Understanding Medicare

What Is Medicare?

Medicare is the federal health insurance program primarily for people age 65 and older, as well as certain younger people with disabilities and people with End-Stage Renal Disease. Medicare is not a single program — it has multiple parts, each covering different types of healthcare. Understanding which parts you or your loved one has — and what each covers — is essential for managing healthcare costs.

Medicare is funded by a combination of payroll taxes paid during working years, monthly premiums, and general federal revenues. Most people who worked in the U.S. for at least 10 years qualify for Part A without a premium, but Parts B, C, and D involve monthly costs.

Part A: Hospital Insurance

Medicare Part A covers inpatient hospital care, skilled nursing facility (SNF) care under specific conditions, hospice care, and some home health care.

What Part A Covers

• Inpatient hospital stays: Semi-private room, meals, general nursing, drugs as part of inpatient care, and other services
• Skilled nursing facility care: After a qualifying 3-day hospital stay, Medicare covers up to 100 days of skilled nursing care. Days 1-20 are fully covered; days 21-100 require a daily copay. After 100 days, Medicare pays nothing.
• Hospice care: For people with terminal illness who choose comfort care instead of curative care
• Home health care: Skilled nursing or therapy services at home when specific criteria are met

Part A Costs

Most people don't pay a monthly premium for Part A (they worked and paid Medicare taxes for 40+ quarters). However, there is a deductible per benefit period (in 2024, approximately $1,632) and coinsurance for longer hospital stays. These amounts change annually.

Part B: Medical Insurance

Medicare Part B covers medically necessary services and preventive care. Unlike Part A, Part B requires a monthly premium for most people.

What Part B Covers

• Doctor visits and specialist care
• Outpatient hospital services
• Preventive services (annual wellness visit, flu shots, cancer screenings, mammograms, and more)
• Mental health services (outpatient)
• Durable medical equipment (walkers, wheelchairs, hospital beds for home use)
• Lab tests, X-rays, and other diagnostic services
• Ambulance services
• Some home health services

Part B Costs

The standard Part B premium in 2024 is approximately $174 per month, but this increases for higher-income individuals through a surcharge called IRMAA (Income-Related Monthly Adjustment Amount). There is also an annual deductible (approximately $240 in 2024), after which Medicare pays 80% and you pay 20% for most Part B services — with no out-of-pocket cap under Original Medicare.

Part C: Medicare Advantage

Medicare Advantage plans (formerly called Medicare+Choice or Medicare Part C) are an alternative way to receive Medicare benefits. These plans are offered by private insurance companies approved by Medicare and must cover at least what Original Medicare covers.

How Medicare Advantage Differs from Original Medicare

• Usually includes prescription drug coverage (Part D) bundled in
• Often includes extra benefits: dental, vision, hearing, fitness programs
• May have low or $0 monthly premiums beyond the Part B premium
• Typically uses provider networks — you may need to use in-network doctors
• Usually has out-of-pocket maximums (Original Medicare does not)
• Prior authorization may be required for some services

Choosing between Original Medicare and Medicare Advantage is one of the most significant healthcare decisions a person will make at 65. The right choice depends on health status, preferred doctors, prescription needs, and financial situation. The SHIP program in your state offers free counseling to help with this decision.

Part D: Prescription Drug Coverage

Medicare Part D provides prescription drug coverage. It is offered through private insurance companies approved by Medicare. If you have Original Medicare, you add a standalone Part D plan. Many Medicare Advantage plans include Part D coverage.

Key Features

• Each plan has a formulary (list of covered drugs) — verify your specific drugs are covered
• Plans have tiers, and costs vary by tier
• Deductibles, copays, and coverage limits vary by plan
• The Extra Help (Low Income Subsidy) program helps low-income individuals with Part D costs

Late Enrollment Penalty

Medigap / Medicare Supplement Insurance

Original Medicare leaves significant out-of-pocket costs — the 20% coinsurance for Part B services with no cap, hospital deductibles, and skilled nursing coinsurance. Medigap (Medicare Supplement) policies, sold by private insurers, help fill these gaps.

• There are standardized Medigap plan types (Plan A, B, C, D, F, G, K, L, M, N) — all companies must offer the same benefits for the same plan letter
• Plans F and C are no longer available to those new to Medicare after January 2020
• Plan G is currently one of the most popular comprehensive options for new enrollees
• You cannot have both Medigap and Medicare Advantage — they are mutually exclusive
• Medigap does not include prescription drug coverage

Medigap plans often provide the most flexibility in choosing doctors and hospitals — useful for those with complex medical needs who see multiple specialists.

Enrollment Periods

Medicare has strict enrollment windows. Missing these windows can result in permanent late enrollment penalties or gaps in coverage.

• Initial Enrollment Period (IEP): A 7-month window beginning 3 months before your 65th birthday month, including the month of your birthday, and ending 3 months after
• General Enrollment Period (GEP): January 1 – March 31 each year, for those who missed their IEP (late enrollment penalties may apply)
• Special Enrollment Period (SEP): Available if you or your spouse had employer coverage during your IEP
• Annual Open Enrollment Period: October 15 – December 7 each year — change Medicare Advantage or Part D plans
• Medicare Advantage Open Enrollment Period: January 1 – March 31 — switch MA plans or return to Original Medicare

Understanding Medicare Costs

Medicare has multiple types of costs. Understanding them helps in planning and budgeting:

• Premium: Monthly amount you pay to have coverage (Part B, Part D, or Medicare Advantage)
• Deductible: Amount you pay before Medicare starts paying
• Copayment: Fixed amount you pay for a service (e.g., $20 per visit)
• Coinsurance: Percentage you pay after meeting your deductible (e.g., 20% under Part B)
• Out-of-pocket maximum: Medicare Advantage has one; Original Medicare does not (without Medigap)

Income-based adjustments: Higher-income Medicare beneficiaries pay more for Part B and Part D through IRMAA (Income-Related Monthly Adjustment Amounts). These are based on income from 2 years prior.

What Medicare Does NOT Cover

This is one of the most important things families need to understand. Medicare does not cover:

• Long-term custodial care: Daily help with bathing, dressing, eating, and other activities of daily living — whether at home, in assisted living, or in a nursing home. This is the care most families eventually need, and Medicare does NOT cover it.
• Most dental care: Routine dental exams, cleanings, fillings, and dentures are generally not covered
• Most vision care: Routine eye exams and glasses are not covered (some conditions are)
• Hearing aids: Not covered by Original Medicare
• Most care outside the United States
• Cosmetic surgery
• Most acupuncture (with limited exceptions)

Free Help Is Available

The State Health Insurance Assistance Program (SHIP) provides free, unbiased Medicare counseling in every state. SHIP counselors are trained volunteers who can help you:

• Understand Medicare options and compare plans
• Identify programs that help with Medicare costs
• Review Medicare Summary Notices for billing errors
• Navigate appeals if coverage is denied

Find your state's SHIP at shiphelp.org or call 1-800-MEDICARE (1-800-633-4227).

Also visit Medicare.gov for official information, plan comparison tools, and the Medicare Plan Finder.