Medicare is the federal government’s health insurance program that primarily covers people 65 and older and certain younger people with disabilities or kidney failure. Original Medicare does not cover all medical costs. Medicare Advantage plans stand in the place of Original Medicare or you may opt to stay with Original Medicare and purchase a Medicare Supplement policy.
- Medicare is divided into four different parts. Parts A and B make up Original Medicare, Part C is often known as Medicare Advantage (which is provided by private insurers), and Part D is prescription drug insurance.
- Original Medicare (Parts A and B) is a federal health plan that becomes available once you turn 65 years old. Original Medicare does not cover everything. Routine prescription drugs, dental, vision and hearing are a few of the necessary services not covered.
- You generally pay a deductible for your health care before Medicare pays its share. Medicare will then take over and you pay the coinsurance or copayment for covered services and supplies.
- There are optional Medicare plans that you can purchase during select enrollment periods. These plans cover the additional health care costs not covered by Original Medicare. These plans vary by state and include Medicare Advantage plans, supplement insurance (Medigap) and Part D prescription drug coverage.
Medicare is the most common form of health care coverage for seniors. The program provides a way for older Americans to have their health needs taken care of after they retire from the workforce.
The Medicare program was originally founded in 1965. At that time, what is now known as Original Medicare was created. The first major expansion to the program came seven years later, when people with disabilities or end-stage renal disease became qualified for coverage.
Part C was originally established in 1997 and was first known as the Medicare+Choice program. It took on its modern form and was renamed as Medicare Advantage a few years later in 2003. Part D took effect starting in 2006.
The Medicaid program was founded at the same time as Medicare as well. Medicaid was originally created to provide insurance to those who needed cash assistance but has been expanded beyond that since. The program is separate from Medicare and exists today to provide health care to low-income Americans.
The basics of Medicare include both plans that are provided by the federal government and ones that are available through private insurers. Different types of plans can cover different parts of your health care.
Understanding Medicare Coverage Plans
Medicare is divided into four parts, named alphabetically from Part A through Part D.
Parts A and B are sometimes referred to as Original Medicare. Parts C and D are newer options. Generally, you can get coverage through Original Medicare or through Medicare Advantage plans if you qualify.
Medicare Advantage plans require that you live in the service area of the plan you want to join.
Original Medicare is provided through the federal government. Americans are typically eligible to enroll in Original Medicare when they turn 65. It is divided into Parts A and B, which each handle different parts of your health care.
It’s important to remember that Original Medicare does not cover everything, with notable areas like vision and dental coverage excluded.
Medicare Part A
Medicare Part A is hospital insurance. It covers the costs of a hospital or nursing facility stay, but does not cover long-term care.
What does Medicare Part A cover?
- Inpatient care in a hospital
- Inpatient care in a skilled nursing facility
- Home health care
- Hospice care
Part A does not cover the costs of treatments you receive while in the hospital. That falls under Part B.
Medicare Part B
Medicare Part B is medical insurance that covers doctor visits. It also covers the costs of what CMS calls medically necessary services and preventative services.
- Medically necessary services include those supplies, tests or other services to diagnose and treat your medical condition.
- Preventative services include health care required to detect and treat a condition early on.
Medicare Advantage Plans (Part C)
Medicare Part C is also called Medicare Advantage, a form of private insurance. Enrollment in Part C is voluntary.
These plans are sold through insurance firms that have contracted with the federal government. All Medicare Advantage plans must provide the same coverage as Medicare Part A and Part B, but other benefits vary from plan to plan.
Most Medicare Advantage plans also offer prescription drug coverage. Medicare Advantage plans may also bundle coverage beyond what Original Medicare plans cover and may include vision, hearing and dental coverage.
Medicare Part D (Prescription Drugs)
Medicare Part D covers the cost of prescription drugs and is provided through private insurers. People who enroll in Part D pay a monthly premium. It covers the prescription drugs you buy at your local or mail-order pharmacy.
Most states have more than two dozen private insurers to choose from for Part D coverage. You can often receive prescription drug coverage through a Medicare Advantage plan, essentially combining Parts C and D.
You can also purchase a standalone drug plan to pair with Original Medicare. Different Part D plans come with their own formulary, and there may be some variety in what drugs they cover.
Medicare Supplement Plans (Medigap)
A Medicare Supplement plan, commonly known as Medigap, is an additional coverage option to Original Medicare.
Medicare Part A and Part B only covers 80 percent of services. Adding a Medigap plan covers the remaining 20 percent, eliminating coinsurance or copayments as well as some additional out-of-pocket costs.
What Medigap Can Cover
These policies are sold by private insurance companies. If you have Medicare Advantage, you cannot pair your coverage with supplemental insurance. Medigap is only meant to help with Original Medicare.
Comparing Medicare Plans
When trying to find the best Medicare plan for you, it’s important to be aware of and compare all your options. Having a solid understanding of the differences between each type of plan can help you narrow down your choices.
Types of Medicare Coverage
- Original Medicare
- Medicare Advantage
- Part D Prescription Drug Coverage
When comparing plans, one of the first things you should determine is how much money you are willing or able to spend on your health care coverage. This can help you narrow down your initial options.
You also should make a list of certain conditions or services that are a must for you and should be included in your plan. If you have coverage needs that aren’t available under Original Medicare, it can play a key role in determining if Medicare Advantage is the best option for you.
You will also have to consider where you live if you decide to opt for Medicare Advantage. These plans are available regionally and can vary from city to city. You are likely to have more options if you live in a populated area.
Medicare Advantage plans and Part D plans also come with a star rating system based on what they provide and how well they do. Be sure to take star ratings into account when choosing between plans.
How to Choose a Medicare Plan
- Determine how much you can spend on health care.
- Figure out what treatments, services or coverage are most important to you.
- Look into Original Medicare and Medigap.
- Compare Medicare Advantage and Part D plans available in your area.
- Compare plan ratings.
It’s also important to continuously compare plans each year during enrollment periods. Coverage and plans available near you can change year to year, opening new and potentially better coverage options.
Medicare Enrollment and Eligibility
Not everyone qualifies for Medicare Parts A and B. Still, others may be able to get it if they pay premiums.
Requirements to qualify for premium-free Medicare Part A at age 65 or older:
- You or your spouse had Medicare-covered government employment.
- You or your spouse has worked long enough (usually 10 years) to qualify for Social Security and paid Medicare taxes.
- You are receiving retirement benefits from Social Security or the Railroad Retirement board. Or you are eligible to receive Social Security or Railroad benefits but you have not filed for them.
If you or your spouse didn’t pay Medicare taxes while working but are a U.S. citizen or legal permanent resident and 65 or older, you may be eligible to buy Medicare Part A coverage.
You can also qualify for premium-free Medicare Part A if you are under 65 and require dialysis or are a kidney transplant patient. People younger than 65 diagnosed with Lou Gehrig’s disease (ALS) also qualify the first month after they receive disability benefits.
- Find out if you are eligible for Medicare and how much your expected premium would cost with the Medicare.gov Eligibility Tool. Source: U.S. Centers for Medicare & Medicaid Services
- As far as signing up for Original Medicare if you are eligible, you’ll be automatically enrolled when you turn 65 if you are already receiving Social Security benefits.
Three Ways to Enroll in Medicare
- Online at the Social Security website. It takes less than 10 minutes, according to the Social Security Administration.
- A toll-free phone call to 1-800-772-1213 from 7 a.m. to 7 p.m., Monday through Friday. Deaf and partially deaf people can call TTY 1-800-325-0778.
- In person at your local Social Security office, but you are required to call first to make an appointment.
You should sign up during your 65th birthday month or sometime in the three months before or after your birthday month. If you miss this window, you may face permanent financial penalties.
If you are new to Medicare, you have several periods when you can enroll or change your plan, even if you don’t know when you first become eligible.
Written by: Christian Simmons