Guide to Medicare

Medicare is a health insurance program funded by the federal government. Access to this program is limited, but it's an affordable option if you're eligible for Medicare coverage.
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Guide to Medicare

Written by Brian Greenberg
CEO / Founder & Licensed Insurance Agent

Last updated: November 24th, 2022

Reviewed by Paige Geisler
Licensed Insurance Agent

Most people don’t even pay a premium for basic Medicare, which covers inpatient care in a hospital setting and some other medical services. Find out more about Medicare below, including who is eligible, how much it might cost you, and how to get this health insurance.

What Is Medicare?

Medicare is health insurance provided by the United States federal government. The government doesn’t directly administrate the program. Instead, the Centers for Medicare & Medicaid Services contract with intermediaries, which are private companies that manage the insurance for various beneficiaries. These intermediaries are tasked with overseeing benefits, claims review, and claims payments following rules set out by CMS.

What Is the Difference Between Medicare and Common Health Insurance Plans?

While private companies administrate the Medicare program, it isn’t quite the same as common commercial or private health insurance plans (such as those you might get from companies like Blue Cross or Cigna). Here are a few differences between Medicare and common insurance plans:

Medicare Private Insurance
Medicare is funded by the federal government, which gets money for the program via payroll taxes. Private insurance companies are funded via premium payments and investments.
CMS manages Medicare, which sets the rules for what types of treatments are covered and how much the program will pay for those services. Common health insurance plans are managed by private companies that can set their own rules within compliance with federal laws like the Affordable Care Act.
Medicare is only available to qualifying older adults or people with certain conditions or disabilities. Private or employer-sponsored health insurance plans are typically eligible to anyone who purchases them in the health care marketplace or any covered employee who opts for benefits from their employer.

Who Can Apply for Medicare?

To be eligible for Medicare, you must meet one of the following conditions:

  • Be 65 or older
  • Be diagnosed with permanent kidney failure that requires you to receive a transplant or dialysis (end-stage renal disease)
  • Have a qualifying disability that keeps you from working (or working over a certain amount)

What Are the Different Parts of Medicare?

Medicare coverage is divided into parts. When enrolling in Medicare, you can choose the parts (or plans) that best meet your needs. Read more about each of these parts, when you might need them, and what they cover below.

What Is Medicare Part A?

Medicare Part A is one component of what is sometimes referred to as Original Medicare. People can enroll in Medicare Part A when they’re 65, are diagnosed with end-stage renal disease, or have been on disability for 24 months. This part of the program is also sometimes called Medicare hospital insurance as it’s geared toward covering inpatient stays.

What Does Medicare Part A Cover?

With a few exceptions, Medicare Part A only pays for covered services in a hospital or inpatient setting. This means you typically must be admitted to a facility for treatment to have this coverage kick in. That includes hospitals, certain types of clinics, skilled nursing facilities, and qualified nursing homes. Medicare Part A also covers some home health and hospice care services.

What Is Medicare Part B?

Medicare Part B is the second component of Original Medicare. It serves as a partner to your Medicare Part A.

If you’re eligible for free Medicare Part A, you can add Part B coverage. If you aren’t eligible for free Medicare Part A, you can buy Part B coverage without also buying Part A coverage as long as you meet the overall requirements for Medicare eligibility.

What Does Medicare Part B Cover?

For an Employer Plan Open Enrollment, the national Open enrollment for an Affordable Care Part B helps pay for the costs of outpatient care. That includes visits to your primary care physician and specialists, ambulance services, blood transfusions, some (very limited) prescription drugs, mental health services, and some durable medical equipment such as canes, walkers, wheelchairs, and hospital beds.

Medicare Part B pays for preventative services, such as checkups with your primary care physician or an annual flu shot. All other covered services are paid on a medically necessary basis, which means your provider may need to prove that they’re medically necessary with a diagnosis and other documentation when sending a claim.

What Is Medicare Part C?

Medicare Part C refers to Medicare Advantage Plans. These are Medicare plans offered through private insurance companies that combine the benefits associated with Parts A and B. You can choose these options instead of Original Medicare, though you may have different premiums and deductibles under a Medicare Advantage Plan. You might also have to use providers in-network with your plan to ensure the best cost savings.

What Does Medicare Part C Cover?

Medicare Advantage Plans must cover all the things Original Medicare covers, which means anything covered under Parts A and B should be covered by your Part C plan. These plans often include additional coverage, which is one reason people choose them. That might consist of coverage for some hearing, vision, or dental services, access to discounted or free fitness programs, and built-in prescription drug coverage. When you have a Medicare Advantage Plan with prescription drug benefits, you don’t have to buy a separate Part D plan.

What Is Medicare Part D?

Medicare Part D is the Medicare prescription drug benefit. If you have Medicare Part A and B, you must buy a Medicare Part D plan to get comprehensive prescription drug coverage. If you have a Medicare Advantage Plan without prescription drug benefits, you’ll also need a Part D plan if you want coverage for prescription drugs.

What Does Medicare Part D Cover?

You can choose from a variety of Medicare Part D plans, and plans aren’t required to cover all possible drugs. Plans do have to provide formularies, which are lists of covered drugs. By looking at those formularies, you can find a plan that covers the types of prescription drugs you take regularly.

Medicare does have rules for what drugs might be covered under these plans, including:

  • The drugs are only available by prescription (the plans won’t cover over-the-counter remedies).
  • The drugs are medically necessary and prescribed for the condition that is medically accepted.
  • The drugs are approved by the Food and Drug Administration.

What Is Medigap Insurance?

Medigap insurance plans are designed to fill the gaps left under Medicare Part A and B. They cover some or all of your copay or coinsurance costs after Medicare Parts A or B pay. Part B coinsurance is 20% of approved charges, and Part A coinsurance can start if you are in the hospital or another facility for more than 60 days. Those expenses can add up. A Medigap plan can help you save a lot of money if you use medical services often during the year.

You can’t use a Medigap plan with a Medicare Advantage Plan. In fact, it’s illegal for someone to sell you a Medigap plan if you have a Medicare Advantage Plan unless you’re buying the Medigap plan to start when you transfer back to Original Medicare (Parts A and B).

Types of Medigap Insurance Plans

Medigap policies are sold by private insurance companies. They aren’t funded or overseen by CMS like Medicare plans are. However, they are standardized and do follow rules. Here’s a look at the types of plans and what plans in each tier must offer:

Medicare Guide - Types of Medigap Insurance Plans

Helps cover Part A coinsurance for hospital stays (or additional days after Medicare benefits are used) Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Helps cover Part B coinsurance Yes Yes Yes Yes Yes Yes only 50% only 75% Yes Yes, with some copay amounts
Helps cover Part A coinsurance for hospice Yes Yes Yes Yes Yes Yes only 50% only 75% Yes Yes
Helps cover Part A coinsurance for skilled nursing Yes Yes Yes Yes Yes Yes only 50% only 75% Yes Yes
Covers Part A deductible Yes Yes Yes Yes Yes Yes only 50% only 75% only 50% Yes
Covers Part B deductible No No YesNo YesNo No No No No

Plan types C and F can’t be sold to anyone who became eligible for Medicare after January 1, 2020.

How Much Does Medicare Cost?

When considering the cost of Medicare plans, you must consider three major factors:

  • Premium costs. This is how much you will pay to buy the plan.
  • Deductible costs. This is how much you pay before the Medicare plan starts to cover costs.
  • Copays or coinsurance. This is how much out-of-pocket you pay for services after you meet the deductible.

How Much Does Medicare Cost

Premium Costs Most people don't pay a premium. If you don't work enough years (and pay taxes for those years), you may have to pay for Medicare Part A. The premiums for 2022 were $274 or $499 per month depending on how long you or your spouse worked. The premiums for 2022 are $170.10 to $578.30 per month, depending on your income. Part B premiums can be deducted from your Social Security benefits payments. Varies by plan, ranging up to $200 per month on average. Varies by plan. You pay an income adjustment of $12.40 to $77.90 if your income is more than $91,000 annually.
Deductibles In 2022, the Part A deductible is $1,556. In 2022, the Part B deductible is $233. Varies by plan. No more than $480 as of 2022.
Copays or Coinsurance Coinsurance depends on how many days you're in a facility. There's no coinsurance for the first 60 days. For days 61-90, the coinsurance is $389 per day. For days 91 and beyond, the coinsurance is $778 per day. Part B coinsurance is 20% of covered charges. Varies by plan. Varies depending on the plan and which phase of coverage you are in. Phases include: Deductible, when you pay 100% of covered costs. Initial coverage period, when you pay 25% of covered costs. Gap, or donut hole, period, when you also pay 25% of covered costs (but the way out-of-pocket costs are documented helps you get out of the gap faster). Catastrophic coverage period, when you pay 5% of covered costs.

How Do You Enroll in Medicare?

If you apply for Social Security benefits for your retirement or apply for benefits through the Railroad Retirement Board, you probably don’t have to apply for Medicare. Your application for retirement benefits is also your Medicare application. As long as you apply for and receive these benefits at least 4 months before your 65th birthday, you’ll automatically get Part A and Part B coverage.

You can, however, opt out of Part B coverage. You can also choose a Part C plan instead of selecting Parts A and B.

If you want to apply for Medicare online and aren’t applying for Social Security benefits, you can do so. Individuals can also apply for Medicare or Medicare Advantage Plans during special enrollment periods, which last for 8 months after employer-based group coverage ends.
The Medicare Open Enrollment period is October 15 through December 7 each year. You can enroll during these times if you miss other enrollment periods or switch plans if you want to make changes to your Medicare enrollments.

Key Takeaways for Potential Medicare Beneficiaries

Medicare isn’t free. You pay for it throughout your life when you pay into the federal tax system via payroll taxes. You will also likely pay some premiums for the benefits, even once you retire. That being said, the premiums and deductibles are often low compared to many common private insurance plans, and the right Medicare coverage can help you manage your health expenses in retirement.

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