility + network protection + extras | Have local providers in-network, want lowest cost |
Many low-income seniors qualify for both Medicare and Medi-Cal — making them "dual eligible." This is one of the most powerful and underutilized combinations in the healthcare system. Medi-Cal acts as a backup plan that can cover what Medicare leaves behind, including long-term care.
If your income is low enough, Medi-Cal's Medicare Savings Programs will pay your Medicare premiums, deductibles, and/or coinsurance — essentially making Medicare much more affordable or even free to use. There are four MSP levels:
| Program | What Medi-Cal Pays | Approx. Income Limit (individual) |
|---|---|---|
| QMB Qualified Medicare Beneficiary | Part A & B premiums, deductibles, coinsurance | ~100% FPL (~$1,304/mo) |
| SLMB Specified Low-Income Medicare Beneficiary | Part B premium only | 100%–120% FPL (~$1,565/mo) |
| QI Qualifying Individual | Part B premium (partial or full) | 120%–135% FPL (~$1,763/mo) |
| QDWI Qualified Disabled Working Individual | Part A premium | ~200% FPL (working disabled) |
Income limits shown are approximate 2026 figures. MSPs are subject to the reinstated Medi-Cal asset limit of $130,000/individual ($195,000/couple) effective January 1, 2026.
Medicare does NOT cover custodial long-term care — the ongoing help with activities of daily living (bathing, dressing, eating) that most people eventually need. A nursing home stay in California can cost $12,000–$18,000+ per month.
Medi-Cal does cover long-term custodial care for those who qualify — both in nursing facilities and through in-home supportive services (IHSS), which allows seniors to receive care at home.
