Medicare is a federal program that provides health insurance to senior citizens age 65 and older, and to people with qualifying disabilities regardless of age. To be eligible, you must be a legal U.S. resident and a U.S. citizen, or a legal resident living in the United States for at least five consecutive years, up to the month you apply for Medicare coverage.
Signed into law by President Lyndon Johnson in 1965, Medicare initially only had two parts. Referred to as Original Medicare, Part A and Part B covered basic hospital care and outpatient costs, respectively. Since that time, the program has expanded to include more “parts” and, with that, more benefits.
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Understanding Medicare’s parts and how they work together will help you to sign up for coverage in a way that will optimize the care you receive.
Medicare meets the needs of more than 66 million Americans. With an estimated 10,000 baby boomers turning 65 years old every day through 2030, the number of people on Medicare continues to grow.
Medicare Part A: Hospital Coverage
Part A is your hospital insurance. It pays toward hospital expenses, hospice care, skilled nursing facility stays, rehabilitation facility stays, and even certain home healthcare services.
Do not assume this means everything will be paid in the long haul. Medicare has strict rules that limit how long it will cover these services, if at all.
Hospital stays can get expensive. The average cost of a three-day hospital stay is around $30,000. Thanks to Medicare, enrollees only pay a $1,632 deductible for hospital stays in 2024.
Medicare Part B: Medical Coverage
Part B is your medical insurance. It covers a variety of medical services, including healthcare provider visits, ambulance rides, preventive screening tests (e.g., for cancer and heart disease), diabetic supplies, durable medicalequipment, imaging studies, laboratory tests, limited medications, vaccines, wellness visits, and more.
The bulk of health care you receive will be in the outpatient setting, meaning out of the hospital. This could be at a clinician’s office, a laboratory, a radiology facility, or any number of locations.
Even if a service is technically provided at a hospital (e.g., an X-ray is done at a hospital’s radiology department), Medicare does not consider it hospital care unless you are admitted as an inpatient.
Medicare Part C: Medicare Advantage
Medicare Advantage (Part C), formerly known as Medicare+Choice, is an alternative to Original Medicare that was added to the program in 1997. You can either choose Original Medicare (Parts A and B) or Part C. The government does not allow you to have both.
Medicare Advantage plans are offered by private insurance companies that have signed contracts with the federal government. These plans agree to cover everything Original Medicare does, but they may also offer additional services called supplemental benefits.
In 2023, more than 30 million Americans chose Medicare Advantage plans over Original Medicare to make sure they had extended coverage for the services they needed (e.g., dental, hearing, vision). Medicare Advantage plans come at an added cost to beneficiaries, who usually pay higher monthly premiums, deductibles, or copays than they would on Original Medicare.
In addition, there are other types of Medicare health plans. These may provide both Part A and Part B, but many provide only Part B coverage. One type is a Medicare Cost Plan, available in certain areas of the United States.
Medicare Part D: Prescription Drug Coverage
Part D is prescription drug coverage that was signed into law in 2003 under President George W. Bush; it took effect in 2006. Similar to Medicare Advantage, these plans are run by private insurance companies, but they must meet standard guidelines set forth by the federal government.
Each plan has a different medication formulary,and each Medicare beneficiary must decide which plan best fits their needs. No one plan covers all medications.
The National Center for Health Statistics reports that nearly half of Americans are taking at least one prescription medication, and nearly 25% are taking more than three prescriptions. It is easy to see how quickly prescription drug costs can add up.
Medicare Supplement Plans: Medigap
For those who want extra coverage, a Medicare Supplement Plan, also known as a Medigap plan, could be something to consider. These plans are not an official part of the Medicare program, though the Centers for Medicare & Medicaid Services (CMS) standardizes what they cover.
Medigap plans are the same across all states, with the exceptions of Massachusetts, Minnesota, and Wisconsin.
Medigap plans don’t actually add extra benefits to your Medicare coverage. What they do is help pay down costs that Medicare leaves on the table, like deductibles, coinsurance, and copayments. They may even add coverage when you travel overseas.
These plans are offered by private insurers and can only be used in conjunction with Original Medicare, not a Medicare Advantage plan.
Medicare Supplement Plans
When to Enroll in Medicare
The Initial Enrollment Period for Medicare begins three months before and ends three months after your 65th birthday. People on Social Security Disability Insurance (SSDI) become eligible for Medicare in the 25th month of SSDI benefits and are automatically enrolled in the program by the Social Security Administration.
Some peoplemay be eligible for special enrollment periods based on their employment history or other health insurance coverage they have.
There is an Open Enrollment Period every year for people who want to change their Medicare coverage. If you want to, say, change from one private Medicare plan to another, or change from Original Medicare to Medicare Advantage (or vice versa), this is the time to do it.
The open enrollment period happens every year from October 15 to December 7.
Not everyone has to sign up for every part of Medicare, but not signing up on time could cost a bundle in late fees if you choose to enroll later. The late fees for Part A could last years, but Part B and Part D late penalties could last as long as you have Medicare.
For the record, choosing a Medicare Advantage plan instead of Original Medicare will not get you out of paying Part A and Part B penalties.
How Much Medicare Costs
Medicare is often referred to as socialized medicine, but it isn’t free. Though it may be more affordable than some private insurance plans, many Americans struggle to afford health care.
For those who meet certain asset and income requirements, there are Medicare savings programs that may help to keep costs down.
- Part A: Monthly premiums for Part A are free for people who have worked more than 40 quarters (10 years) of Medicare-taxed employment. Their spouses, and sometimes their former spouses and widows, are also eligible for free premiums. Those who have worked less than that will pay hundreds of dollars every month. For 2024, that is as much as $278 per month (for 30 to 39 quarters) to $506 per month (for less than 30 quarters of work). Additional Part A costs include a $1,632 deductible in 2024 for a hospital stay up to 60 days within the benefit period. For longer hospital stays, there is a daily $408 copayment for days 60 to 90 and a $816 copayment for days 91 to 150. After that, you pay all costs.Stays in a skilled nursing facility are covered for 20 days, after which time there is a copayment of $204 per day for days 21 through 100. After that, you pay all costs.
- Part B: Everyone pays monthly premiums for Part B, and the more you earn, the more you will pay. Medicare looks to your income tax returns from two years ago to determine the cost of your premiums. There is also a one-time deductible to pay every year before your benefits kick in ($240 in 2024). With the exception of preventive screening tests, the welcome to Medicare visit and annual wellness visitsare free if your healthcare provider agrees to Medicare’s physician fee schedule. You should expect to pay a 20% coinsurance for any Part B services you receive.
- Part C (Medicare Advantage) and Part D: Premiums, deductibles, and copayments for Medicare Advantage and Part D plans will vary based on the private insurance company that offers the plan. However, if your income exceeds a certain amount, CMS requires that you pay a fee known as the Income-Related Monthly Adjustment Amount (IRMAA) in addition to your monthly Part D premiums. This charge will also be added if you are on a Medicare Advantage plan that includes prescription drug coverage. The IRMAA is paid directly to the government, not to the private insurance company that hosts your plan.
Help Paying Medicare Premiums: Programs to Know
Where to Find Help
Because Medicare is a complicated program with ever-changing rules and regulations, it can get tricky to know how to proceed.
You may want to enlist the help of your StateHealth Insurance Assistance Program if you have any questions or concerns about your Medicare coverage. These are volunteer-run programs that receive funding from the federal government to guide you. Alternatively, you can hire private consultants to assist you with any issues you may have.
