Signing up for Medicare involves making important decisions. For instance, you can sign up for a Medicare Advantage plan or enroll in Medicare Supplement Insurance, or Medigap.

You can't sign up for both types of coverage, so you'll want to understand how each works. The biggest difference between Medigap and Medicare Advantage is that with a Medigap plan, you have the freedom to see any doctor that accepts Medicare, whereas with Medicare Advantage, you must get care within the plan's network of doctors and hospitals.

Here's what you should know.

Medigap vs. Medicare Advantage: Overview
You may not be alone if you're unsure how Medigap and Medicare Advantage differ. Only about a third of people "strongly agree" that they can make effective Medicare selection decisions, according to a July 2022 report from health care consulting firm Sage Growth Partners.

Here's the breakdown:

Medigap
Medigap, or Medicare Supplement Insurance, is insurance sold by private companies that fills the "gaps" in Original Medicare by covering certain out-of-pocket expenses, such as deductibles and copays. Medicare beneficiaries pay a monthly premium for a Medigap plan, which can vary widely based on age and geographic location. (You'll also pay a monthly Part B premium and any Part D prescription drug premium you may have.)

Medigap plans are standardized, meaning that a Medigap Plan G policy from one insurance company offers the same benefits as a Medigap Plan G policy from another company. The differences to consider are price and company reputation.

» MORE: Compare Medicare Supplement Insurance plans

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How it works
Original Medicare comes with deductibles and coinsurances you'll owe for your care. Some of your costs in Original Medicare that may be covered by a Medigap plan (depending on the type of plan you choose) include:

A deductible for an inpatient hospital stay of $1,600 in 2023.

A copayment for each inpatient hospital day, such as $400 per day in 2023 for days 61 to 90.

A copayment for each day in a skilled nursing facility, up to $200 per day in 2023 for days 21 to 100.

A 20% coinsurance for medical services covered under Medicare Part B.

If you have a Medigap plan that covers these costs, you won't pay anything out of pocket other than your Medigap premium. "It'll keep the out of pocket to a very reasonable amount of money," says Jeffrey Golden, a certified financial planner in New York City.

» MORE: What you'll pay for Medicare in 2023
When to buy it
Medigap can be purchased during the six-month period that starts the month you're 65 or older and obtain Medicare Part B. During this time, called the Medigap open enrollment period, companies must offer you a Medigap plan at the same price as everyone else. After this period, you may have to go through medical underwriting to get a policy, which could result in a higher price or denial of coverage if you're in poor health. (This is true unless you live in Connecticut, Massachusetts, Maine or New York, which offer guaranteed issue protections.)

You should carefully consider whether a Medigap plan is right for you when you're first eligible since it may be expensive or impossible to get a plan later.

» MORE: Best Medicare Supplement Insurance companies
Medicare Advantage
Medicare Advantage is a bundled alternative to Original Medicare that includes the coverage of Medicare Part A and Part B, usually Part D (prescription drugs), and often extra benefits such as some dental and vision coverage. Medicare Advantage is sold by private insurance companies that have contracted with the federal government to offer plans.