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Medicare is the federal government health insurance program for people age 65 and older and younger people living with certain illnesses or disabilities. Its coverage plays an important role in containing medical costs as you age. But Medicare benefits don’t pay for everything.
What is Medicare?
Medicare consists of four parts — Part A, Part B, Part C and Part D. Each part offers specific coverage and varies in cost:
Part A covers hospital care and related services.
Part B covers doctor appointments and outpatient medical care.
Part C covers the same benefits of Parts A and B but is offered by private insurers.
Part D covers prescription drugs.
Here’s what you should know about Medicare coverage and some of the expenses that come with it.
You’re entitled to Medicare if you’re at least 65 and a U.S. citizen, or a permanent legal resident for the past five years. Medicare also covers some people under age 65 who have a disability. People who receive Social Security disability insurance usually become eligible for Medicare after a two-year waiting period. However, those with end-stage renal disease (permanent kidney failure) are enrolled automatically upon signing up and those with amyotrophic lateral sclerosis (ALS, also known as Lou Gehrig’s disease) are eligible the month disability begins.
Medicare at a glance
Inpatient hospital or skilled nursing facility care.
Premium: $0 for most people; but up to $499 per month in 2022 for those who don't qualify for premium-free Part A.
Deductible: $1,556 in 2022.
Doctor visits and preventive services.
Premium: Starts at $170.10 per month in 2022.
Deductible: $233 in 2022.
The same coverage as Parts A and B, plus additional benefits that may include cost help with vision, hearing and dental care.
Premium: Continue to pay Part B premium, plus premium billed by private insurer. (Some plans have $0 premiums.)
Out-of-pocket limit: As much as $7,550 in 2022.
Generic and brand-name prescription drugs.
Premium: Varies by private insurer; average is $33 per month in 2022.
Original Medicare refers to Medicare Part A and Medicare Part B, which are managed by the federal government. People can see any doctor that accepts Medicare assignment and the government program pays a significant portion of the cost.
Medicare Part A (hospital insurance)
Medicare Part A covers inpatient care in a hospital or skilled nursing facility, although not custodial or long-term care. Part A also helps pay for hospice care and some home health care.
Medicare Part A has a deductible ($1,556 in 2022) and coinsurance, which means patients pay a portion of the bill. There's no coinsurance for the first 60 days of inpatient hospital care, for example, but patients typically pay $389 per day in 2022 for the 61st through 90th day of hospitalization, and more after that.
Most people don't pay premiums for Medicare Part A if they or their spouse paid Medicare taxes for at least 10 years. (Medicare taxes are part of the payroll taxes deducted from most working people’s paychecks. You can see if you qualify by checking your Social Security statement, which is available through the Social Security website.) If you don't qualify for premium-free Part A, it's still available to most, but with a high monthly premium. You pay monthly premiums for Part A of up to $499 per month in 2022.
Medicare Part B (medical insurance)
Medicare Part B covers doctor visits and other medically necessary services and supplies. That includes preventive services or health care to prevent illness, as well as ambulance services, durable medical equipment, mental health coverage and a few types of outpatient prescription drugs.
Medicare Part B requires a monthly premium that starts at $170.10 per month in 2022. Single people with adjusted gross incomes over $91,000 and married couples filing jointly with AGIs over $182,000 pay higher premiums. Medicare Part B has a deductible of $233 in 2022. After that, you typically pay 20% of the Medicare-approved amount for services and supplies.
The Medicare Part B penalty
If you don’t have group health insurance from a large employer and fail to sign up for Medicare Part B at 65, then later decide you need it, you’ll likely pay a penalty of 10% of the standard premium for each 12-month period that you delayed. You will pay this penalty for life.
You can avoid the penalty if you had health insurance through your job or your spouse’s or partner's job when you first became eligible. You must sign up within eight months of when that coverage ends and show proof of group insurance after you turned 65.
Medicare Advantage (Medicare Part C)
Medicare Advantage, also known as Medicare Part C, is a type of health plan offered by private insurance companies that provides the benefits of Part A and Part B and often Part D (prescription drug coverage) as well. You must continue to pay your Part B premium, and there may be a separate premium you pay to the insurer. However, many Medicare Advantage plans are offered at $0 premiums to the insured.
These bundled plans may have additional coverage, such as providing some cost benefits for vision, hearing and dental care.
Unlike Original Medicare, Medicare Advantage plans have an annual limit on out-of-pocket costs. You could pay as much as $7,550 out of pocket in 2022. Medicare Advantage plans are typically HMOs or PPOs. They provide coverage only in certain local areas, generally require pre-authorization and referrals, and charge copays and coinsurance for most health care services.
Medicare Part D (prescription drugs)
Medicare Part D helps cover the cost of prescription drugs, both generic and brand name. Plans are offered by private insurers and require a monthly premium that averages $33 per month in 2022. Higher income beneficiaries pay more.
As with Part B, there typically is a late penalty premium if you don’t sign up when you're first eligible. The Part D penalty is 1% of the national base beneficiary premium ($33.37 per month in 2022) multiplied by the number of months you're late enrolling after you go without creditable drug coverage for 63 days.
Medigap (Medicare Supplement Insurance)
Medigap, or Medicare Supplement Insurance, is an additional health insurance policy you can buy from a private insurer to help pay your share of the costs not covered by Medicare Part A and Part B. This includes deductibles, coinsurance and some health care if you travel outside the U.S. Medigap plans can't cover long-term care, prescription drugs, dental, vision, hearing aids or private nursing care.
There are 10 types of Medigap plans available in most states. You must have Medicare Part A and Part B to purchase a Medigap policy. Medigap isn't compatible with Medicare Advantage — you may purchase one or the other.
Enrolling in Medicare
If you’re receiving Social Security benefits when you turn 65, you'll be enrolled automatically in Medicare Part A, which covers hospital costs, and Part B, which covers doctor visits. If you want Medicare Part D prescription drug coverage, you’ll need to enroll yourself — that’s not automatic.
If you’re not receiving Social Security benefits, you’ll sign up for Medicare through the Social Security Administration website. You typically should do so in the seven-month window around your 65th birthday (which includes the three months before the month you turn 65, your birthday month, and the three months after your birthday month) to avoid permanent penalties and long waiting times for your insurance to start.
If you want Medicare Supplement Insurance, or Medigap, you would sign up during the six-month Medigap enrollment period, which starts the month you turn 65 and are enrolled in Medicare Part B. The private insurers who provide Medigap plans are required to take you if you sign up during that period. Otherwise, there is no guarantee they will sell you a Medigap plan, or they could charge you more for a plan.
Medicare enrollment periods
You’ll be enrolled automatically in Medicare Part A and Part B when you turn 65 if you've already claimed Social Security or qualify due to disability. Otherwise, it's up to you to proactively enroll yourself. Here are the times to do so:
Initial enrollment period: If you’re not automatically enrolled in Medicare, there will be an initial enrollment period that lasts for seven months around your 65th birthday: the three months before and after your birthday month, plus your birthday month. (If your birthday is the first day of the month, this period will include the four months before and two months after your birthday month.)
General enrollment period: If you don’t apply for Medicare during your initial enrollment period, you’ll have to wait for Medicare’s general enrollment period, which runs from Jan. 1 to March 31 each year. Coverage starts July 1, and you may owe late penalties.
Special enrollment period: This is a period when you’re allowed to join Medicare or make changes to your coverage based on a few specific life events, such as leaving a job or moving out of your plan’s coverage area.
If you want to change your coverage at a later date, there's an annual Medicare open enrollment period that allows you to do this, the fall open enrollment from Oct. 15 to Dec. 7 each year. (If you have Medicare Advantage, you can also make a change during Medicare Advantage open enrollment from Jan. 1 to March 31 each year.)
How to enroll in Medicare
If you’re enrolling yourself, you can sign up in one of three ways:
The online application typically takes less than 10 minutes. Social Security Administration offices have reopened and require masks, along with physical distancing of at least six feet. Offices ask that you come alone unless you require assistance, and you should plan for the weather, because you might have to wait outside. Make sure to call to check about in-person appointment availability if you can't enroll online. Appointments are encouraged.
What Medicare doesn't cover
Common expenses that Medicare doesn’t cover (and that are excluded in the Medicare law) include:
Most dental care.
Most foot care, unless related to diabetes or medically necessary due to injury or disease.
The biggest potential expense that’s not covered is long-term care, also known as custodial care. The federal health program Medicaid pays custodial costs, but is typically reserved for those with low income and little savings.
Medicare vs. Medicaid
Medicare is an insurance program primarily serving people over 65 no matter their income level, and those on SSDI and with certain illnesses. Medicare is a federal program, and it’s the same everywhere in the U.S.
Medicaid is an assistance program, serving low-income people of all ages, and patient financial responsibility is typically small or nonexistent. Medicaid is a federal-state program, and it varies state to state.
Where can I find out more?
Medicare.gov is the official site for Medicare. You can browse the site, live chat with someone from Medicare or call 800-MEDICARE (800-633-4227, TTY 877-486-2048). You can also input your state to find local organizations that can help.