Medicare 101: Understanding How Medicare Works
Get the Most From Your Medicare Supplement Plans by Learning What Medicare Covers
Medicare is health insurance for people age 65 or older, under age 65 with certain disabilities, and any age with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a kidney transplant). While Medicare will pay for most medical expenses, there are very big gaps that could be financially devastating if you need medical treatment, so most people on Medicare get a Medicare Supplement policy to help cover the extra health care costs that Medicare does not pay.
How Does the Original Medicare Plan Work?
The Original Medicare Plan is a fee-for-service plan (generally, a fee is charged each time you get a service) managed by the Federal government.
Here are the general rules for how it works:
- You use your red, white, and blue Medicare card when you get healthcare.
- You can go to any doctor, supplier, hospital, or other facility that accepts Medicare and is accepting new Medicare patients.
- You may have supplemental coverage, such as a Medicare Supplement (also known as a Medigap policy) or a Medicare Advantage plan which offers Medicare through a private insurance company, and may pay costs that the Original Medicare Plan does not cover.
- You can purchase Medicare Supplement insurance or Medicare Advantage from private insurance carriers through this website. Medicare Advantage plans often come with no monthly premium, but may have higher deductibles and do restrict the doctors and hospitals you can go to.
The Different Parts of Medicare
You can get the most from your Medicare benefits by learning what Medicare covers and by taking advantage of all that Medicare has to offer.
Medicare has the following parts:
Medicare Part A (Hospital Insurance) helps cover your inpatient care in hospitals. Part A also helps cover skilled nursing facilities, hospice, and home healthcare if you meet certain conditions.
Medicare Part B (Medical Insurance) helps cover medically-necessary services like doctors' services and outpatient care. Part B also helps cover some preventive services to help maintain your health and to keep certain illnesses from getting worse. There is a $185 deductible, then Medicare pays its share (usually 80%), and you pay your share (coinsurance or co-payment—usually 20%) for Part B-covered services and supplies.
Medicare Part C (Medicare Advantage Plans) is another way to get your Medicare benefits. It combines Part A, Part B, and sometimes, Part D (prescription drug) coverage. Medicare Advantage Plans are managed by private insurance companies approved by Medicare. These plans must cover medically-necessary services. However, plans can charge different copayments, coinsurance, or deductibles for these services.
Medicare Part D (Medicare Prescription Drug Coverage) helps cover prescription drugs. This coverage may help lower your rescription drug costs and help protect against higher costs in the future.
What Services Does Medicare Cover?
Medicare covers certain medical services and supplies in hospitals, doctors' offices, and other healthcare settings. Services are either covered under Medicare Part A (Hospital Insurance) or Medicare Part B (Medical Insurance). If you have both Part A and Part B, these services and supplies must be covered as long as they are reasonable and necessary for your health, no matter what type of Medicare plan you have.
What Is Part A (Hospital Insurance)?
Part A helps cover the following after a $1,364 deductible:
Inpatient care in hospitals - this includes critical access hospitals and inpatient rehabilitation facilities, inpatient stays in a skilled nursing facility (not custodial or long-term care), hospice care services, home healthcare services, and inpatient care in a Religious Nonmedical Healthcare Institution (coverage is related to non-medical, non-religious parts of care).
You usually don't pay a monthly premium for Part A coverage if you or your spouse paid Medicare taxes while working. If you aren't eligible for premium-free Part A, you may be able to buy it if you meet one of these conditions:
- You didn't work or didn't pay enough Medicare taxes while you worked and you are age 65 or older
- You are disabled and have returned to work
Note: Currently, the Part A premium for people who must buy Part A can cost up to $437 each month. In most cases, if you choose to buy Part A, you must also have or enroll in Part B and pay the monthly Part B premium. If you have limited income and resources, your state may help you pay for Part A and/or Part B.
When Can You Sign Up for Part A?
If you get benefits from Social Security or the Railroad Retirement Board (RRB), you will automatically get Part A starting the first day of the month you turn age 65. If you are under age 65 and disabled, you will automatically get Part A after you get disability benefits from Social Security or RRB for 24 months. Your Medicare card will be mailed to you about 3 months before your 65th birthday, or your 25th month of disability benefits. People with ALS (Amyotrophic Lateral Sclerosis, or Lou Gehrig's disease) automatically get Part A the month their disability benefits begin. If you aren't eligible for premium-free Part A, you can buy Part A during the following times:
- Initial Enrollment Period - the 7-month period that begins 3 months before your 65th birthday and ends 3 months after your 65th birthday.
- General Enrollment Period - from January 1 - March 31 each year
- Special Enrollment Period - if you have group health coverage through your employer or union, or that of your spouse, you may have a special enrollment period.
Semi-private room, meals, general nursing, drugs as part of your inpatient treatment, and other hospital services and supplies. This includes inpatient care you get in acute care hospitals, critical access hospitals, inpatient care as part of a clinical research study, and mental healthcare. This doesn't include private-duty nursing or a television or telephone in your room. It also doesn't include a private room, unless medically necessary. Inpatient mental healthcare in a psychiatric hospital is limited to 190 days in a lifetime.
Starting with the 4th pint of blood you get at a hospital or skilled nursing facility during a covered stay. The first three pints are not covered.
Home Health Services
Limited to reasonable and necessary part-time or intermittent skilled care or continuing need for physical therapy, occupational therapy, or speech-related pathology ordered by the doctor and provided by Medicare-certified home health agency. Home health services may also include medical social services, home health aide services or other services, durable medical equipment (such as wheelchairs, hospital beds, oxygen, and walkers), and medical supplies for use at home.
For people with a terminal illness who are expected to live 6 months or less if the disease runs its normal course. Coverage includes drugs, medical and support services from a Medicare-approved hospice, and other services not otherwise covered by Medicare (like grief counseling) for terminal and related conditions. Hospice care is usually given in your home (or other facility where you may live). Medicare covers some short-term inpatient stays (for pain and symptom management) and inpatient respite care (care given to a hospice patient so that the usual caregiver can rest).
Skilled Nursing Facility Care
Semi-private room, meals, skilled nursing and rehabilitative services, and other services and supplies (only after a 3-day minimum inpatient hospital stay for a related illness or injury) for up to 100 days in a benefit period. To get care in a skilled nursing facility, you must need skilled care like intravenous injections or physical therapy. Medicare does not cover long-term care or custodial care in this setting.
What Is Part B (Medical Insurance)?
Part B helps cover medically-necessary services like doctors' services, outpatient care, and other medical services that Part A doesn't cover. Part B also covers some preventive services. If you aren't sure if you have Part B, look at your Medicare card. If you have Part B, "MEDICAL (PART B)" is printed on your card.
How Much Does Part B Cost?
You pay the Part B premium each month. Most people enrolling today pay a monthly premium of $135.50. However, your monthly premium will be higher if your individual income is more than $85,000, or if you file a joint tax return for income exceeding $170,000. Higher Part B premiums are based on a sliding scale.
When Can You Sign Up for Part B?
If you aren't getting Social Security or RRB benefits, and you want to get Part B, you will need to sign up for Part B when you are close to age 65. If you didn't sign up for Part B when you first became eligible, you may be able to sign up during one of these times:
General Enrollment Period
The General Enrollment Period is from January 1-March 31 each year. Your coverage will begin on July 1. However, the cost of your Part B will go up 10% for each full 12-month period you could have had Part but didn't sign up for it, unless you qualify for a Special Enrollment Period (see below). You may have to pay this late-enrollment penalty as long as you have Part B.
Special Enrollment Period
If you wait to sign up for Part B because you or your spouse are working and have group health plan coverage based on that work or if you are disabled and you or a family member are working and have group health plan coverage based on that work, then you can sign up for Part B any time while you have group health plan coverage based on current employment or during the 8-month period that begins the month the employment ends, or the group health plan coverage ends, whichever happens first.
What Is the Part B Late-Enrollment Penalty?
If you don't sign up for Part B when you are first eligible, the cost for Part B may go up 10% for each full 12-month period that you could have had Part B, but didn't sign up for it. If you delay taking Part B because you or your spouse (or a family member, if you are disabled) are working and have group health plan coverage based on that work, you may not have to pay the higher premium.
Medically-necessary services - this means the item or service is needed for the diagnosis or treatment of your medical condition.
Preventive services - Services that help prevent or lessen complications from a condition you already have, find health problems early when treatment works best, or manage a medical problem.
What You Pay for Medicare Part B-Covered Services
Costs for Part B services vary depending on the type of service you get and the type of plan you choose. General cost information is provided in the Part B coverage charts for the Original Medicare Plan below.
This information may help you understand the coverage charts:
"No cost" means that Medicare will pay for the service, and there is no cost to you.
"You pay coinsurance" means that, in most cases, you will pay 20% of the Medicare-approved amount for the service.
"You pay coinsurance and Part B deductible applies" means that you must pay all costs until you meet the yearly Part B deductible before Medicare begins to pay its share. Then, you pay the coinsurance (in most cases, 20% of the Medicare-approved amount of the service).
What's NOT Covered by Part A and Part B?
Much like a traditional health insurance policy, Medicare does not cover all of your medical services. Items that are not covered include:
- Chiropractic services (except to correct a subluxation - when one or more of the bones of your spine move out of position - using manipulation of the spine)
- Cosmetic surgery
- Custodial care
- Dental care and dentures (with only a few exceptions)
- Eye care (routine exam), eye refractions (exam that measures your ability to see at specific distances),
and most eyeglasses
- Foot care (routine), like cutting corns or calluses
- Hearing aids and exams for the purpose of fitting a hearing aid
- Hearing tests that haven't been ordered by your doctor
- Laboratory tests for screening purposes, except those listed above
- Long-term care, for example, if you only need custodial care in a nursing home
- Orthopedic shoes (with few exceptions)
- Physical exams (routine or yearly). Medicare will cover a one-time physical exam within the first 6 months of enrolling in Part B (coinsurance and Part B deductible applies)
- Prescription drugs. Most outpatient prescription drugs aren't covered by Part A or Part B. If you need prescription drug coverage, you will also need to purchase Medicare Part D
- Syringes or insulin, unless the insulin is used with an insulin pump, but it may be covered by Medicare prescription drug coverage (Part D)
- Travel (healthcare while you're traveling outside the United States)