Medicare is the federal health insurance program for people aged 65 and older, as well as certain younger people with disabilities or specific medical conditions. It is divided into four parts — A, B, C, and D — each covering different types of healthcare services. Understanding how each part works is essential for making informed decisions about your healthcare coverage.
Medicare Part A — Hospital Insurance
Medicare Part A covers inpatient hospital care, skilled nursing facility care, hospice care, and some home health services. Most people do not pay a premium for Part A because they or their spouse paid Medicare taxes for at least 10 years while working.
Part A coverage includes:
- Inpatient hospital stays including semi-private rooms, meals, and general nursing
- Skilled nursing facility care following a qualifying hospital stay
- Hospice care for people with a terminal illness
- Limited home health services
Part A does not cover everything. It comes with a deductible for each benefit period and coinsurance costs for extended hospital stays.
Medicare Part B — Medical Insurance
Medicare Part B covers outpatient medical services including doctor visits, preventive care, lab tests, X-rays, mental health services, and durable medical equipment such as wheelchairs and walkers.
Most people pay a monthly premium for Part B. The standard premium amount is set each year by the federal government and may be higher for people with higher incomes.
Part B coverage includes:
- Doctor visits and specialist consultations
- Preventive services such as flu shots, mammograms, and colonoscopies
- Outpatient mental health services
- Physical therapy, occupational therapy, and speech therapy
- Durable medical equipment
- Some home health services
Part B covers 80 percent of approved costs after the annual deductible is met. You are responsible for the remaining 20 percent with no out-of-pocket maximum unless you have supplemental coverage.
Medicare Part C — Medicare Advantage
Medicare Part C, also called Medicare Advantage, is an alternative way to receive your Medicare benefits through a private insurance company approved by Medicare. These plans must cover everything that original Medicare covers and most include additional benefits such as dental, vision, and hearing coverage.
Medicare Advantage plans often include prescription drug coverage as well, combining the benefits of Parts A, B, and D into a single plan.
Key features of Medicare Advantage:
- Offered by private insurers approved by Medicare
- Must cover all Part A and Part B services
- Often includes extra benefits not covered by original Medicare
- Typically requires using a network of doctors and hospitals
- Usually has an out-of-pocket maximum which original Medicare does not have
Medicare Advantage plans vary widely in cost, coverage, and network. It is important to compare plans carefully during the annual enrollment period.
Medicare Part D — Prescription Drug Coverage
Medicare Part D provides prescription drug coverage. It is offered through private insurance companies approved by Medicare and can be added to original Medicare as a standalone plan or may be included in a Medicare Advantage plan.
Each Part D plan has its own list of covered drugs called a formulary. Plans are organized into tiers with different cost sharing levels for generic drugs, preferred brand drugs, and non-preferred brand drugs.
Key features of Medicare Part D:
- Available as a standalone plan added to original Medicare
- Often included in Medicare Advantage plans
- Each plan has its own formulary and cost structure
- Premiums, deductibles, and copays vary by plan
- Higher income beneficiaries may pay an income-related surcharge
When to enroll in Medicare
Most people become eligible for Medicare at age 65. There are several enrollment periods to be aware of:
- Initial enrollment period — a seven month window that begins three months before your 65th birthday month and ends three months after
- General enrollment period — January 1 through March 31 each year for people who missed their initial enrollment period
- Annual open enrollment period — October 15 through December 7 each year when you can switch between original Medicare and Medicare Advantage or change your Part D plan
- Special enrollment periods — available in certain situations such as losing employer coverage
Late enrollment penalties
Enrolling late in Medicare can result in permanent premium penalties. Missing your Part B enrollment window without qualifying for a special enrollment period results in a 10 percent penalty added to your premium for each 12 month period you were eligible but did not enroll. Part D has a similar late enrollment penalty.
Original Medicare vs Medicare Advantage
Choosing between original Medicare and Medicare Advantage is one of the most important decisions a new Medicare enrollee faces:
- Original Medicare — includes Parts A and B, accepted by most doctors and hospitals nationwide, no referrals needed to see specialists, no out-of-pocket maximum
- Medicare Advantage — combines Parts A, B, and usually D, often includes extra benefits, typically has an out-of-pocket maximum, usually requires staying within a provider network
What Medicare does not cover
Medicare does not cover everything. Services not covered by original Medicare include:
- Long term care in a nursing home
- Routine dental care
- Routine vision care and eyeglasses
- Hearing aids
- Most care received outside the United States
Supplemental insurance called Medigap can help cover some of the gaps in original Medicare coverage such as deductibles, coinsurance, and copays.
Key terms to know
- Premium — the monthly amount you pay for coverage
- Deductible — the amount you pay out of pocket before coverage kicks in
- Coinsurance — your share of costs after the deductible is met, usually a percentage
- Copay — a fixed amount you pay for a covered service
- Formulary — a list of drugs covered by a Part D plan
- Medigap — supplemental insurance that covers gaps in original Medicare
- Benefit period — the way Medicare measures your use of hospital and skilled nursing facility services
Sources
- Medicare.gov — Official U.S. Government Medicare Information
- Centers for Medicare and Medicaid Services
- USA.gov — Medicare
This article is for general informational purposes only and does not constitute legal, financial, or medical advice. Laws and program details are subject to change. Consult a licensed insurance professional or visit Medicare.gov for the most current information.