What is Medicare? A Complete Guide

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What is Medicare? Who qualifies for Medicare? How much does Medicare cost? If you’re nearing retirement age, you may be intimidated about exploiting Medicare for the first time. This comprehensive guide will help you learn more about what Medicare is, who it’s for and the many types and parts of Medicare available to you. 

What is Medicare?

Medicare is a federal health insurance program that primarily assists men and women over the age of 65 with their medical care costs. In most cases, you can enroll in Medicare when you turn 65, but the program is also open to select younger people living with disabilities

There are multiple parts of Medicare, and each part covers a unique aspect of healthcare. The costs of Medicare are significantly lower than private health insurance plans.

Main Types of Medicare Plans

  • Original Medicare
  • Medicare Advantage
  • Medicare Supplemental Coverage or Medigap
  • Prescription Drug Coverage

What is the Difference Between Medicare and Medicaid?

Medicare is an insurance program offered by the federal government intended to make medical care costs more affordable for senior citizens. Medicare primarily serves men and women over the age of 65, but also extends to some younger people with select disabilities.

Medicaid is a state-run assistance program intended to make medical care bills more affordable for low-income populations. Unlike Medicare, you can be any age and be enrolled in Medicaid so long as you qualify based on your income. Medicaid programs vary depending on local governments, and Medicaid enrollees usually pay very little for service. 

Medicare Open Enrollment

Medicare Open Enrollment is the period when you can enroll in, drop or switch a Medicare insurance plan. There are multiple periods of enrollment that you can use to sign onto coverage. 

  • Open Enrollment begins on October 15 and runs until December 7 each year. 
  • Coverage that you purchase during the Open Enrollment period goes into effect on January 1 of the following year. 
  • If you’re currently enrolled in a Medicare Advantage plan, your Open Enrollment period is from January 1 to March 31 of each year. 

Important Terms to Know

As you explore Medicare policy options, you’ll come across a number of unique terms that describe what you’ll pay for coverage and when. This section will help you familiarize yourself with some of the most common terms you’ll see as you compare insurance options. 

What is a monthly premium?

A monthly premium is the amount of money that you must pay every month to keep your Medicare coverage current. Your premium is due to your insurance provider every month, regardless of whether or not you receive treatments or services in any given month. Choosing an affordable premium is especially important for Medicare enrollees, as many seniors live on a limited income.  

What is coinsurance?

Your coinsurance percentage is the percentage of your care costs that you are responsible for paying after your deductible has been met. For example, in 2021, Medicare Part B has a deductible of $203 and a coinsurance percentage of 20%. This means that after you pay $203 towards your own medical care costs that are covered under Part B, you’ll be responsible for paying 20% of the remaining bills that you receive. Medicare will cover the remaining 80%. 

What are out-of-pocket costs?

The term “out-of-pocket costs” refers to costs that you are responsible for paying without assistance from your insurance provider. For example, Medicare Part B’s 20% coinsurance percentage is an out-of-pocket cost because you’re responsible for paying it without your insurance’s help.  

What is Open Enrollment?

Open Enrollment refers to a period when you are eligible to sign up for, switch or drop a Medicare Health Plan. There are multiple Open Enrollment periods, but annual Open Enrollment occurs once a year. Understanding when Open Enrollment is occurring helps ensure that you don’t suffer a gap in health insurance coverage.   

What is an HMO?

A health maintenance organization (HMO) is a type of insurance plan structure that requires you to see care providers within an insurance company’s network. HMOs are more affordable than other types of plan structures but provide you with less choice in which providers you see. Some Medicare Advantage plans operate as HMOs, so you may want to avoid these options if you have a care provider you’re very interested in continuing to see. 

What is a PPO?

A preferred provider organization (PPO) is another type of structure that an insurance plan might follow. With a PPO, you can choose any doctor or specialist who you’d like to see, regardless of whether or not they are in your insurance company’s network. 

Though you can usually save money when you elect to see an in-network provider, you are not required to do so to use your benefits. Some Medicare Advantage plans operate as PPOs, which can guide your decision when selecting an insurance provider.      

What is a PFFS?

A Medicare Private Fee-For-Service (PFFS) Plan is a type of Medicare Advantage Plan in which the plan providers decide how much you pay for each type of service. 

What is prescription drug coverage?

Prescription drug coverage helps you pay for regular medications that you receive outside of a hospital setting. Many new Medicare enrollees are surprised to learn that prescription drugs are not covered by Original Medicare, even if prescribed by a doctor. 

However, you can purchase independent prescription drug coverage (referred to as “Medicare Part D”) from private health insurance companies. 

The 4 Parts of Medicare

There are 4 primary parts of Medicare: Part A, Part B, Part C and Part D. Each part of Medicare offers a specific type of healthcare coverage. Part A and Part B are offered by the federal government, while Part C and Part D are offered by private companies. 

Medicare Part A

Medicare Part A (sometimes referred to as “hospital insurance”) covers inpatient care that you receive within a hospital setting. In most cases, if you or your spouse paid Medicare taxes while you were working, you won’t pay a premium for Medicare Part A coverage. If you or your spouse did not pay into Medicare taxes for at least 40 quarters, you’ll pay between $259 and $471 each month for your Part A coverage.

Medicare Part A has a deductible of $1,484 for inpatient hospital stays for each benefit period. After you pay this deductible, you’ll have a $0 coinsurance payment for the next 60 days you spend in inpatient care. Beyond this, your coinsurance increases until you exhaust your “lifetime reserve,” after which you will be responsible for 100% of your inpatient care costs.

Medicare Part A and Part B are the 2 parts of Original Medicare, providing coverage for a wide range of medical care needs. Original Medicare is only offered by the federal government. 

Best for: Anyone interested in enrolling in Medicare through a simple, streamlined process.

What it covers: 

  • Inpatient care in a hospital
  • Skilled nursing facility care
  • Nursing home care (inpatient, skilled care that’s not long-term care)
  • Hospice care
  • Home health care

What it doesn’t cover:

  • Any type of care or prescription drugs that are not administered to you within a hospital

Medicare Part B

Medicare Part B provides you with outpatient care coverage. It helps you cover a wide range of medical services, including clinical trials, mental health treatments and services, ambulance services and many other types of treatments. Like Medicare Part A, Medicare Part B is a part of Original Medicare and is only offered through the federal government.

The standard Part B premium is currently set at $148.50 per month. However, the amount that you’ll pay for Part B coverage may vary depending on the amount of money that you earned while you were working. Part B also includes a deductible of $203. 

After paying your deductible, you’ll pay a coinsurance rate of 20%. There is no out-of-pocket maximum for Part B coverage, so you’ll pay this 20% no matter how much your medical care costs, with Medicare covering the remaining 80%. 

Best for: Anyone who is enrolling in Original Medicare and who has decided that Part A coverage is right for them. 

What it covers: 

Medicare Part B covers 2 primary areas of care: 

  • Medically necessary services: This includes services necessary to diagnose and treat a medical condition.
  • Preventive services: This includes services needed to prevent future health conditions (for example, flu shots or annual physicals). 

What it doesn’t cover:

  • Inpatient care administered within a hospital setting
  • Most dental treatments and services
  • Prescription drugs
  • Most vision services
  • Any type of service or treatment that is not medically necessary

Medicare Part C

Medicare Part C plans (sometimes referred to as a “Medicare Advantage” plan) provide you with an alternative to Original Medicare. Part C plans combine the coverages included in both Medicare Part A and Part B with a single monthly premium. Medicare Part C plans are offered by private companies authorized to do so by the federal government, and every Part C plan must include all coverages found in Part A and B.

Many people who choose a Part C plan over Original Medicare do so because these plans often include benefits that aren’t covered under the Original Medicare. For example, many Part C plan providers elect to include dental insurance, vision benefits and Part D coverage with their plans. Deductibles and premiums will vary widely by company, and each Part C plan provider sets their own rates and decides which extra benefits to offer. 

Best for: Anyone who is looking for a simpler way to get their Medicare coverage with a single premium or who is interested in extra benefits not covered by Original Medicare (like dental and vision insurance). 

What it covers: 

  • Everything included on both Part A and Part B of Original Medicare
  • Extra coverages that the insurance provider elects to extend

Coverages for Medicare Part C plans vary depending on the plan you choose and the company offering your plan. 

What it doesn’t cover:

  • Anything not covered in the terms of the plan

Medicare Part D

Medicare Part D coverage is prescription drug coverage. Part D plans are an add-on coverage that you can purchase with Original Medicare or a Part C plan if it is not already included. It helps you pay for regular prescriptions that you take to maintain your health. 

Like Medicare Part C plans, Medicare Part D plans are only available through private insurance providers and must offer coverage for a range of drugs dictated by the federal government. Premiums and deductibles on Part D plans will vary by plan and provider.

Best for: Anyone who takes regular prescription drugs to maintain their health outside of a hospital setting. 

What it covers: 

  • Medically-necessary prescription drugs not administered in a hospital setting

What it doesn’t cover:

  • Any type of service-based medical care

Medicare Plan G and Medicare Plan F

Plan G and Plan F are both “Medigap” policy options. Medigap coverages are add-on plans that “fill in the gaps” left by Original Medicare by expanding coverage to more types of bills (like your coinsurance percentage on Part B). 

In some states, Plan G and Plan F also offered high-deductible Medicare plan options. Benefits on Medigap plans are standardized across companies, and every company that elects to offer Medigap coverage must offer the benefits set in place.

As of January 1, 2020, Medigap policies that cover your Part B deductible are no longer allowed to enroll new policyholders. This means that it is no longer possible to purchase Plan F coverage. 

Medicare Plan F

Plan F coverage previously offered the following benefits to policyholders:

  • Part A coinsurance and hospital costs for an additional 365 days after Medicare benefits are exhausted
  • Part B coinsurance
  • First 3 pints of blood
  • Part A hospice care coinsurance or copayment
  • Skilled nursing facility coinsurance
  • Part A deductible
  • Part B deductible
  • Part B excess charge
  • 80% of foreign travel care costs up to plan limits

New Medicare enrollees may no longer sign onto Plan F coverage because this Medigap option covers the Part B deductible. 

Medicare Plan G

Medigap Plan G includes coverage for the following benefits:

  • Part A coinsurance and hospital costs for an additional 365 days after Medicare benefits are exhausted
  • Part B coinsurance
  • First 3 pints of blood
  • Part A hospice care coinsurance or copayment
  • Skilled nursing facility coinsurance
  • Part A deductible
  • Part B excess charge
  • 80% of foreign travel care costs up to plan limits

Plan G coverage can be ideal for anyone concerned about excess charges on their Original Medicare plan, especially their Part B coinsurance. 

Types of Medicare Plans

When you compare Medicare plans, you may see different parts grouped together with a different name. Let’s take a closer look at the types of Medicare plans. 

Original Medicare

Original Medicare is made up of Medicare Part A and Part B coverage. It is offered during specific times of the year and includes most health services you’ll need. 

Best for: Anyone looking for an easy enrollment process and low-cost coverage. 

What it covers: 

  • Inpatient care in a hospital
  • Skilled nursing facility care
  • Nursing home care
  • Hospice care
  • Home health care
  • Medically necessary services and treatments
  • Preventative services

What it doesn’t cover:

  • Prescription drugs
  • Most dental treatments
  • Most vision services
  • Any procedure or treatment deemed to be not medically necessary

Medicare Advantage Plans

Medicare Advantage plans include Medicare Part C coverage. By law, these plans must include every benefit you’d receive if you enrolled in Original Medicare. Most Medicare Advantage plan providers also extend benefits to coverages beyond what is offered by Original Medicare, like prescription drug coverage and dental insurance. 

Best for: Anyone looking for a simpler way to get their Medicare coverage as well as additional benefits and inclusions.

What it covers: 

  • Everything covered on Medicare Part A and Medicare Part B
  • Any add-ons the company elects to offer (Part D coverage is usually included)

What it doesn’t cover:

  • Any medical care needs not covered by Original Medicare and not specified in the policy’s terms

Medicare Supplemental/Medigap Plans

Medicare Supplemental insurance plans (or “Medigap plans” for short) provide you with additional coverage you can add onto your Medicare coverage. Medigap plans help you cover things like your deductible and coinsurance costs, as well as a few healthcare services not covered by Original Medicare. When you compare Medicare Supplemental plans, you’ll see that they are labeled with a letter of the alphabet A through N. Not every insurance company offers every Medigap plan.

Medigap benefits are standardized across companies. This means that it doesn’t matter which insurance provider you purchase your plan from, the company must include a specific list of benefits. For example, if you decide to purchase Plan B coverage, you’ll find the exact same benefits with every insurance company that offers it. 

Best for: Adding extra coverage to your Original Medicare policy.

What it covers: 

Depending on the plan you choose, your Medicare Supplemental plan might include coverage for: 

  • Part A coinsurance and hospital costs after you use up your Part A coverage
  • Part B coinsurance
  • First 3 pints of blood
  • Part A hospice care coinsurance or copayment
  • Skilled nursing facility coinsurance
  • Part A deductible
  • Part B deductible
  • Part B excess charge
  • Foreign travel care costs

You can learn more about the specifics of each Medigap plan here

What it doesn’t cover:

  • Your Part B deductible
  • Any extra cost not specified in your list of benefits

Who is Eligible?

You’re eligible for Medicare if you meet at least 1 of the following criteria:

  • You are over the age of 65 and a citizen of the United States or permanent resident who has lived in the United States for at least five years
  • You are younger than 65, but you have been eligible for Social Security benefits due to a disability for at least 24 months
  • You have amyotrophic lateral sclerosis (ALS) or permanent kidney failure that requires regular dialysis or a kidney transplant

When Do I Apply?

Most Medicare enrollees are automatically enrolled in Original Medicare when they reach 65 years of age. If you are currently collecting Social Security benefits, you will automatically be enrolled in Medicare Part A and Part B without needing to do anything. Your Medicare card will be mailed to you about 3 months before your 65th birthday, and your coverage will go into effect on the first day of the month you turn 65.

If you are collecting Social Security benefits due to a disability, you will also be automatically enrolled in Medicare once you reach your 25th month of disability benefit entitlement. You do not need to do anything to enroll, and your Medicare card will be mailed to you about 3 months before your 25th month of benefit entitlement.

If you are not currently receiving Social Security benefits but you qualify for Medicare, you’ll need to apply during an enrollment period. There are 3 distinct enrollment periods you can use to get coverage.

  • Initial Enrollment: Your Initial Enrollment period begins 3 months before you turn 65 and lasts for 3 months after you turn 65. This is the most advantageous time to apply for Medicare.
  • Open Enrollment: If you miss your Initial Enrollment period, you can sign up for Medicare during Open Enrollment. Open Enrollment begins on October 15 of each year and ends on December 7 of the same year. You can also change Medicare plans during this time.
  • Medicare Advantage Open Enrollment: If you currently have a Medicare Advantage plan, you can switch back to Original Medicare or a different Medicare Advantage plan during Medicare Advantage Open Enrollment. This special Open Enrollment period begins on January 1 of each year and closes on March 31. 

How to Sign Up

If you qualify for Medicare and aren’t enrolled automatically, you can take the following steps to sign onto coverage.

  • Create a Social Security account: The easiest way to sign up for Original Medicare is through the Social Security Administration’s website. Click here to create a profile. After you’ve created your profile, you can immediately apply for Part A and Part B coverage or you can continue to explore other options.
  • Consider Medicare Advantage and Part D coverage: Knowing all of your options can help ensure that you’re getting the best possible coverage. After creating a profile with the Social Security Administration, explore Part C and Part D options near you through Medicare.gov. Visit this website and create an account to get started.
  • Sign onto coverage: If you decide to purchase a Part C plan, complete an application through Medicare.gov. If you’re interested in Original Medicare, enroll through the Social Security administration.

You’ll be guided through the next steps by the government or the company issuing your insurance, depending on the type of coverage you’ve chosen.

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Get Covered with Medicare

Even if you don’t currently qualify for Medicare, it’s a great idea to begin exploring your options early. Knowing the difference between the multiple types of Medicare and Medicare plans available in your area can help ensure that you’re ready to get coverage when your Initial Enrollment period begins. 

If you miss your Initial Enrollment period, you’ll need to wait until Open Enrollment to get covered, which can leave you with a gap in health insurance — so don’t put off exploring Medicare options.  

Frequently Asked Questions

Q

What is the Medicare deductible for 2021?

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What is the Medicare deductible for 2021?
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In 2021, the Medicare Part A deductible is $1,484 for each benefit period, while the deductible for Part B coverage is $203. Deductibles on Medicare Advantage plans and Part D coverage will vary depending on the company issuing the policy.

 

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Q

Is income used to determine medicare premiums?

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Is income used to determine medicare premiums?
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In most cases, your income will not affect your Medicare premiums. If you are considered a “high-income beneficiary” with a modified adjusted gross income of more than $88,000 for an individual taxpayer or $176,000 for a married couple filing jointly, you’ll pay more per month for your Medicare coverage. You’ll never pay more than $504.90 a month for Original Medicare. 

 

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Q

What is Medicare for All?

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What is Medicare for All?
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Medicare for All is a proposed government initiative that would expand Medicare eligibility beyond those with disabilities or who are over the age of 65. As the name suggests, most versions of Medicare for All propose that anyone who qualifies will have the option to enroll in Medicare regardless of age or health status. 

 

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Q

What home health care is covered by Medicare?

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What home health care is covered by Medicare?
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Medicare Part A and Part B provide coverage for the following home health services:

  • Part-time skilled care nursing
  • Physical therapy
  • Occupational therapy
  • Speech-language pathology services
  • Medical social services
  • Part-time or intermittent home health aide services
  • Injectable osteoporosis drugs for women  

Medicare does not cover custodial care or 24/7 in-home care.

 

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