Medicare is a U.S. government insurance program for people over 65 years old or younger people with certain disabilities. It covers a range of healthcare services, including doctor visits, hospital stays, and prescription drugs.
In 1965, the U.S. government created Medicare to provide health coverage and financial security for older Americans who lacked access to insurance through employment.
The program initially covered only hospital stays (Part A), with optional supplemental coverage for doctor services (Part B). In 1997, the program added Medicare Part C (also called Medicare Advantage) to allow Health Maintenance Organizations (HMOs) to participate in providing coverage. The program added Part D, which covers prescription drugs, in 2003.
This article summarizes the structure of Medicare, eligibility and enrollment rules, annual costs, and more.
Learn more about the history of Medicare.
Glossary of Medicare terms
- Out-of-pocket cost: This is the amount a person must pay for care when Medicare does not pay the total amount or offer coverage. Costs can include deductibles, coinsurance, copayments, and premiums.
- Premium: This is the amount of money someone pays each month for Medicare coverage.
- Deductible: This is an annual amount a person must spend out of pocket within a certain period before Medicare starts to fund their treatments.
- Coinsurance: This is the percentage of treatment costs that a person must self-fund. For Medicare Part B, coinsurance is 20%.
- Copayment: This is a fixed dollar amount a person with insurance pays when receiving certain treatments. For Medicare, this usually applies to prescription drugs.
Medicare consists of four parts: Part A, Part B, Part C (Medicare Advantage), and Part D. Parts A and B are together referred to as Original Medicare and cover the majority of services.
The following coverage applies to each Medicare part:
- Part A: This covers inpatient hospital care and related services, as well as skilled nursing facility stays and hospice care for eligible individuals.
- Part B: This covers general medical and outpatient services, including general doctor visits, preventive services, durable medical equipment (DME), tests and screenings, mental health services, and more.
- Part C: Medicare Advantage is not a separate benefit but a provision allowing private insurers to offer plans to those enrolled in parts A and B. These plans offer the same coverage as parts A and B, plus additional benefits.
- Part D: This covers prescription drugs.
In addition, a person has the option to enroll in a Medicare supplement plan, also called a Medigap plan, to help cover out-of-pocket costs not covered by Original Medicare.
Learn more about the different parts of Medicare.
What Medicare does not cover
Generally, your coverage will depend on whether Medicare deems a service medically necessary. Plus, Original Medicare does not cover some specific services:
- eye exams for eyeglasses
- long-term or custodial care
- cosmetic surgery
- massages
- routine physical exams
- hearing aids and exams to fit them
- concierge care
- most dental care
- any services from a healthcare profession that does not accept Medicare
Some Medicare Advantage plans may offer some of these services as additional benefits.
Any U.S. citizen or permanent resident is eligible for Medicare at the age of 65 years. In addition, a person can get Medicare earlier if they receive Social Security disability benefits or if they’re living with end stage renal disease (ESRD) or amyotrophic lateral sclerosis (ALS).
A person can also get Medicare if they’re the spouse of an eligible person. A divorced spouse, a widow or widower, and children living with a disability under age 22 years can also get Medicare based on their connection to an eligible person.
A person qualifying for Medicare due to disability is automatically enrolled in Original Medicare (parts A and B). Those who qualify based on age have to enroll manually, and everyone has to manually enroll in Part C, Part D, or Medigap.
It’s important to know the different Medicare enrollment periods. They are:
- Initial enrollment period: This is the 7-month period surrounding a person’s birthday, from the 3 months before to the 3 months after their birthday month
- Open enrollment period: From October 15 to December 7, a person can switch between Original Medicare and Part C (Medicare Advantage), change Part C plans, or modify a Part D plan.
- General enrollment period: Those who miss the initial enrollment period can enroll from January 1 to March 31.
- Special enrollment period: Individuals who delay Medicare enrollment because they still have private health insurance can still enroll for 8 months after their other coverage ends.
- Medicare Advantage open enrollment period: From January 1 to March 31 each year, people can change Part C plans or switch back to Original Medicare. However, they cannot switch from Original Medicare to Part C.
People eligible for Medicare should also be aware that signing up outside these authorized enrollment periods can result in late fees being added to their insurance premiums.
Is it mandatory to enroll in Medicare?
Eligible Medicare beneficiaries must enroll in Part A. Part B, on the other hand, is optional. However, a person can choose to enroll in Medicare Advantage (Part C) instead of Original Medicare.
Part D enrollment is also optional, except for those qualifying for both Medicare and Medicaid and certain beneficiaries with low income. The Social Security Administration will enroll these people automatically if they do not make a selection.
Instead of Part D, a person can choose a Medicare Advantage plan with prescription drug coverage.
Learn more: “Is Medicare mandatory?“
Medicare may fully cover some costs, but not all of them. How much a person pays out of pocket depends on each Medicare part. Generally, similarly to private insurance, Medicare plans have premiums, deductibles, and copays.
| Part A | Part B | |
|---|---|---|
| Premium | $0 if a person worked and paid taxes for 40 quarters, received disability benefits for 24 months, or has ESRD or ALS (For those who do pay, their premium will depend on their income.) | $185 or higher, depending on income |
| Deductible | $1,676 | $257 |
| Copay | Hospital: • days 1 to 60: $0 after meeting deductible • days 61 to 90: $419 per day • days 91 to 150: $816 per day • after day 150: full cost Skilled nursing facility (SNF): • days 1 to 20: $0 • days 21 to 100: $209.50 per day • days 101 and beyond: full cost | 20% of the Medicare-approved cost of services |
| Other costs or copays of note | 20% of Medicare-approved amount for durable medical equipment (DME) while hospitalized up to $5 for drugs covered under Part B | 20% of the Medicare-approved amount for DME, partial hospitalization for mental health, and outpatient hospital care |
Private insurance companies provide Part D, Medicare Advantage, and Medigap plans. These companies set their prices based on various factors, including where a person lives.
According to the Centers for Medicare and Medicaid Services (CMS), the base premium for Part D is $46.50. For Medicare Advantage, it is $17.
Based on an analysis by the KFF, the average premium for Medigap plans was around $217 in 2023.
People can look at the available plans and their costs in their areas on Medicare.gov.
Medicare and Medicaid are two government healthcare programs. This means that CMS, which falls under the Department of Health and Human Services (HHS), oversees both.
The main distinction between the two is eligibility: While Medicare is for people over 65 years old or individuals with certain health conditions or disabilities, Medicaid primarily serves households with low income.
Unlike Medicare, Medicaid does not have age limitations and may cover additional benefits not covered by Medicare.
Individuals with Medicare usually contribute to the costs through deductibles, coinsurance, and premiums. Those with Medicaid do not typically pay anything for covered medical expenses, except for small copayments for select services.
Some people may qualify for both programs.
Learn more about the difference between Medicare and Medicaid.
Those with questions about Medicare, the enrollment process, eligibility, or anything else can contact the program at 800-MEDICARE (800-633-4227) or 877-486-2048 for TTY. Representatives are available 24/7 except during some federal holidays.
People can also get assistance with Medicare through their local State Health Insurance Assistance Program (SHIP). These programs receive funding from the federal government but are not affiliated with any specific insurance company or health plan.
They can counsel and assist with various Medicare inquiries, such as helping people understand their rights, resolving billing issues, addressing complaints about medical care, and navigating how Medicare works with other types of insurance.
Back in 1965, the U.S. government established Medicare to offer health coverage for older Americans without access to employer-provided insurance.
The primary components of Original Medicare are parts A and B, which cover hospital stays and outpatient care, respectively, as well as Part D, which covers prescription drugs.
In addition, individuals have the option to switch from Original Medicare to Medicare Advantage or enroll in Medigap for extra financial assistance with Original Medicare expenses. It is important to enroll or switch coverage during the approved enrollment periods to avoid incurring late penalties.
Medicare resources
For more resources to help guide you through the complex world of medical insurance, visit our Medicare hub.