What you need to know about Medicare insurance

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Medicare is the  health insurance  program that covers eligible people 65 years and older and others who are eligible based on qualifying conditions.

This federal government program is available as two main options: Original Medicare (Medicare Part A and Part B) and Medicare Advantage. The option you choose helps determine the coverage, benefits and how much you will pay for premiums and out-of-pocket costs.

Read on to learn more about how Medicare works and which option might be right for you.

What is Medicare health insurance?

Medicare is the federal government health insurance program that primarily serves people over 65, as well as those with qualifying disabilities. The federal government’s Centers for Medicare and Medicaid Services (CMS) administers Medicare and the program is financed by federal taxes and premiums paid by beneficiaries.

Beneficiaries pay premiums and out-of-pocket costs, including copays, deductibles and copayments.

There are two types of Medicare: Original Medicare and Medicare Advantage.

Original Medicare includes Part A (hospital insurance) and Part B (outpatient insurance). You can also sign up for Part D (prescription drug insurance). People with Original Medicare can additionally get Medicare supplement insurance (Medigap), which helps with premiums and out-of-pocket costs and provides “an added layer of flexibility,” says Casey Schwarz, senior counsel, education and federal policy at the Medicare Rights Center.
Medicare Advantage (Part C), which is provided by private health insurance companies, offers all of the benefits of Original Medicare, plus added benefits, such as dental and vision. However, Medicare Advantage plans may have more restricted networks of providers as they are offered by private companies.

Key Takeaways

Individuals over 65 and those with qualifying disabilities who are eligible for Medicare can choose between Original Medicare or Medicare Advantage.
People with Original Medicare can also add Part D prescription drug benefits. Medicare Advantage usually includes prescription drug coverage as part of plan offerings.
Medicare Advantage is offered by private health insurance companies and often includes supplemental benefits not found in Original Medicare.
Original Medicare has a wider network of providers and hospitals than found in most Medicare Advantage plans.

How does Medicare insurance work?

Medicare works largely like other forms of health insurance. Many – but not all – of your health care costs are covered under Medicare.

Medicare coverage is broken into four parts:

Part A — Part A covers hospitalizations, skilled nursing facilities and hospice care. Free for most Americans. However, people who didn’t pay at least 40 quarters of Social Security taxes pay a monthly premium —depending on how many quarters you paid taxes.
Part B — Part B handles physician services, preventive care and outpatient care. Parts A and B are also called Original Medicare. Most Americans pay a standard Part B premium monthly. However, people who make more than $91,000 (or $182,000 for joint tax filers) pay higher premiums.
Part C — Private insurance companies offer Part C plans, which are called Medicare Advantage. Medicare Advantage provides hospital and physician coverage with supplemental benefits. Most Medicare Advantage plans provide prescription drug benefits. They may also offer vision, dental and fitness benefits. Medicare Advantage plans can also have other supplemental benefits not allowed in Original Medicare, such as home health care, adult daycare and transportation for non-medical needs. Medicare Advantage plan costs vary greatly by the plan. However, there are plans available with no premiums. These plans may have higher out-of-pocket costs. Other plans charge higher premiums but with more benefits and lower out-of-pocket costs.
Part D — Part D is prescription drug benefits for people with Original Medicare. Private companies offer these plans. Private companies charge different premiums for the drug plan.

Medicare beneficiaries can choose between Original Medicare or Medicare Advantage. If they decide on Original Medicare, they can add a Part D plan to help pay for prescription drugs.

Who is eligible for Medicare insurance?

People who are 65 and older are eligible for Medicare. Also, people under 65 with qualifying disabilities and those with ALS or end-stage renal disease are eligible.

As you approach your 65th birthday, Medicare will send you information about how to enroll in Medicare and choose a plan. You have until three months after your birth month when you turn 65 to select a Medicare plan. If you don’t pick one, Medicare will automatically enroll you in Original Medicare.

Find out more about Medicare eligibility.

When to sign up for Medicare

Many people have enrolled in Medicare automatically. Enrollment is automatic if you’re not yet age 65, but you’re already receiving Social Security or Railroad Retirement benefits.

If you’re disabled, you’re automatically enrolled in both Part A and Part B of Medicare, beginning with your 25th month of disability.

However, if you don’t meet those criteria and are about to turn 65, you have an important choice to make.

“The first thing people need to decide is whether they want to enroll in Medicare when they are first eligible,” Schwarz says.

She notes that in some cases, people may not want to sign up for the full range of Medicare coverage when they become eligible.

For example, those who are still working at age 65 and have health insurance coverage through an employer may not need Medicare Part B – which covers doctor visits and outpatient care – until they retire and no longer have coverage through an employer.

If you didn’t sign up for Part B when you’re first eligible, Medicare may charge a 10% fine on your monthly premium for each 12-month period that you don’t sign up. So, that could mean paying 30% more for Part B if you don’t sign up for Part B after three years of eligibility or if you don’t sign up during a Special Enrollment Period.

Most people enroll in Medicare in one of two ways. You have an individual enrollment period, which begins three months before you turn age 65 or if you qualify due to a qualifying disability. Or, if you have ALS or end-stage-renal disease, you may qualify right away. Immediate coverage for ESRD patients depends on very specific criteria being met. ESRD patients may have a four-month waiting period if the specific criteria are not met. Applying early can help you avoid a possible delay in the start of your Part B coverage.

To apply for Medicare, contact any Social Security Administration office or fill out an application online on the Social Security website. (If you or your spouse worked for the railroad, contact the Railroad Retirement Board.)

You can call about Medicare options by contacting Social Security’s toll-free number, 1-800-772-1213, or visit the Social Security website.

You can’t enroll in Medicare through your state’s health insurance marketplaces (also known as “exchanges”). The exchanges sell only  individual and non-group health insurance  policies.

What a Medicare health plan covers

Medicare benefits depend on the type of plan.

Original Medicare includes Parts A and B. Part A is for inpatient care, such as hospital, skilled nursing facilities, hospice care and home health care in some instances. Part B covers doctor visits, outpatient care, medical supplies and preventive services. You can also buy a separate Part D prescription drug benefit plan to help pay for prescription drugs.

Another option is selecting a Part C plan, which is also called Medicare Advantage.

“A Medicare Advantage plan has to cover all the same things that Original Medicare covers, but they can have different rules, restrictions, networks, and cost-sharing,” Schwarz says.

Medicare Advantage plans usually combine benefits such as hospital and physician care with prescription drugs and telehealth coverage. Those plans may also offer dental, vision, and other supplemental benefits not found in Original Medicare.

Find out more about what Medicare covers and what it doesn’t cover.

What are the parts of Medicare?

There are two typical types of Medicare coverage plans:

Original Medicare. This form of coverage comes in two parts. Part A is hospital insurance, and Part B is medical insurance. Optional add-ons to Original Medicare include Part D, which is Medicare prescription drug coverage, and Medicare Supplement Insurance, also known as a Medigap policy or “Medicare gap insurance.”
Medicare Advantage. Also known as Part C, this type of coverage is often described as an “all in one” package that includes Parts A, B, and (in most cases) D.

Here’s more about each part of Medicare:

What Parts A and B cover

Parts A and B are often called Original Medicare or traditional Medicare. They cover hospitalizations and outpatient care.

Medicare Part A is the part of Medicare that covers inpatient care.

“For most people — for everyone who has sufficient Social Security work history — that is premium-free,” Schwarz says.

Examples of Part A coverages include:

Inpatient care in a hospital
Skilled nursing facility care
Nursing home care, but only for inpatient care in a skilled nursing facility that’s not custodial or long-term care
Hospice care
Home health care, but certain restrictions apply

Even if you have insurance from another source, “it almost always makes sense for folks to enroll in Part A” as soon as you are eligible, Schwarz says.

Meanwhile, Part B covers both medically necessary services — such as services or supplies needed to diagnose or treat your medical condition — and preventive services, which cost you nothing as long as you get the services from an approved provider.

Part B usually covers:

Doctor visits
Clinical research
Ambulance services
Durable medical equipment (DME)
Mental health
Outpatient services, but certain restrictions apply
Partial hospitalization
Limited outpatient prescription drugs

Unlike Part A, Part B has a premium.

Should you sign up for Part B as soon as you are eligible? That depends on your situation, Schwarz says, including:

Whether you will be eligible for a special enrollment period when you decide to enroll later. If not, you will have to wait until the general enrollment period.
Whether you have other insurance that will serve as the primary payer.

What Part C (Medicare Advantage plan) covers

Private insurance companies offer Medicare Part C plans, which are called Medicare Advantage. Medicare Advantage includes the hospital coverage with supplemental benefits.

Most Medicare Advantage plans provide prescription drug benefits. They also may offer vision, dental and fitness benefits.

Medicare Advantage plans can also have other supplemental benefits not allowed in Original Medicare, such as adult daycare and transportation for non-medical needs. Benefits vary by insurance company and plan, so make sure to dig into the benefits information when choosing a Medicare Advantage plan.

What Part D covers

Medicare Part D is prescription drug benefits for people with Original Medicare. Private companies offer these plans.

Original Medicare vs. Medicare Advantage

The answer to which type of Medicare plan is better — Original Medicare or Medicare Advantage — depends on what you want from your coverage, what plans your providers accept, where you live and how many insurers offer Medicare Advantage plans in your area.

With Original Medicare, you can go to any doctor, hospital, or another healthcare provider who accepts Medicare. Medicare Advantage usually has more restricted provider networks.

Medicare Advantage offers multiple choices, so you can find the plan that’s right for you. Many Medicare Advantage plans have low or no premiums, but Original Medicare generally has lower deductibles.

“Some people are going to feel more comfortable with paying more in premiums to have more flexibility and fewer out-of-pocket costs,” Schwarz says.

By contrast, others prefer to pay less in premiums and to have more out-of-pocket costs if they need additional care because “if they don’t need additional care, then that’s money that they’ve saved,” Schwarz says.

In 2022, a typical beneficiary would have about 40 plans to choose from in their area, according to the Kaiser Family Foundation.

Here’s a side-by-side comparison of Original Medicare vs. Medicare Advantage:

Comparing Original Medicare vs. Medicare Advantage	Original Medicare	Medicare Advantage
Premiums and deductibles	Standard for most Americans	Varies
Costs	Most beneficiaries pay a combined $170.10 monthly for Parts A and B; people with higher incomes and/or didn’t pay 10 years of Social Security taxes pay more	Vary by individual plan; the average premium is $19 in 2022, but many plans offer low to zero dollar premiums.
Coinsurance	Yes	Yes
Copays	Yes	Yes
Out-of-pocket maximums	No	Yes
Provider network	Any doctor who takes Medicare	Doctor must take the specific Medicare Advantage plan.
Referral to see specialist	Rare	Likely — especially for an HMO plan.
Prescription drug benefit	You must buy a separate Part D plan	Nearly all Medicare Advantage plans offer prescription drug benefits.
Supplemental benefits like vision and dental	No	Yes
Medigap eligibility	Yes	No
Care outside of your state	You can find a provider who takes Original Medicare	Medicare Advantage has smaller provider networks; you might not be able to find a provider out-of-state who accepts your plan. Emergency care is usually covered.
Care outside of the U.S.	Doesn’t cover, but some Medigap plans will help pay for care	Usually doesn’t cover care outside of the U.S.

Find out more about the pros and cons of Medicare Advantage plans.

Which plan is more popular? Insure.com conducted a survey to find out. See the results.

What Medicare does not cover

Medicare has some limits in terms of what it covers. For example, Original Medicare does not cover any of the following:

Long-term care
Most dental care
Eye exams related to prescribing glasses
Dentures
Cosmetic surgery
Acupuncture
Hearing aids and exams for fitting them
Routine foot care

By law, Medicare Advantage Plans must cover all of the services that Original Medicare covers. These plans may also cover many things Original Medicare doesn’t cover, including:

Vision
Hearing
Dental
Wellness programs, such as gym memberships

Some Medicare Advantage plans also cover things like transportation to doctor visits, over-the-counter drugs, and adult day-care services. Plans also typically cover prescription drugs through Part D.

The type of coverage available varies from plan to plan, however, so shop around.

Frequently Asked Questions

What are the best Medicare plans?

Some Medicare plans shine more brightly than others. The Centers for Medicare and Medicaid Services rates plans on a five-star basis and posts the findings at the Medicare.gov website.

Rankings are based on information from:

Member satisfaction survey
Plans
Health care providers

Each fall, Medicare updates these ratings for the following year. When you search for Medicare Advantage plans, look for a star icon with a “5” inside it to find the best plans.

Do I have to sign up for Medicare if I have private insurance?

No, you aren’t required to sign up for Medicare if you have private insurance. Your individual circumstances – including the nature of your health coverage — will determine whether this is the right decision for you.

However, if you have coverage through an employer with fewer than 20 employees, you should sign up for Original Medicare when you’re first eligible. In this situation, Medicare pays before your other coverage. If you delay enrolling, you may have to pay a lifetime penalty if you enroll later.

If you have individual coverage through a health care marketplace or directly from an insurer, you should sign up for Part A and Part B when you’re first eligible. Once your Medicare coverage begins, you should drop your individual plan coverage.

Can I drop my employer health insurance for Medicare?

Once you’re eligible for Medicare, you can drop your employer’s health insurance coverage. However, this might not be the best decision. In many cases, employer health insurance is as good as – or better than – Medicare coverage.

The nature of your health insurance plan and your own health care needs likely will dictate whether or not it makes sense to leave your employer’s coverage and turn to Medicare.

Source:

Medicare.gov. “Costs.” Accessed August 2022.

Disclaimer:

Insure.com is not affiliated with or endorsed by the government or Federal Medicare program. Plans are insured or covered by a Medicare Advantage organization with a Medicare contract and/or a Medicare approved Part D sponsor. Enrollment in the plan depends on the plan’s contract renewal with Medicare. We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov or 1-800-MEDICARE (TTY 1-877-486-2048), 24 hours a day/7 days a week, to get information on all of your options. Not all plans offer all of these benefits. Benefits and availability may vary by carrier and location. Limitations and exclusions may apply. Every year, Medicare evaluates plans based on a 5-star rating system. Part B Premium give-back is not available with all plans. Actual Part B premium reduction could be lower. Deductibles, copays and coinsurance may apply.

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Chris Kissell

Contributing Researcher

Chris Kissell is a Denver-based writer and editor with work featured on U.S. News & World Report, MSN Money, Fox Business, Forbes, Yahoo Finance, Money Talks News and more.