Medicare is a federal health insurance program that provides health insurance for senior citizens and some disabled individuals. Unlike Medicaid, which is backed by a joint effort between federal and state governments, Medicare is exclusively backed by the federal government. Because of this, the eligibility requirements are the same for people regardless of where they live in the United States.
What Are the Different Parts of Medicare?
There are four different parts to Medicare, ranging from Part A to Part D. But to make better sense of it, it’s more helpful to break them down into three different groups: Original Medicare (Part A and Part B), Medicare Advantage (Part C), and Part D. “Original Medicare,” which is comprised of Parts A and B, was established before the creation of Parts C and D.
Who Is Eligible for Medicare?
People who qualify can be separated into two age groups:
65 Years and Older
This is the main group for which Medicare was set up. In order to qualify, though, you’ll need to fulfill two requirements:
- You must have been a U.S. citizen or permanent resident for more than 5 years, and
- You must have paid Medicare taxes for at least 10 years to get premium-free Part A. But even without having paid taxes for the requisite amount of time, you can qualify for Medicare, but will have to pay more.
Under 65 Years of Age
In limited cases, some groups under the age of 65 are eligible to get Medicare benefits. In order to qualify, you’ll need to fall under one of these three groups:
- You’re permanently disabled and you’ve received Social Security Disability Insurance (SSDI) for at least the last two years; or
- You’re suffering from end-stage renal disease (ESRD)/end-stage kidney disease and need to undergo continuous dialysis or need a kidney transplant; or
- You receive Social Security disability benefits for amyotrophic lateral sclerosis (ALS)/Lou Gehrig’s disease.
Medicare Part A: Hospital Insurance
Medicare Part A Covers:
- Inpatient hospital care;
- Stays in hospitals and skilled nursing facilities (SNF) (there are limits on time);
- Home healthcare services (like home health visits);
- Hospice care; and
- Any necessary medical supplies and drugs administered during your stay at a facility (There may be charges for such items when administered at home or hospice.)
Things That Part A Doesn’t Cover:
- Any doctors fees associated with the care you receive during your hospital stay;
- Hospital fees deemed medically unnecessary (personal care items, private duty nursing, or having a TV or phone in your room); and
- Prescription medication (and supplies) that were not administered as part of hospital treatment or as part of a covered stay at an SNF.
Each of the benefits under Part A are subject to costs either in the form of a deductible or co-pay/co-insurance depending on the length of your inpatient care. However, in situations where Medicare covers home health care, there is no deductible or copayment.
|Daily coinsurance||$0||1st — 60th day|
|$352||61st — 90th day|
|$704||91st — 150th day, lifetime reserve days|
|Skilled Nursing Facility Benefits|
|Daily coinsurance||$0||1st — 20th day|
|$176||21st — 100th day|
|No benefits starting the 101st day|
|Home Health Services Benefits|
|Other||20% of Medicare-approved amount for durable medical equipment|
|Copayment||Up to $5 copayment per prescription for outpatient drugs for pain and symptom management|
|Coinsurance||5% coinsurance for inpatient respite stay|
Additionally, if you haven’t worked at least 10 years in the United States (and paid Social Security taxes along the way), then you’ll have to pay a monthly premium for Part A. As of 2020, the monthly premiums are:
- Individuals who made at least 30 quarters of Social Security tax payments or were married to someone with at least 30 quarters of payments will pay $252 a month.
- Individuals with less than 30 quarters will pay $458 a month
Medicare Part B: Medical Insurance
Medicare Part B Covers:
- Outpatient medical services;
- Coverage for physician services and routine doctor visits;
- Preventive care and services (like flu shots and mammograms);
- Equipment or tests administered during outpatient services; and
- Medication administered during outpatient visits.
Things That Part B Doesn’t Cover:
- Prescription medication (and supplies related to drugs covered under Part D).
There are three different costs associated with Part B:
- Monthly Premium: The standard premium is $144.60. But higher-income beneficiaries will pay more for Part B, from $57.80-$347 in 2020, depending on level of income;
- Annual Deductible: $198; and
- Co-Insurance/Co-Pay: 20% of covered medical services.
Medicare Part C: Medicare Advantage
Medicare Part C was established in 2003 (although there were forms of managed care prior to that) and gave folks the choice to opt out of government-provided Original Medicare (Parts A and B). People with Medicare Part C instead choose a Medicare-approved private insurer to give them the benefits that Parts A and B provide, plus some additional coverage.
Essentially, Part C gives consumers an option: either go with Original Medicare or go with Medicare Advantage. People generally choose Part C because of what they see as low premiums and extra benefits.
Another option to consider, though, is to purchase a Medigap plan that combines with Parts A and B to address any coverage gaps. To sort out which is the best option for you, read more about the differences between Medicare Advantage and Medigap.
Medicare Part C Covers:
- Everything covered by Parts A and B;
- Likely will cover prescription drugs; and
- Possibly additional benefits or services (like hearing, vision, and dental services) depending on the private health plan you choose.
Because Medicare Advantage plans are provided by private insurers, costs will vary between plans. The federal government pays these insurers a fixed amount per month, but consumers still have to pay the following:
- Part B Monthly Premium: Again the standard premium is $144.60. But higher-income beneficiaries will pay more for Part B, from $57.80-$347 in 2020, depending on level of income.
- Additional Monthly Premium: This cost varies depending on the private health plan you have;
- Additional Annual Deductible: Some plans may charge an additional annual deductible, and
- Co-Insurance/Co-Pay: Varies plan-to-plan depending on the coverage.
Medicare Part D: Prescription Drug Coverage
Medicare Part D is voluntary and is actually a separate policy that you can buy from a Medicare-approved private insurer. Part D provides coverage for many generic and brand name prescription plans, but because it’s through your choice of private insurer, the list of which medications are covered can vary from one plan to the next.
Medicare Part D Covers:
- Outpatient prescription drugs.
Things Part D Doesn’t Cover:
- Everything else under Parts A and B.
In a word: complicated. But there are a few primary costs to Part D:
- Monthly Premium: This varies depending on the private health plan you’ve chosen;
- Annual Deductible: Again, this amount depends on the drug plan insurance you’ve chosen to purchase, but the maximum is $435.
- Co-Insurance/Co-Pay: Plans establish cost-sharing rules. Levels will vary depending on your Part D plan; and
- Costs in the Coverage Gap/”Donut Hole”: This is where things get complicated. Once total drug costs (by both you and the plan) reaches $4,020, you get into a coverage gap where you’re responsible for 25% of drug costs.
- Catastrophic Coverage: When total costs reach $9,038.75, this stage begins. You pay the greater of 5% or $3.95 for most generics and $8.95 for all other drugs.
Enrolling In and Paying for Medicare
How Do You Enroll in Medicare?
Enrollment in Original Medicare is automatic once you turn 65 and have already been getting benefits from Social Security. If you have ALS or some illness where you get disability benefits, you’re automatically enrolled in Parts A and B once those benefits begin. In most other cases you have to enroll through Social Security.
Who Pays for Medicare?
You do. Medicare is funded by taxpayers like you and is managed by the federal government through the Social Security Administration. In addition, you pay for the premiums for Part B and Part D, as well as costs associated with the parts of Medicare.
Taking the Next Steps
Mark your calendar for enrollment in Medicare, and for enrollment in add-ons like Medicare Supplement or Medicare Advantage.