Medicare can cover most of your health care costs starting at age 65, but it leaves some big gaps: expensive deductibles and co-payments for hospital stays and doctor's visits, and no coverage for prescription drugs. Most people supplement their Medicare coverage with a medigap plan and a Part D prescription-drug policy offered by private insurers. But the costs can really add up when you have to buy three kinds of coverage. In addition to the Medicare Part B premium of $104.90 per month (or $121.80 per month for new enrollees in 2016 -- and even more for people with high incomes), the most popular medigap plan, Plan F, has an average cost of $2,293 in 2016 for a 65-year-old man ($191 per month), according to Weiss Ratings, and the average Part D plan costs $34 per month. Altogether, the average person pays $3,959 in premiums a year -- not counting co-payments, deductibles and other out-of-pocket costs.

No wonder more beneficiaries are intrigued by Medicare Advantage plans, which let you trade government-administered Medicare for comprehensive medical and drug coverage through a private insurer for much less than the cost of a medigap policy. The average Advantage plan costs $37 per month above your Part B premium, and some plans charge nothing above that premium. "The most exciting reason to use Medicare Advantage is to save a lot of money," says Aaron Tidball, manager of the Allsup Medicare Advisor, which helps people with their Medicare decisions. "There are plans that have no added premiums, $5 co-payments for primary care and no co-pays for generic drugs." It's also easier to have one policy, instead of juggling three types of coverage. Nearly one-third of beneficiaries have coverage through an Advantage plan rather than original Medicare.

It sounds almost too good to be true.

But there is a major difference: With Medicare, you can use any doctor or hospital who accepts Medicare patients. With Medicare Advantage, you are restricted to a limited network of doctors and hospitals. The least-expensive plans tend to have the smallest networks and larger out-of-pocket expenses throughout the year. And this is critical: You may not be able to change your mind later if you end up having greater health care needs. Even though you can return to Medicare at certain times each year, it may be impossible to buy a medigap plan to supplement Medicare coverage. If more than six months have passed since you originally signed up for Medicare Part B, in most states medigap insurers can reject you or charge you more because of your health. The Affordable Care Act's prohibition against refusing or charging more to insure someone because of a preexisting condition does not apply to medigap insurers.

"People need to make this decision with their eyes open," says Tricia Neuman, director of the program on Medicare policy for the Kaiser Family Foundation. "In essence, it means the decision people make is an irrevocable one, and many people don't realize it. They assume they can go back and forth, but they can be locked into Medicare Advantage."

How Medicare Advantage works

Medicare Advantage plans must cover everything that traditional Medicare does, but you may have more out-of-pocket costs than you would when pairing Medicare with a medigap policy. You'll have co-payments for doctor's visits, hospital stays, prescription drugs and other care. Medicare Advantage plans must limit your out-of-pocket costs for in-network care to no more than $6,700 in 2016, although some limit such costs to just $3,000. "This is one of the ways that plans compete," says Cathy Schoen, senior scholar at the New York Academy of Medicine.

For some people, the main difference is cash flow. "Do you want to pay a co-pay every time you use the doctor, or do you want to pay a medigap premium once a month and not worry about it? It comes down to comfort level and frequency of usage," says Tidball. If you don't have many medical expenses, you'll come out ahead with the lower premiums. The Advantage plans may also provide extra coverage that isn't available through traditional Medicare, such as dental, vision and hearing benefits or a gym membership.

"The Medicare Advantage premium will look much lower on a monthly basis, but the cost-sharing has been going up in the plans," says Schoen. "You need to look at what you will be paying in deductibles, what share of the doctor's fees you'll pay -- whether it's a fixed dollar amount or percentage of the total cost -- and what will happen if you're hospitalized."

For example, one plan in Columbus, Ohio, has a $0 premium but charges $250 each day for hospitalization. Another plan has a $99 monthly premium but $0 hospital co-pay. "There are always trade-offs," says Alan Mittermaier, president of HealthMetrix Research, which analyzes Medicare Advantage plans.

The key difference among competing plans is in provider networks. You must use the doctors, hospitals and other providers in your insurer's network or else you'll pay more. With a Medicare Advantage PPO, you'll usually have higher co-payments and deductibles, and a higher out-of-pocket maximum for care outside of your insurer's network. "The in-network maximum may be $6,700, but the out-of-network maximum may be $10,000," says Diane Omdahl, president of 65 Incorporated, a Mequon, Wisc., company that helps people with Medicare decisions. And Medicare Advantage HMOs generally don't cover out-of-network care at all, except for emergencies. You'll have to pay the full price for care outside of your provider's network yourself, with no out-of-pocket spending limit.

Not surprisingly, the least-expensive plans tend to have the smallest provider networks. "Choice costs money in health care," says Christopher Abbott, health plan chief executive officer for United Healthcare Medicare and Retirement in Wisconsin, Michigan and the Dakotas. "The HMO plans have a lower premium because they have a narrow network." More than 90% of United Healthcare members had more than one Medicare Advantage plan available in their area in 2016. They may, for example, have the option of a $0 premium plan with a smaller network, as well as a plan with a monthly premium that offers richer benefits, lower cost-sharing and more flexibility in access to specialists. "You want to make sure you have access to see the doctors you want, and that you have the right balance of choice and affordability," says Abbott.

Even if your current doctors are included, find out if the plan includes the hospitals and specialists you'd prefer if the need arises. The Kaiser Family Foundation found that about 20% of Medicare Advantage plans don't include an academic medical center in their network, and that 41% don't include their county's National Cancer Institute-designated Cancer Center. If you are healthy and choose a plan with a narrow network, make sure other plans in your area cover the hospitals you'd prefer. You can switch Medicare Advantage plans during open enrollment every fall, but some areas have many more Medicare Advantage options than others.

Kaiser Family Foundation's Tricia Neuman uses a story about her friend Craig to drive home the importance of considering the breadth of a plan's network.

When he turned 65, Craig chose a Medicare Advantage HMO. Because he was healthy and didn't need much care, he figured he'd save the money on premiums. But then doctors discovered he had a tumor and would need surgery. The surgeon in the insurer's network had done the necessary procedure only a few times and Craig wasn't comfortable with that lack of experience, but the specialists recommended by Craig's doctors were not in his plan's network.

He appealed to go out-of-network, but the insurer denied the request. Craig considered switching back to traditional Medicare, which would let him use any doctor, but he couldn't get a medigap policy because of his condition. Without a supplemental policy, he'd have to pay Medicare's deductibles and co-payments without any out-of-pocket maximum. Instead, he was able to wait to have the procedure and, during the next open enrollment season, switched to a different Medicare Advantage plan that included the surgeon he preferred. "His story illustrates the conundrum people can face because they really are limited if they live in a state where they can't buy a medigap policy" without medical underwriting, says Neuman.

How to pick a Medicare Advantage plan

If you are interested in Medicare Advantage, now is the time to start thinking about your options. You can switch from traditional Medicare into a Medicare Advantage plan -- or switch from one Medicare Advantage plan to another -- during open enrollment every year, which runs from October 15 to December 7 for coverage to begin on January 1.

You can compare all of the plans available in your area at www.medicare.gov/find-a-plan (the 2017 plans will be listed by October 1). Type in your zip code and your drugs and dosages, then click on "Medicare health plans" and specify whether you'd like plans with prescription-drug coverage (most people do). In the "refine your search" column, you can change the health status to estimate costs (the default is "good," but you can choose "poor" or "excellent").

You'll see details about each plan in your area, including premiums, deductibles and co-pays for medical and drug coverage, the plan's out-of-pocket maximum, and other information. Click "compare plans" for details of the cost of in-network and out-of-network doctor's visits, hospital stays and other care, and an estimate of your costs for the year under each plan based on your health status and the drugs you take.

As with Part D, out-of-pocket drug costs can vary a lot by plan. "The prescription-drug portion is increasingly an important piece of the decision process because it's something people use every day," says Abbott.

The plan may also provide coverage that isn't available through Medicare. "They may have benefits for hearing aids, eyewear, a gym membership, and dental cleaning and x-rays that would not be offered in medi-gap policies," says Mittermaier.

Finally, check the insurers' star ratings, which assess the plans based on customer service, communications, appeal procedures, and coverage of health screenings and chronic conditions. The top rating is five stars. You can switch into a five-star plan anytime during the year -- not just during open enrollment -- but very few plans earn that superior rating.

After narrowing your list, contact the plan directly to get details about providers -- that information isn't on the Medicare Plan Finder and providers can change from year to year. "After you've whittled down your options to three to four plans, then you should find out whether certain hospitals or specialists are in those plans," says Neuman. "It takes a lot of work to do that."

HealthMetrix Research analyzes Advantage plans in 92 markets across the U.S. each year and ranks plans based on the lowest out-of-pocket costs for people in good, fair and poor health. Go to www.medicarenewswatch.com; the latest results will be released in October.

Also consider a Medicare Advantage special needs plan if you have certain chronic conditions, such as diabetes or heart disease. You can find these plans in the Medicare Plan Finder, too. They have benefits designed specifically for people with similar medical conditions, including coordinated care and special drug coverage. The government gives insurers a higher level of reimbursement for these plans, so it may not cost more to get this extra coverage if you qualify.

What If you change your mind?

The biggest risk of switching into a Medicare Advantage plan is that you might not be able to get a medigap plan if you change your mind. The decision you make when you first sign up for Medicare can affect your care choices for years.

You can switch from Medicare Advantage back to traditional Medicare from January 1 to February 14 each year. You can enroll in any Part D plan then, but there's no guarantee that you'll be able to get an affordable medigap plan. "The older you get, the more difficult it becomes, and some insurance companies won't even speak to someone over age 70," says Tidball.

You have more options in a few states. New York and Connecticut let you switch into a medigap plan at any time regardless of your health. "For someone who has minimal needs and is an infrequent user of health care, there's no reason not to start with Medicare Advantage in one of these states and you can always get a medigap policy later," says Tidball. Find out about your state's rules at your state insurance department (go to www.naic.org for links).

There are a few other special situations when you can get a medigap policy without medical underwriting. If you have Medicare with medigap and then switch into a Medicare Advantage plan, you have up to 12 months to return to Medicare and get the same medigap plan. You can also switch back into Medicare and get a medigap plan if your Medicare Advantage plan leaves the business or if you move outside of your plan's service area, and in a few other situations (check Medicare.gov's Special Enrollment Periods section).

Keep this special enrollment period in mind if you plan to move in a few years. "If part of your life plan is moving, there's really no reason to spend all that extra money on medigap, especially if you're an infrequent user of your health care," says Tidball. "You can get a Medicare Advantage plan, even with a $0 premium, and when you move, use the special enrollment period to go into medigap." Of course, if your health takes a turn for the worse that prevents you from moving, you could be stuck in a Medicare Advantage plan that doesn't serve your needs.

Copyright 2016 The Kiplinger Washington Editors

This article was written by Kimberly Lankford, Contributing Editor and Kiplinger's Personal Finance from Kiplinger and was legally licensed through the NewsCred publisher network.