Beyond that, the program — and all the options — can get a little complicated. Understanding the basics can help you get started making the choices that are best for you. Keep reading to find out what you need to know, especially if you’re enrolling for the first time or are considering changing plans.
The 4 Parts of Medicare
There are four parts to the Medicare program: Part A covers hospital services, Part B covers physician services, Part C covers managed care programs (called Medicare Advantage), and Part D covers pharmaceuticals. Each part has its own rules about what will or won’t be covered and what the out-of-pocket costs are for the beneficiary (the person with Medicare coverage), says Gerard Anderson, PhD, a professor at the Johns Hopkins Bloomberg School of Public Health in Baltimore, who works with policymakers to manage healthcare spending.
What’s the Difference Between Medicare and Medicaid?
While it can be easy to confuse Medicare and Medicaid, they aren’t the same thing. Medicaid is a public health insurance program for low-income individuals of any age. About 1 in 5 people in the United States access health insurance through Medicaid services, according to the Kaiser Family Foundation. With Medicare, income and assets aren’t considerations in determining eligibility or benefit payments; as long as a person is 65 or older or permanently disabled, they qualify.
How Does Medicare Work?
Healthcare coverage with Medicare operates like private health insurance works: by paying a portion of the cost of medical care. In most cases, the beneficiary will be required to pay a deductible. An individual can opt to purchase co-insurance (called Medigap; see below) to help pay for any services that Medicare doesn’t cover. Medicare typically covers 100 percent of many preventive services, such as annual wellness visits, cardiovascular screenings (every five years), annual mammograms, annual flu shots, bone density measurements, and screenings for cervical, prostate, and colorectal cancers.
The Basics: What Are Medicare Part A and Medicare Part B?
The two main components of Medicare are Part A and Part B. Part A covers inpatient hospital care, hospice care, inpatient care in a skilled nursing facility, and home healthcare services. This part of Medicare is free if either you or your spouse paid Medicare payroll taxes for at least 10 years (if you didn’t you can pay a monthly premium). Part B covers medical care and services provided by doctors and other healthcare providers, home healthcare, the purchase or rental of durable medical equipment, as indicated by Medicare (things like walkers, blood sugar meters, or even a hospital bed), and some outpatient care and home health services. You will pay a standard monthly premium for Medicare Part B coverage; if your income is above a certain threshold, you’ll pay more. Copayments and deductibles are required for many of the services covered under both parts A and B.
Medicare Part D: Prescription Drug Coverage
This component of Medicare helps cover the cost of prescription drugs, including many recommended vaccines. You can get a Medicare drug plan in two ways: by joining a Part D plan in addition to Original Medicare (Parts A and B) or by enrolling in a Medicare Advantage Plan (more on that in a minute) with drug coverage. Medicare Part D is only offered through private insurance companies. According to Dr. Anderson, the biggest recent change to Medicare has been the passage of certain drug provisions in the federal government’s 2022 Inflation Reduction Act, as reported by the Centers for Medicare and Medicaid Services. “This will allow Medicare to negotiate drug prices for certain drugs, penalize drug companies that raise prices, and prevent any Medicare beneficiary with Part D coverage from paying more than $2,000 out-of-pocket,” he says.
Medicare Part C, Also Known as Medicare Advantage (MA Plans)
The Kaiser Family Foundation estimates that nearly half of people covered by Medicare in 2022 chose a Medicare Advantage plan. Medicare Advantage plans are sponsored by private insurers that are paid by the federal government to provide Medicare-covered services as per Medicare rules. Medicare Advantage plans are a way to bundle the different parts of Medicare, and include Part A (hospital insurance), Part B (medical insurance), and usually Part D (Medicare drug coverage), according to Medicare.gov. Medicare Advantage plans may cover things that Original Medicare doesn’t, such as gym memberships, over-the-counter drugs, and some vision, hearing, and dental services. Medicare Advantage plans include both HMOs and PPOs. HMO stands for health maintenance organization, and the coverage is restricted to a particular group of doctors, called a network. PPO is short for preferred provider organization, and it allows people the flexibility to choose doctors in or outside the network.
What’s Medicare Supplemental Insurance (Medigap)?
Original Medicare (Medicare A and B) pays for a lot of healthcare costs, but doesn’t cover everything. A person might purchase a Medigap policy to help pay for any remaining healthcare costs such as copays, coinsurance, and deductibles. As with Medicare Advantage Plans, Medigap policies are sold by private insurance companies, and you pay a monthly premium in addition to the monthly Part B premium that you pay to Medicare. If you want extra benefits beyond Medicare Part A and Part B, both Medicare Advantage Plans and Medigap are options, but you can’t have both at the same time.
How to Decide Between Medicare and Medicare Advantage?
You’ll want to do your research when selecting a plan. Consider issues such as how much you currently spend on things like prescription medications and doctor visits. Do you want to stick with your current providers? If you choose a Medicare Advantage HMO plan, you need to make sure those doctors are “in network.” Although Original Medicare pays for many of your healthcare costs, there’s no limit to how much out-of-pocket you pay per year unless you have supplemental coverage such as Medigap. For many people, Medicare Advantage programs involve less financial risk because insurers set a yearly cap for out-of-pocket spending, and once you hit it, you pay nothing for covered services for the rest of the year.
How Do You Enroll in Medicare?
If you are already collecting Social Security benefits, the government will automatically enroll you in Medicare Parts A and B. However, in certain circumstances you can choose to decline Part B since it has a monthly cost; if you opt to keep the coverage, Medicare will deduct the cost from any Social Security benefits you are collecting. If you aren’t drawing Social Security benefits yet, your first chance to sign up for Medicare (called the initial enrollment period) is when you turn 65. Although Medicare provides your healthcare coverage, you have to sign up through Social Security or the Railroad Retirement Board to determine if you’re eligible and to find out if you (or another qualifying person) paid Medicare taxes long enough to get Part A without having to pay a monthly premium. The seven-month enrollment period starts three months before you turn 65 and ends three months after the month of your birthday. Medicare coverage begins based on the month you signed up. If you miss the seven-month initial enrollment period, you can sign up for Part B during general enrollment, which runs from January 1 to March 1, and coverage will begin on July 1. Note that you will pay a penalty for signing up late: The more years you delay, the higher the penalty. There are some scenarios where you might want to wait to sign up for Medicare and you won’t be penalized — for example, if you or your spouse are still working, and you have health insurance through your job.
Open Enrollment: Your Time to Join, Switch, or Drop a Plan
There is an open enrollment period every year when you can join, switch, or drop a Medicare plan. “From October 15 through December 7, 2022, Medicare beneficiaries can review how they receive their Medicare coverage for 2023,” says Judith A. Stein, executive director at the Center for Medicare Advocacy in Willimantic, Connecticut. According to Medicare.gov, you can do any of the following during open enrollment:
Change from Original Medicare to a Medicare Advantage PlanChange from a Medicare Advantage Plan back to Original MedicareSwitch from one Medicare Advantage Plan to another Medicare Advantage PlanSwitch from a Medicare Advantage Plan that doesn’t offer drug coverage to a Medicare Advantage Plan that offers drug coverageSwitch from a Medicare Advantage Plan that offers drug coverage to a Medicare Advantage Plan that doesn’t offer drug coverageJoin a Medicare drug planSwitch from one Medicare drug plan to another Medicare drug planDrop your Medicare drug coverage completely
Whether you are in Original Medicare with a Part D prescription drug plan, or enrolled in a private Medicare Advantage plan, all beneficiaries should make sure their current plan will meet their needs in the coming year. There are several reasons people should review their plan annually and compare it with others. Says Stein, “If you are now in a Medicare Advantage plan, will your doctors, other healthcare providers, hospitals, and healthcare institutions be in your plan next year? Will your medications be included in your drug plan, within Medicare Advantage or in Part D?” These things can and do change every year, and so everyone should check, says Stein.
