What is Medicare?

Medicare is divided into four parts: Part A, Part B, Part C, and Part D. Each component provides specific coverage and varies in price:

• Part A includes hospitalization and related services.
• Part B addresses doctor visits and outpatient medical care.
• Part C provides the same benefits as Parts A and B but is only available through private insurers.
• Part D covers prescription drugs.

Here's what you should know about Medicare coverage and some of the associated costs.

Medicare eligibility

If you are at least 65 years old and a U.S. citizen or permanent legal resident for the past five years, you are eligible for Medicare. Medicare also covers some disabled people under the age of 65. After a two-year waiting period, people who receive Social Security disability insurance are usually eligible for Medicare. Those with end-stage renal disease (permanent kidney failure) are automatically enrolled when they sign up, while those with amyotrophic lateral sclerosis (ALS, also known as Lou Gehrig's disease) are eligible the month their disability begins.

Medicare at a glance

Original Medicare

Original Medicare refers to Medicare Parts A and B, which are administered by the federal government. People can go to any doctor who accepts Medicare assignment, and the government pays a significant portion of the bill.

Medicare Part A (hospital insurance)

Part A of Medicare covers inpatient hospital or skilled nursing facility care, but not custodial or long-term care. Part A also contributes to the cost of hospice care and some home health care.

In 2023, Medicare Part A has a $1,600 deductible and coinsurance, which means patients pay a portion of the bill. For the first 60 days of inpatient hospital care, for example, there is no coinsurance, but patients typically pay $400 per day in 2023 for the 61st through 90th days of hospitalization, and more after that.

Most people do not have to pay Medicare Part A premiums if they or their spouse have paid Medicare taxes for at least ten years. (Medicare taxes are deducted from most working people's paychecks; check your Social Security statement, which is available through the Social Security website, to see if you qualify.) If you don't qualify for premium-free Part A, it's still available to most, but with a high monthly premium. In 2023, you pay monthly premiums for Part A of up to $506 per month.

Medicare Part B (medical insurance)

Part B of Medicare covers doctor visits as well as other medically necessary services and supplies. Preventive services or health care to prevent illness are included, as are ambulance services, durable medical equipment, mental health coverage, and a few types of outpatient prescription drugs.

In 2023, the monthly premium for Medicare Part B will begin at $164.90. Singles with AGIs of more than $97,000 and married couples filing jointly with AGIs of more than $194,000 pay higher premiums. In 2023, the deductible for Medicare Part B is $226. Following that, you are typically required to pay 20% of the Medicare-approved amount for services and supplies.

The Medicare Part B penalty

If you don't have group health insurance through a large employer and don't sign up for Medicare Part B at the age of 65, but later decide you need it, you'll likely have to pay a penalty of 10% of the standard premium for each 12-month period you delayed. This late enrollment penalty will follow you for the rest of your life.

If you had health insurance through your job or the job of your spouse or partner when you first became eligible, you can avoid the penalty. You must sign up within eight months of the expiration of your previous coverage and provide proof of group insurance after reaching the age of 65.

Medicare Advantage (Medicare Part C)

Medicare Advantage, also known as Medicare Part C, is a type of health plan provided by private insurance companies that includes the benefits of Parts A and B, as well as Part D (prescription drug coverage). You must continue to pay your Part B premium, as well as any additional premiums owed to the insurer. However, many Medicare Advantage plans are available at no cost to the insured.

These bundled plans may include additional coverage, such as cost-sharing for vision, hearing, and dental care.

In contrast to Original Medicare, Medicare Advantage plans have an annual out-of-pocket cost cap. In 2023, you could pay as much as $8,300 out of pocket. HMOs and PPOs are the most common types of Medicare Advantage plans. They only provide coverage in specific geographic areas, generally require pre-authorization and referrals, and charge copays and coinsurance for the majority of health-care services.

Medicare Part D (prescription drugs)

Part D of Medicare covers the cost of prescription drugs, both generic and brand name. Plans are provided by private insurers and require a monthly premium of $31.50 in 2023. Beneficiaries with higher incomes pay more.

As with Part B, there is usually a late penalty premium if you do not enroll when you first become eligible. After 63 days without creditable drug coverage, the Part D penalty is 1% of the national base beneficiary premium, which is $32.74 per month in 2023, multiplied by the number of months you are late enrolling.

Medigap (Medicare Supplement Insurance)

Medigap, or Medicare Supplement Insurance, is a private health insurance policy that you can purchase to help pay your share of the costs not covered by Medicare Part A and Part B, such as deductibles, coinsurance, and some health care if you travel outside the United States. Long-term care, prescription drugs, dental, vision, hearing aids, or private nursing care are not covered by Medigap plans.

In most states, there are ten different types of Medigap plans. To purchase a Medigap policy, you must have Medicare Parts A and B. Medigap is not interchangeable with Medicare Advantage; you must choose one or the other.

Enrolling in Medicare

If you receive Social Security benefits at the age of 65, you will be automatically enrolled in Medicare Part A, which covers hospital costs, and Part B, which covers doctor visits. If you want Medicare Part D prescription drug coverage, you must enroll — it is not automatic.

If you do not receive Social Security benefits, you will enroll in Medicare through the Social Security Administration's website. To avoid permanent penalties and long waiting periods for your insurance to begin, you should do so within a seven-month window around your 65th birthday (which includes the three months before the month you turn 65, your birthday month, and the three months after your birthday month).

If you want Medicare Supplement Insurance, or Medigap, you must sign up during the six-month Medigap enrollment period, which begins the month you turn 65 and enroll in Medicare Part B. Private insurers that offer Medigap plans must accept you if you sign up during that period. Otherwise, there is no guarantee that they will sell you a Medigap policy, and they may charge you more for one.

Medicare enrollment periods

If you've already claimed Social Security or qualify due to disability, you'll be automatically enrolled in Medicare Parts A and B when you turn 65. Otherwise, you must proactively enroll yourself. Here are some examples:

• Initial enrollment period: If you are not automatically enrolled in Medicare, there will be an initial enrollment period of seven months around your 65th birthday: three months before and after your birthday month, plus your birthday month. (If your birthday is on the first of the month, this period includes the four months preceding and two months following your birthday month.)
• General enrollment period: If you do not apply for Medicare during your initial enrollment period, you will have to wait until the general enrollment period, which runs from January 1 to March 31 each year. Coverage begins the month after you sign up, and late fees may apply.
• Special enrollment period: This is a time when you can join Medicare or make changes to your coverage because of certain life events, such as leaving a job or moving out of your plan's coverage area.

If you want to change your coverage later, you can do so during the annual Medicare open enrollment period, which runs from October 15 to December 7 each year. (If you have Medicare Advantage, you can also make changes during open enrollment, which runs from January 1 to March 31 each year.)

How to enroll in Medicare

If you want to enroll yourself, you have three options:

• Apply for Medicare online at Social Security’s site.
• Call Social Security at 800-772-1213 for assistance.
• Contact the Social Security Administration in your area.

The online application process usually takes less than ten minutes. The Social Security Administration has reopened and requires masks as well as a physical distance of at least six feet. Offices prefer that you come alone unless you require assistance, and you should dress appropriately for the weather because you may be required to wait outside. If you are unable to enroll online, call to inquire about in-person appointment availability. Appointments are strongly advised.

What Medicare doesn't cover

Common expenses that Medicare does not cover (and that are specifically excluded from the Medicare law) are as follows:

• Hearing aids and examinations for fitting.
• Eye examinations and glasses.
• Dentures.
• The majority of dental care.
• Unless related to diabetes or medically necessary due to injury or disease, most foot care.
• Medical care overseas.
• Cosmetic surgery.
• Massage therapy.

Long-term care, also known as custodial care, is the most significant potential uninsured expense. Medicaid, the federal health-care program, pays custodial costs but is typically reserved for those with low income and few savings.

Medicare vs. Medicaid

Medicare is an insurance program that primarily serves people over the age of 65, regardless of income level, as well as those on SSDI and suffering from certain illnesses. Medicare is a federal program that is the same throughout the United States.

Medicaid is a low-income assistance program that serves people of all ages, and patient financial responsibility is typically minimal or nonexistent. Medicaid is a federal-state program that varies by state.