People enrolling in a Medicare plan have several options, including Original Medicare and Medicare Advantage. Choosing the most appropriate plan depends on a person’s preferences, circumstances, overall health, and budget.
The two primary types of Medicare coverage are Original Medicare and Medicare Advantage.
Original Medicare has some subtypes. The government manages Original Medicare under a fee-for-service arrangement. Private insurers offer Medicare Advantage plans, and the government approves these plans.
This article explains the types of Medicare plans available and the coverage they provide. It also offers advice for people who care for family members with disabilities or health conditions and wish to handle their Medicare affairs.
Glossary of Medicare terms
We may use a few terms in this article that can be helpful to understand when selecting the best insurance plan:
- Out-of-pocket costs: An out-of-pocket cost is the amount a person must pay for medical care when Medicare does not pay the total cost or offer coverage. These costs can include deductibles, coinsurance, copayments, and premiums.
- Deductible: This is an annual amount a person must spend out of pocket within a certain period before an insurer starts to fund their treatments.
- Coinsurance: This is the percentage of treatment costs that a person must self-fund. For Medicare Part B, this 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.
Medicare Part A
Part A covers inpatient hospital care. It also includes hospice care, skilled nursing facility care, and home healthcare when a person meets specific criteria.
As long as a person or their spouse has paid Medicare taxes for at least 10 years (40 quarters) during their working life, the person is over 65 years old, or they have a qualifying disability, they do not pay monthly premiums for Part A.
Those who did not pay enough Medicare taxes may purchase this coverage. Monthly premiums for those who need to purchase Part A are either $278 or $505, depending on how many years they or their spouse have paid Medicare taxes.
Medicare Part B
This optional coverage requires a monthly premium. Part B covers medically necessary services such as outpatient doctor visits, diagnostic services, and preventive services.
The monthly premium for Part B in 2024 is $174.70 for those with an income of less than $103,000.
Learn more about Medicare Part B.
Medicare Part C
Medicare Part C is also called Medicare Advantage. Private insurers sell and administer these policies, but Medicare must approve any Medicare Advantage plan before insurers can market it.
These plans provide the same coverage as parts A and B but many also include prescription drug coverage. People with end stage renal disease are not eligible for a Medicare Advantage plan.
Monthly premiums for Medicare Advantage plans depend on the area and the plan a person chooses.
Read more about Medicare Advantage plans.
Medicare Part D
This plan provides prescription drug coverage for a monthly premium, which a person pays in addition to premiums for any other type of Medicare plan they have.
A Part D plan’s coverage depends on its cost, its drug formulary, and the insurance provider.
Read more about Medicare Part D.
Different costs
Medicare does not typically cover 100% of medical costs, and most plans require a person to meet a deductible before Medicare pays for medical services.
Part B also charges a 20% coinsurance on many outpatient services, such as doctor consultations and physical therapy.
Part D often has an income-adjusted premium, with higher premiums for those in higher income brackets.
Read more on the costs and entitlements of Medicare.
| Medicare part | Deductible | Monthly premium |
|---|---|---|
| Part A | $1,632 per benefit period for hospital stays | $0 (for most people) |
| Part B | $240 before Original Medicare begins to pay | $174.70 (with an income of less than $103,000) |
There are multiple types of Medicare Advantage (Part C) plans, which vary depending on the network of healthcare professionals they offer and how payment for services works.
Consumers may choose from among the following plan types:
Health Maintenance Organization (HMO)
With an HMO, the plan holder typically can receive care only from healthcare professionals in a specified network, except for emergency treatment and out-of-area urgent care or dialysis care.
Some plans may have point-of-service (POS) options that allow the person to receive out-of-network treatment.
Preferred Provider Organization (PPO)
A PPO allows people to visit any doctor or hospital they want in most situations.
This applies to both in-network and out-of-network healthcare professionals. However, out-of-network care incurs additional costs.
Read about the differences between HMOs and PPOs.
Private Fee-for-Service plan (PFFS)
For this type of plan, administrators determine what the insurer pays for doctor and hospital coverage and what the plan holder must pay.
A person does not need to choose a primary care doctor or obtain a referral to see a specialist. If the plan has a network, in-network treatment costs are lower than out-of-network costs.
Medicare savings account (MSA)
An MSA consists of two parts: a high deductible plan and a tax-free savings account dedicated to healthcare costs.
The deductible depends on the individual plan, and a person must purchase Medicare Part D to receive prescription drug coverage.
Read more about Medicare savings account plans.
Medicare supplement insurance, commonly known as Medigap, covers some out-of-pocket expenses for people with Medicare parts A and B.
Medigap covers deductibles, copayments, and coinsurance. A person must have parts A and B to qualify for a Medicare supplement plan.
Those enrolled in Medicare Advantage should not have a Medigap plan. A person cannot use their Medigap policy to pay their Medicare Advantage plan copayments, deductibles, and premiums.
Private insurers sell Medigap policies, so coverage varies according to the insurance company. These policies may cover services that are not available under Medicare.
Medigap is a single-user policy, so spouses must buy their own coverage.
The costs and benefits of different Medigap policies depend on the insurance company. When it comes to pricing Medigap plans, insurance providers may use one of several methods:
- Community pricing: Premiums are the same regardless of age.
- Issue age-related: When a person starts the policy, the insurance provider factors their age into the premium. That means buying the policy promptly after reaching 65 years of age is more cost effective.
- Attain age-related: The insurer bases the original premium on the person’s current age, but premiums rise as time passes.
The price of Medigap plans varies by state. As noted, prices are lower when a person buys a policy as soon as they reach the age of Medicare eligibility. Individual insurance companies may also offer discounts.
Medigap does not cover:
- private caretakers
- nursing facility care
- vision testing and care
- dental care
- hearing aids
People with preexisting conditions should be aware that a Medigap plan may not cover costs relating to preexisting conditions for up to 6 months after the date on which a person buys the plan.
Those with a Medicare Advantage plan are ineligible for Medigap insurance.
Learn more about how Medigap works.
The time may come when a Medicare plan holder can no longer make their own decisions for reasons of mental or physical health.
Before that time, the person should designate a trusted individual to serve as their power of attorney. A lawyer can prepare this document.
A power of attorney document permits another person to conduct business and make decisions on behalf of the insured person.
The person with power of attorney can pay bills, file taxes, collect Social Security benefits, and choose or change healthcare plans on behalf of the insured person.
An alternative is to name someone as a healthcare proxy. This person would be able to make decisions about medical treatment but not about other financial issues.
A release form notifies Medicare that the insured person allows the named individual or group to access their medical information.
Caregivers may benefit from resources that the Centers for Medicare and Medicaid Services provides in association with caregiver organizations.
Many caregivers may find that their family members qualify for some form of Medicare home healthcare. A doctor must certify that these home healthcare services are necessary.
If a person cannot leave home and has a care plan that suggests the need for intermittent skilled nursing care, speech or physical therapy, or continuous occupational therapy, Medicare covers home healthcare.
Learn more about Medicare and caregivers.
Caregiving is a demanding task, and the caregiver often spends much of their time meeting the needs of the person they are caring for.
Some programs are available to provide financial assistance to caregivers. While these payments generally compensate those who are caring for U.S. military veterans or people on Medicaid, other options are available.
Every state, as well as the District of Columbia, has programs that allow qualifying Medicaid recipients to manage their long-term care. Depending on the individual state’s regulations, this may include hiring relatives to provide care.
Since each state’s regulations are different, those seeking payment for caregiving must look into their state’s requirements. Many states will not allow a spouse to receive payment for caregiving.
It is often the case that caregivers who live in the same home as the person they care for are not eligible to receive payment for providing care.
Medicare resources
For more resources to help guide you through the complex world of medical insurance, visit our Medicare hub.
Original Medicare and Medicare Advantage are the two main types of Medicare.
Original Medicare is available as parts A, B, and D. Part C is a bundled plan called Medicare Advantage.
A person who participates in any of these policies can grant power of attorney to a trusted individual or caregiver in case they become unable to manage their affairs.
This means that the person with power of attorney can administer the policy on behalf of the plan holder and view their medical information. In some states, caregivers can receive payment for caring for relatives.