Medicare Explained

Once you turn 65 years old, you may think you have insurance all figured out since you've more than likely dealt with it some sort of way, either professionally or personally, throughout the years. After getting insurance from your employer or the marketplace for so many years, it can seem intimidating to learn a totally new form of insurance. After all, insurance itself can be complicated. Medicare can be even more confusing and complex! There's an alphabet soup of plans, coverage choices, premium levels, enrollment rules, and so much more.

Not only is there a lot of information available that may overwhelm you, but there are so many parts to Medicare available for you to choose from. Choosing the right Medicare plan for your needs takes time, effort, and energy. From enrollment periods, differences between Parts A, B, C, & D, to "donut holes"—we're here to explain Medicare and your options in plain, easy to understand terms so that you can make an educated decision.

We'll break down key concepts of Medicare so you'll feel confident in the coverage decision you ultimately make once you or a loved one becomes eligible to enroll. Medicare can be an extremely beneficial resource. Once you have the right knowledge and understanding of Medicare, you're able to maximize its benefits in your life.

What is Medicare?

Medicare is a federal insurance program that helps seniors and disabled individuals throughout the United States cover some of their healthcare costs, including providing access to the quality and affordable healthcare they need.

Medicare was signed into law in 1965. Since then, Medicare has helped and continues to help millions of Americans every year. Medicare is a different program than Medicaid, which offers health and other services to eligible low-income people of all ages. Medicare is administered by the Centers for Medicare & Medicaid Services (CMS), a division of the U.S. Department of Health & Human Services (HHS).

Who Qualifies for Medicare?

Once you're at least 65 years old and are a United States citizen or permanent legal resident for the past five years, you are entitled to Medicare. Along with people who are 65 years old, Medicare also covers some disabled people under age 65.

People who receive Social Security disability insurance usually become eligible for Medicare after a two-year waiting period, although those with end-stage renal disease (permanent kidney failure requiring dialysis or a transplant, sometimes called ESRD) and amyotrophic lateral sclerosis (ALS, also known as Lou Gehrig's disease) can be eligible immediately.

Medicare Eligibility

Generally, you're eligible for Original Medicare (either Parts A and/or B) if you're a U.S. citizen or you've been a legal permanent resident for at least five consecutive years, and one of the following applies to you:

 You're 65 or older and have paid into Medicare through payroll taxes during your (or your spouse's) working years

 You're under 65, permanently disabled, and you're receiving disability benefits from Social Security or the Railroad Retirement Board

 You have end-stage renal disease (ESRD) requiring ongoing dialysis or a transplant

 You have ALS (Amyotrophic Lateral Sclerosis), also known as Lou Gehrig's Disease

What are the Different Parts of Medicare?

There are four different parts of Medicare that help cover specific services. Part A and Part B are often referred to as Original Medicare. Medicare Part C, or Medicare Advantage, is private health insurance, while Medicare Part D offers coverage for prescription drugs.

  • Medicare Part A (Hospital Insurance)
    Part A, which is also known as Original Medicare, is offered by the federal government and covers inpatient hospital stays, care in a skilled nursing facility, hospice care, and some home healthcare.
  • Medicare Part B (Medical Insurance/Outpatient Coverage)
    Part B, which is also known as Original Medicare, is offered by the federal government and covers certain doctors' services, outpatient care, medical supplies, lab work, and preventive services.
  • Medicare Part C (Medicare Advantage)
    Part C, which is also known as Medicare Advantage, is offered by private insurance companies and includes the same coverage as Original Medicare. Essentially, Part C bundles up the services provided by Part A and Part B into one plan. Plus, most Medicare Advantage plans offer additional services like dental, vision, and prescription drug coverage. Medicare Advantage plans vary from state to state and from insurer to insurer. Depending on where you live, there are differences in Part C plans.
  • Medicare Part D (Prescription Drug Coverage)
    Part D, which is also known as Prescription Drugs Plans, are offered by private insurance companies and help cover your prescription drug costs. Each Part D plan is different and has its own formulary or list of covered drugs. Generally, Part D allows you to purchase your prescriptions at a much lower price than retail. Part D adds prescription drug coverage to:
    • Original Medicare
    • Some Medicare Cost Plans
    • Some Medicare Private-Fee-for-Service Plans
    • Medicare Medical Savings Account Plans
    Part D has a gap between when initial coverage ends and catastrophic covering begins, which is known as the "donut hole." Beneficiaries spend more on covered drugs during the gap period, which begins when the beneficiary and their plan have spent a combined $3,310 on covered drugs. Once total drug costs reach $4,850, beneficiaries transition into catastrophic coverage, and the plan once again pays for most covered drug costs.

Part C and Part D plans are offered by insurance companies and other private companies approved by Medicare. Medicare Advantage Plans may also offer prescription drug coverage that follows the same rules as Medicare Prescription Drug Plans.

In addition to the four plans above, you also have the option to add additional coverage with Medicare Supplement plans. These plans are often referred to as Medigap plans because they fill the gaps in the coverage you receive from Original Medicare Part A and Part B. Private insurers offer these Medigap plans to supplement your Original Medicare benefits. Medigap plans have an additional premium, but only cover costs of some of the care Original Medicare doesn't cover. These plans often don't include any additional perks or optional benefits.

What are the Different Types of Coverage Options?

Nowadays, there are plenty of options for you to choose from when designing and setting up your Medicare plan. There are guidelines and rules around the type of Medicare plans you can be enrolled in at any given time based on what the plans offer:

Option 1

Original Medicare (Part A and Part B)

Option 2

Original Medicare (Part A and Part B) and add a Medicare Supplement plan to help pay for Original Medicare's out-of-pocket costs

Option 3

Original Medicare (Part A and Part B) and add a stand-alone Part D Prescription Drug Plan

Option 4

Original Medicare (Part A and Part B) and add a Medicare Supplement plan to help pay for Original Medicare's out-of-pocket costs + add a Part D plan to cover your prescription costs

Option 5

Receive your Part A and Part B coverage from a Medicare Advantage plan. You can also get additional coverage, including prescription drugs with a Medicare Advantage Prescription Drug plan.

Find out about coverage in your specific state.

Click on your state for details.