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What is Medicare?

Medicare is federal health insurance for people aged 65+ or younger people with certain disabilities

Learning about Medicare options can feel overwhelming. Many aren’t sure where to begin. With several parts, plan options, and coverage stages, it can be difficult to know which method of receiving your benefits is the best for you. However, once you understand the basics of Medicare, choosing your coverage options will be much easier. This is a general overview to help you understand what Medicare is and what it will cover.

What is Medicare?

Medicare is a government-run health insurance program. It helps pay for some of the costs of medical care, including doctor visits, inpatient hospital stays, outpatient services, and prescription drugs.

The initial eligibility age for Medicare is 65. Some people can get Medicare earlier if they are disabled or have specific conditions, like End-Stage Renal Disease (ESRD) that requires dialysis or Lou Gehrig’s disease (amyotrophic lateral sclerosis).

The total Medicare enrollment number soared to 66.4 million in 2022, according to the Centers for Medicare and Medicaid Services (CMS). Out of these millions of people, 55.9 million were aged 65 or older, and 7.9 million were younger than 65 with a qualifying disability.

What Medicare is not

Medicare is an important safety net for seniors and people with disabilities. It helps pay for some healthcare costs, which can be expensive. However, it’s important to remember that Medicare does not cover all medical expenses. There may be out-of-pocket costs associated with doctor visits, hospital stays, procedures, or prescription drugs that you will still be responsible for.

Medicare is also not a welfare program. To qualify for free Medicare Part A, you must have worked and paid Medicare taxes for at least 10 years to be eligible for benefits. However, you can still be eligible for Medicare Part A with less than 10 years of work history if you meet all other criteria, but you might have to pay a Part A premium. There are some exceptions, but this is the general rule.

Although similar in name, Medicare is not the same as Medicaid.

Medicare vs. Medicaid

Many confuse Medicare with Medicaid. Medicaid is a health insurance program primarily for low-income people who have limited resources, though like Medicare it also sometimes provides coverage for certain people with disabilities. It is the main source of healthcare coverage for many women, children, and families who are not eligible for Medicare.

On the other hand, Medicare is for people 65 and older and people with certain disabilities. It is a health insurance program administered by the federal government that helps make medical care more affordable.

Medicare and Medicaid are both government-run health insurance programs, but there are important differences in eligibility, costs, and coverage. For example, some Medicaid services that aren’t covered by Medicare include routine dental care and optometry services.

RELATED: Compare Medicare vs. Medicaid

4 parts of Medicare

Medicare has four different parts with each covering a different set of medical costs. 

  • Part A: Inpatient hospital stays, skilled nursing care, some home health care, and hospice care
  • Part B: Doctor visits, lab tests, medical equipment, outpatient medical services, and some preventive care.
  • Part C: Medicare Advantage plans are offered by private insurance companies approved by Medicare, covering all of the services listed in Parts A and B and typically Part D. It is a privately administered alternative to being enrolled in Original Medicare (Parts A and B).
  • Part D: Prescription drug coverage

Medicare Part A

Coverage: Part A covers hospital stays, skilled nursing facility care, home health, and hospice care. 

Eligibility: You must be a U.S. resident who is eligible for Medicare. For premium-free Part A services, you must have worked and been paying your Medicare taxes for at least 10 years. Sometimes, eligibility may be based on your spouse’s work history. 

Costs: Part A is free for those who have worked and paid Medicare taxes for at least 10 years. If you’ve worked less than 10 years, then you may have to pay a Part A premium. The Part A hospital deductible for 2024 is $1,632 for each benefit period. Part A coinsurance for days 61-90 of hospitalization is $408 per day. Coinsurance for 60 lifetime reserve days of hospitalization is $816 per day. However, these coinsurance costs may be covered if you have a Medigap policy.

Medicare Part B

Coverage: Part B of Medicare helps seniors pay for some of the costs of doctor visits, outpatient care, durable medical equipment, and some prescriptions administered by a healthcare provider. It also covers preventive services like cancer screenings.

Eligibility: You must be a U.S. resident who is eligible for Medicare. 

Costs: The monthly Part B premium for 2024 is $174.70. However, this may increase based on your income. The 2024Part B deductible is $240, and coinsurance for covered services varies, though most services are covered at 80% with a 20% coinsurance.

RELATED: How much does Medicare Part B cost?

Medicare Advantage (Part C)

Coverage: Medicare Advantage is a private health plan that covers many of the services in Parts A and B. It is a privately-administered version of Medicare offered by insurance companies approved by Medicare. If you are enrolled in a Medicare Advantage plan, you are no longer enrolled in Original (fee-for-service) Medicare.

Eligibility: To be eligible for Medicare Advantage, you must have Part A and B. 

Costs: The average premium for Medicare Advantage in 2022 is $18.50 per month. You may have to pay a monthly premium, but not always. Some Medicare Part C plans don’t have a monthly premium but may include a deductible and require a copay at the time of each appointment.

RELATED: Compare Medicare Advantage plans

Medicare Part D

Coverage: Part D is not part of Original Medicare. It’s optional coverage Medicare consumers can enroll in to pay for prescription drug costs.

Eligibility: To be eligible for Medicare prescription drug coverage, you must be enrolled in Part A and/or Part B. 

Costs: The national base monthly premium for Part D is $34.70 per month but varies by income. Not all Part D plans have a deductible, but some do. The maximum Part D deductible for 2024 is $545. Copays or coinsurance for covered drugs will vary by plan. 

RELATED: Medicare Part D costs

What isn’t covered by Medicare?

Medicare covers many but not all medical services. Here’s a list of common services that Medicare likely won’t cover:

  • Long-term care like nursing homes or custodial care
  • Eye exams and glasses*
  • Cosmetic surgery that is not medically necessary
  • Routine dental care and dentures*
  • Alternative therapies like acupuncture
  • Weight loss programs
  • Hearing aids*

* Medicare coverage of these items may change soon

How to enroll in Medicare or make changes to your plan

There are a few different ways to enroll in Medicare coverage. Some will receive benefits automatically when they apply for or are receiving Social Security, while others will need to apply for coverage. You can also choose to enroll in Original Medicare (Parts A and B) or a Medicare Advantage plan (Parts A, B, and typically D administered through a private plan).

RELATED: Original Medicare vs. Medicare Advantage

The best time to sign up for Medicare is during the Initial Enrollment Period. This seven-month period starts three months before the month you turn 65, includes the month you turn 65, and ends three months after the month you turn 65. 

During this time, you can enroll in Medicare without penalty. After the Initial Enrollment Period ends, you may pay a permanent premium penalty for Part B and Part D coverage if you decide to sign up. You can delay Part B or Part D enrollment without penalty if you have creditable coverage. Late penalties may also be eliminated if you qualify for the Medicare Savings Program or Medicare Extra Help.

To make changes to Part A and B after initial enrollment, there is an Open Enrollment Period every year from Jan. 1 to March 31. The Open Enrollment Period is from Oct. 15 to Dec. 7 to make changes to Part D. 

You can also enroll or make changes during Special Enrollment Periods when significant events impact your life. This includes events like losing your job or health coverage.

Many people who are covered by Medicare also have private health insurance. This is called “coordination of benefits.” When you have two or more insurance plans, each plan pays a portion of the costs for covered services. 

The plan that pays the most for a service is called the “primary payer.” The plan that pays second or pays some of the leftover costs is called the “secondary payer.” While the secondary payer helps cover what the primary payer doesn’t, they may still not cover the entire amount. If a service isn’t covered, neither plan pays. Sometimes Medicare is the primary payer, sometimes it’s secondary, depending on a multitude of factors.

How to save money on Medicare-related costs

There are other programs available that may help you save money on Medicare-related costs. Some of these programs include:

  • SingleCare: This free service offers discounts on medications. Compare pharmacy prices, get a free discount card, and save up to 80% on your medications at more than 35,000 nationwide pharmacies.
  • Medigaps: Medigap policies are a type of private medical insurance that pays some Medicare costs associated with Part A and B services. These are also referred to as Medicare supplement insurance.
  • Medicare Savings Programs: State programs that help pay for Medicare Part A or Part B premiums, deductibles, and coinsurance.
  • Extra Help: Federal funds are available to low-income Medicare Part D recipients.

For more information on these programs or to see if you’re eligible, please visit medicare.gov or contact your local Medicare office.

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