Medicare is a United States federal health insurance program. It provides healthcare programs for older people and people with certain disabilities.
The four Medicare parts provide a combination of hospital and medical insurance, flexible coverage options, and prescription drug coverage.
This article looks at the different parts of Medicare, and Medigap. It also discusses enrollment and costs.
We may use a few terms in this piece that can be helpful to understand when selecting the best insurance plan:
- Deductible: This is an annual amount that a person must spend out of pocket within a certain time period before an insurer starts to fund their treatments.
- Coinsurance: This is a percentage of a treatment cost that a person will need to self-fund. For Medicare Part B, this comes to 20%.
- Copayment: This is a fixed dollar amount that an insured person pays when receiving certain treatments. For Medicare, this usually applies to prescription drugs.
The Centers for Medicare and Medicaid Services (CMS) administer Medicare.
In 2018, Medicare provided health insurance for more than 50 million people over 65, and more than 8 million people with specific disabilities or qualifying conditions, including end stage renal disease or amyotrophic lateral sclerosis.
Original Medicare includes Part A and Part B, while Medicare Part D provides prescription drug coverage as an optional add on service for people with original Medicare.
Medicare Part C, also known as Medicare Advantage, provides a bundled alternative to original Medicare, and may include prescription drug coverage.
A person enrolled in original Medicare (Part A and Part B) can visit any doctor, clinic, or hospital in the U.S. that accepts Medicare. Individuals do not need prior permission or authorization from Medicare or their primary care doctor.
The government pays directly for the services, leaving some out-of-pocket cost sharing for the beneficiary to pay.
Medicare Part A
Medicare Part A is hospital insurance. It covers hospital stays as an inpatient, stays in a skilled nursing facility, home health car, and hospice care.
Typically, people do not pay a premium for their Part A coverage, providing they paid enough Social Security taxes in the U.S.
Medicare Part B
Medicare Part B is medical insurance. It covers necessary medical supplies and services to treat an individual’s health condition. This may include care as an outpatient, preventive services such as vaccinations, ambulance services, and durable medical equipment, such as wheelchairs.
If an individual needs temporary home rehabilitative services, such as physical therapy, Part B provides coverage as long as a doctor has ordered the services to treat a health condition.
Part B has an annual deductible, monthly premium, and coinsurance costs.
Medicare Part C
Private, Medicare-approved insurance companies offer Medicare Part C, also called Medicare Advantage plans.
Advantage plans offer the same coverage as original Medicare and may include additional benefits such as gym membership, hearing, vision, and dental care. Most Medicare Advantage plans also include prescription drug coverage.
Advantage plans cap the out-of-pocket costs for covered healthcare. This means that after a person has spent a specified amount on their healthcare during the year, the plan covers all Medicare-approved expenses until the year’s end. Medicare uses a star rating system for Part C plans.
A person can use this online tool to find Advantage plans in their state.
Medicare Part D
People with original Medicare can enroll in Medicare Part D, which helps with prescription drug costs.
Private insurance companies offer Medicare Part D plans, which Medicare classifies using a star rating system. Plan availability and costs differ between providers and location.
Each prescription drug plan has its own formulary, which is a list of the medications it covers. Formularies cover specific generic and brand-name prescription drugs.
Each plan must include certain categories of drugs, but the individual drug may vary by the plan and provider. The formulary may change the drugs it covers at any time. If a person fills a prescription for a drug that is not included in their plan’s formulary, they may have to pay the full retail cost of the drug.
Medicare Part D costs include a monthly plan premium, yearly deductible, copays, and coinsurance.
Private insurance companies offer Medigap, which is also known as Medicare supplement insurance.
A person with original Medicare must pay certain out-of-pocket expenses, including copays, coinsurance, and deductibles. A Medigap plan helps cover these costs. Some Medigap plans also cover additional services such as medical care outside the U.S.
Medicare standardizes the 10 Medigap plans and designates each plan with a letter. This means that plans with the same letter provide the same benefits no matter where in the country someone lives or which provider they use.
Individuals pay a monthly premium for a Medigap policy, plus any premiums for original Medicare.
People can compare the different parts of Medicare in the table below:
|Inpatient hospital stays
|Skilled nursing facility stays
|Outpatient prescription drugs
|Deductible and copays
People can join a Medicare plan at set times during the year. To avoid late enrollment penalties, a person can enroll in Medicare as soon as they become eligible. Enrollment dates include:
- The initial Medicare enrollment period begins 3 months before someone turns 65, includes the birthday month, and ends 3 months later.
- The general enrollment period is from January 1–March 31, for coverage that starts on July 1.
- The special enrollment period is for certain life events, such as moving to a new location.
- The open enrollment period is from October 15–December 7, during which a person can add, drop, or change between Medicare Advantage plans and original Medicare, and add or change Part D plans.
An online tool can help a person find out if they are eligible for Medicare and when they can enroll.
Medicare costs vary depending on the various parts, plans, and a person’s circumstances.
For most people, Medicare Part A is premium-free, providing they pay Medicare taxes for 40 quarters or more. If someone paid less tax, they must pay a Part A premium.
For covered health services, the deductible is $1,484 deductible for each benefit period.
When a person stays in a hospital, they do not have to pay coinsurance for the first 60 days. Between day 61–90, they pay $371 coinsurance daily, which increases to $742 coinsurance per day beyond day 91.
The standard 2021 Part B premium is $148.50 per month, providing an individual’s annual income is not above $88,000. The premium increases in line with income. For example, if someone’s income is over $500,000 per year, the premium costs $504.90.
Premiums vary between Advantage plans. Some insurance providers offer zero-premium plans, also known as premium-free plans. According to the Kaiser Family Foundation (KFF), in 2019, average premiums were $29 a month.
Plans also have copays and deductibles. The out-of-pocket costs may be lower than original Medicare and have an annual limit.
Premiums vary by plan and the drugs they cover. The basic premium in 2021 is $33.06.
Medicare is a U.S. federal health insurance program, with four distinct parts. Between them, Part A, Part B, Part C, and Part D provide healthcare programs for older people and people with specific disabilities.