What Medicare Insurance Actually Is

Medicare is a federal health insurance program run by the Centers for Medicare & Medicaid Services (CMS). If you are 65 or older, or if you have been receiving Social Security disability benefits for 24 months, or if you have end-stage renal disease, you become may be able to access for Medicare. The program has four main parts, and understanding which parts cover what will help you know what to expect when you see a doctor or go to the hospital.

Medicare is not one insurance plan — it is a framework with different coverage options. Some people use the original Medicare setup (Parts A and B), while others choose a private insurance company plan (Part C). Many add a separate prescription drug plan (Part D) or a supplemental insurance policy to cover costs that Medicare does not pay. Knowing the difference between these parts is the first step to understanding your coverage.

Key Takeaways

  • Medicare Part A covers hospital stays, skilled nursing care, and hospice; Part B covers doctor visits and outpatient services; most people pay no premium for Part A but pay a monthly premium for Part B.
  • Part C (Medicare Advantage) is an alternative to Parts A and B offered by private insurers, and it usually includes prescription drug coverage but may have network restrictions.
  • Part D is prescription drug coverage you add separately if you use original Medicare, and you should enroll during your initial enrollment period or face a permanent penalty.
  • Medigap (supplemental insurance) helps pay costs that original Medicare does not cover, such as copayments and coinsurance, and is sold by private companies.
  • Your coverage choices affect how much you pay out of pocket and which doctors and hospitals you can use.

Medicare Part A: Hospital and Skilled Nursing Care

Part A covers inpatient hospital stays, skilled nursing facility care, hospice care, and home health services. If you or your spouse paid Medicare taxes for at least 10 years while working, you pay no monthly premium for Part A. If you do not meet that requirement, you can still buy Part A, but the monthly cost varies depending on how many years you or your spouse paid into the system.

When you are admitted to a hospital, Part A pays for your room, meals, nursing care, and most medications given in the hospital. However, you pay a deductible — a set amount you must pay out of your own pocket before Part A begins to pay — and the amount changes each year. After you meet the deductible, Part A covers the full cost of the first 60 days of a hospital stay. Days 61 through 90 require a daily copayment, and days beyond 90 require a higher daily copayment. If you need skilled nursing care after a hospital stay (such as physical therapy in a nursing facility), Part A covers up to 100 days, though you pay a daily copayment starting on day 21.

Medicare Part B: Doctor Visits and Outpatient Care

Part B covers doctor visits, outpatient services, preventive care, and medical equipment such as wheelchairs and oxygen. Everyone on Medicare pays a monthly premium for Part B, and the amount depends on your income — higher earners pay more. You also pay an annual deductible before Part B begins to pay, and then you typically pay 20 percent of the cost of most services after that.

Part B covers preventive services at no cost to you, including annual wellness visits, cancer screenings, and vaccinations. When you see a doctor for a medical problem, Part B pays 80 percent of the approved amount after you meet your deductible, and you pay the remaining 20 percent (called coinsurance). If your doctor does not accept Medicare, you may pay more out of pocket. Part B also covers mental health services, physical therapy, and home health care ordered by a doctor.

Part C: Medicare Advantage Plans as an Alternative

Part C, also called Medicare Advantage, is an alternative way to receive your Part A and Part B coverage. Instead of using original Medicare, you enroll in a private insurance plan approved by Medicare. These plans are offered by insurance companies such as UnitedHealthcare, Humana, Aetna, and others, and each plan has its own rules about which doctors you can see and which hospitals you can use.

Most Medicare Advantage plans include prescription drug coverage (Part D) built in, so you do not need to buy a separate drug plan. However, Medicare Advantage plans often have networks — lists of doctors and hospitals you must use to get the lowest cost. If you see a doctor outside the network, you may pay much more or the plan may not cover the visit at all. Some plans charge lower monthly premiums than original Medicare, but you may pay more when you actually use care. You can switch to or from a Medicare Advantage plan only during the annual enrollment period (October 15 to December 7) or if you have a may have access to life event.

Part D: Prescription Drug Coverage

Part D is prescription drug coverage you add if you use original Medicare (Parts A and B). If you choose a Medicare Advantage plan, drug coverage is usually included. Part D is sold by private insurance companies, and each company offers different plans with different lists of covered drugs, different costs, and different pharmacies.

You should enroll in Part D when you first become may be able to access for Medicare. If you wait and do not enroll when you are first may be able to access, you will pay a permanent penalty on your monthly premium for as long as you have Medicare. The penalty is 1 percent of the national average Part D premium for each month you were may be able to access but did not enroll. Part D plans have an annual deductible, and after you meet it, you pay a copayment or coinsurance for each prescription. Once your out-of-pocket costs reach a certain amount in a year, the plan pays a larger share of your drug costs.

Medigap: Supplemental Insurance to Fill the Gaps

Medigap (also called supplemental insurance) is a policy sold by private insurance companies that helps pay costs that original Medicare does not cover. If you use original Medicare (Parts A and B), you pay deductibles, copayments, and coinsurance out of your own pocket. A Medigap policy covers some or all of these costs, depending on which plan you choose.

There are 10 standardized Medigap plans, labeled A through N, and each covers a different set of costs. For example, Plan G covers the Part B deductible, coinsurance, and copayments, while Plan A covers fewer costs but has a lower premium. You can enroll in Medigap when you first turn 65 and enroll in Medicare Part B — this is your best chance to buy a plan without being denied or charged more because of health problems. If you wait, insurance companies can refuse to sell you a plan or charge you a higher premium based on your health history. Medigap does not cover prescription drugs, so if you use original Medicare, you still need to enroll in Part D.

Costs You Will Pay Under Medicare

Medicare costs include premiums (monthly payments), deductibles (amounts you pay before coverage begins), copayments (fixed amounts per visit or service), and coinsurance (a percentage of the cost). The exact amounts change each year. Part A has no premium for most people but has a deductible and copayments for hospital and nursing care. Part B has a monthly premium and an annual deductible, and then you pay 20 percent coinsurance for most services.

If you choose a Medicare Advantage plan, your premium may be lower than original Medicare plus Medigap, but you may pay more when you use care because of copayments and network restrictions. If you choose original Medicare and add Medigap, your total monthly premium will be higher, but your out-of-pocket costs when you use care will be lower and more predictable. Part D premiums vary by plan and by income, and you pay copayments or coinsurance for each prescription. The best choice depends on how much health care you expect to use and which doctors you want to see.

Frequently Asked Questions

When should I enroll in Medicare?

You should enroll during your initial enrollment period, which begins three months before the month you turn 65 and ends three months after. If you delay enrolling in Part B or Part D without a valid reason, you will pay a permanent penalty. If you are still working and have health insurance through your employer, you may be able to delay Part B without penalty, but you should contact Social Security to confirm.

Can I change my Medicare plan after I enroll?

Yes, but only during specific times. You can switch between original Medicare and Medicare Advantage, or between different Medicare Advantage plans, during the annual enrollment period (October 15 to December 7). If you have a may have access to life event — such as moving, losing other health coverage, or getting married — you may be able to change plans outside this window. You can switch Part D plans once per year during the same enrollment period.

What if I cannot afford my Medicare premiums?

If your income is low, you may be able to get help paying premiums and out-of-pocket costs through programs such as Medicaid, the Medicare Savings Program, or the Low-Income Subsidy program for Part D. These programs are run by your state, so contact your state Medicaid office or call 1-800-MEDICARE to find out what you may be able to access.

Does Medicare cover dental, vision, or hearing?

Original Medicare does not cover routine dental care, eye exams, eyeglasses, or hearing aids. Some Medicare Advantage plans include limited dental, vision, or hearing coverage, but the benefits are usually small. If you need these services, you can buy a separate plan or pay out of pocket. Some states offer Medicaid coverage for dental care if you have low income.

What happens if I do not enroll in Part D when I first become may be able to access?

You will pay a permanent penalty on your Part D premium for as long as you have Medicare. The penalty is 1 percent of the national average Part D premium for each month you were may be able to access but did not enroll. If you go 63 days or more without Part D or other creditable drug coverage, the penalty applies. The only exception is if you had other health insurance with drug coverage that was at least as good as Part D.