Medicare and Health Insurance Explained

What Medicare Is

Medicare is a federal health insurance program in the United States. It mainly serves people age 65 and older, but some younger people qualify because of a disability, end-stage renal disease, or amyotrophic lateral sclerosis. The Centers for Medicare & Medicaid Services administers the program, while private insurers provide some Medicare coverage options.

Medicare is not the same as Medicaid. Medicaid is a joint federal and state program that helps people with limited income and resources. Some people qualify for both programs, and each may help pay different health care costs.

Medicare does not cover every service, and it rarely pays all costs by itself. People may have premiums, deductibles, copayments, or coinsurance. Understanding the program’s parts and how they work together can help people plan for these expenses.

The Parts of Medicare

Original Medicare consists of Part A and Part B. Part A helps cover inpatient hospital care, limited skilled nursing facility care after a qualifying hospital stay, hospice care, and some home health services. Many people do not pay a monthly premium for Part A if they or a spouse paid Medicare taxes for a sufficient period. Deductibles and other cost-sharing can still apply.

Part B helps cover medically necessary services such as doctor visits, outpatient care, preventive screenings, durable medical equipment, and certain therapies. Most people pay a monthly Part B premium, along with a yearly deductible and usually 20 percent of the Medicare-approved amount for covered services. There is generally no annual out-of-pocket limit under Original Medicare.

Part D is prescription drug coverage. It is offered by private insurers approved by Medicare, either as a standalone plan that works with Original Medicare or as part of some Medicare Advantage plans. Formularies, premiums, pharmacies, and cost-sharing differ by plan, so checking a plan’s drug list is important.

Medicare Supplement Insurance, commonly called Medigap, is another type of private coverage. It can help pay certain costs that Original Medicare leaves to the beneficiary, such as deductibles or coinsurance. Medigap policies do not generally include prescription drug coverage, and they cannot be used with Medicare Advantage.

Original Medicare and Medicare Advantage

People can receive Medicare benefits through Original Medicare or Medicare Advantage, also known as Part C. Original Medicare is administered by the federal government. Beneficiaries can generally see any provider nationwide who accepts Medicare, though they may need referrals or prior authorization for some services. They can add a Part D plan and may choose a Medigap policy if eligible.

Medicare Advantage plans are offered by private companies that contract with Medicare. They must cover the services provided under Parts A and B, but they may use provider networks and rules for referrals or prior authorization. Many plans include prescription drug coverage and may offer extra benefits, such as routine dental, vision, or hearing services. Benefits and costs vary by location and plan.

Medicare Advantage plans have an annual limit on what members pay for covered Part A and Part B services. That limit does not necessarily include premiums, prescription drug costs, or services the plan does not cover. Comparing total costs and provider access matters more than focusing on a single advertised benefit.

How Medicare Differs From Other Insurance

Employer-sponsored insurance, individual marketplace plans, and Medicare all help pay for health care, but their rules differ. A person who becomes eligible for Medicare while still working may be able to keep employer coverage. Whether that coverage pays before or after Medicare depends on factors such as the employer’s size and the person’s situation. It is wise to confirm the rules with the employer’s benefits office before delaying Medicare enrollment.

Marketplace coverage is designed for people who do not have qualifying coverage from another source. Once someone is eligible for Medicare, they generally cannot receive marketplace premium tax credits for coverage that overlaps with Medicare. COBRA, retiree coverage, and other policies also have specific coordination rules and may not protect someone from late enrollment penalties.

Enrollment and Choosing Coverage

Most people first become eligible for Medicare around age 65. The initial enrollment period lasts seven months: the three months before the month they turn 65, that month, and the three months after. People with qualifying employer coverage may have a special enrollment period, but details depend on the coverage and employment status. Missing an enrollment deadline can lead to gaps or lasting penalties, so it is important to check the rules early.

When comparing options, consider monthly premiums, deductibles, copayments, prescription needs, preferred doctors, travel habits, and the ability to pay unexpected costs. Review plan details each year, since premiums, provider networks, and covered drugs can change. Free, unbiased assistance is available through State Health Insurance Assistance Programs, known as SHIP. Medicare.gov and Social Security can also provide official information about plans, eligibility, and enrollment.