Medicare

Understanding Medicare: A Simple Guide to How It Works

Medicare can feel confusing at first. There are different “parts,” different enrollment periods, and several decisions to make. The good news is that once the basic pieces are understood, Medicare becomes much easier to navigate.

Medicare is a federal health insurance program primarily for people age 65 and older. Some people under 65 may also qualify because of certain disabilities or medical conditions.

One of the most important things to understand is that Medicare is not one single plan that covers everything. Instead, there are different parts of Medicare, and people choose how they want to put their coverage together.

The Four Parts of Medicare

Medicare Part A — Hospital Coverage

Part A is often called hospital insurance. It generally helps pay for care you receive when you are formally admitted to a hospital.

Part A may also help cover:

• Inpatient hospital care
• Limited care in a skilled nursing facility after a qualifying hospital stay
• Hospice care
• Certain home health services

Most people do not pay a monthly premium for Part A because they or their spouse paid Medicare taxes while working for a sufficient amount of time.

However, premium-free does not mean completely free. Part A has deductibles and other possible out-of-pocket costs.

It is also important to know that Medicare does not generally cover long-term custodial care simply because someone needs help with everyday activities such as bathing, dressing, eating, or supervision. This is a common source of confusion for families.

Medicare Part B — Medical Coverage

Part B is often called medical insurance. It generally helps cover medical care outside of an inpatient hospital stay.

This may include:

• Doctor visits
• Specialist appointments
• Outpatient care
• Preventive services and screenings
• Lab tests
• Medical equipment
• Ambulance services when medically necessary
• Certain home health services
• Mental health services

Most people pay a monthly premium for Part B. The amount can change each year, and some people with higher incomes may pay more.

Part B also has a deductible. After the deductible is met, Original Medicare commonly pays a portion of approved medical costs and the patient is responsible for the remaining amount.

This is one reason many people choose additional insurance to help cover some of the costs that Original Medicare does not pay.

Original Medicare: Parts A and B

When people talk about Original Medicare, they mean Medicare Part A and Part B together.

With Original Medicare, you can generally see any doctor or healthcare provider in the United States who accepts Medicare. In most cases, you do not have to choose a primary care doctor or get a referral to see a specialist.

The flexibility of Original Medicare is one of its biggest advantages.

However, Original Medicare does not cover every healthcare expense. For example, it generally does not include routine dental care, routine vision care, hearing aids, or most prescription medications you take at home.

Original Medicare also does not have the same type of annual out-of-pocket maximum that Medicare Advantage plans are required to have for covered Part A and Part B services.

Because of these gaps, people who choose Original Medicare often consider adding a Medicare Supplement plan and a Part D prescription drug plan.

Medicare Part D — Prescription Drug Coverage

Part D helps pay for prescription medications.

Part D plans are offered by private insurance companies approved by Medicare. Each plan has its own:

• Monthly premium
• Deductible
• List of covered medications
• Pharmacy network
• Rules about how certain medications are covered

The list of medications covered by a plan is called a formulary.

Before choosing a Part D plan, enter all of your medications into the official Medicare Plan Finder and compare your estimated total annual costs. The plan with the lowest monthly premium is not always the least expensive plan overall.

It is also important to think about Part D even if you do not currently take many medications. If you go without prescription drug coverage and do not have other qualifying drug coverage, you may have to pay a late-enrollment penalty if you sign up later.

What Is Medigap?

Medigap is also called Medicare Supplement Insurance.

A Medigap policy works alongside Original Medicare and can help pay certain costs that Original Medicare leaves for you to pay, such as deductibles, coinsurance, and copayments, depending on the plan.

Medigap plans are sold by private insurance companies.

A common Medicare setup is:

Part A + Part B + Medigap + Part D

This combination can provide broad access to healthcare providers while helping make medical expenses more predictable.

However, you generally cannot use a Medigap policy with a Medicare Advantage plan.

The timing of buying a Medigap policy can also be very important. Depending on where you live and your circumstances, applying outside certain protected enrollment periods may affect your options or costs.

Medicare Advantage — Part C

Medicare Advantage is another way to receive your Medicare benefits.

Instead of receiving your Part A and Part B benefits directly through Original Medicare, you enroll in a Medicare Advantage plan offered by a private insurance company approved by Medicare.

You still have Medicare, but the private plan manages your Medicare-covered healthcare services.

Many Medicare Advantage plans combine several types of coverage into one plan and may include:

• Hospital coverage
• Medical coverage
• Prescription drug coverage
• Dental benefits
• Vision benefits
• Hearing benefits
• Fitness or wellness benefits

These additional benefits can make Medicare Advantage plans attractive. Some plans may also have very low monthly premiums beyond the Part B premium.

However, it is important to look beyond the premium.

Medicare Advantage plans may have provider networks. Depending on the type of plan, you may need to use certain doctors and hospitals to receive the lowest costs. Some plans may require referrals or prior authorization for certain services.

You should consider:

• Are your doctors in the network?
• Are your preferred hospitals included?
• Are your medications covered?
• What are the copayments and coinsurance?
• What is the annual out-of-pocket maximum?
• What happens if you need care while traveling?
• What rules apply to specialist care?

A plan that is excellent for one person may not be the best choice for another.

Original Medicare vs. Medicare Advantage

One of the biggest decisions when entering Medicare is choosing between these two general approaches.

Original Medicare may offer more freedom in choosing healthcare providers who accept Medicare. Many people combine it with a Medigap plan and a separate Part D prescription drug plan.

Medicare Advantage may offer the convenience of receiving multiple benefits through one private plan and may include benefits that Original Medicare does not routinely cover. However, provider networks and plan rules can be more restrictive.

Neither choice is automatically better for everyone.

The right choice depends on your health needs, medications, budget, preferred doctors, travel habits, and comfort with potential out-of-pocket expenses.

When Do You Sign Up for Medicare?

For many people, the first opportunity to enroll begins around their 65th birthday.

The Initial Enrollment Period generally lasts seven months:

• Three months before the month you turn 65
• The month you turn 65
• Three months after the month you turn 65

Some people are automatically enrolled, particularly if they are already receiving certain Social Security benefits. Others need to sign up themselves.

If you are still working at age 65 and have health insurance through your current employer or your spouse’s current employer, you may be able to delay certain parts of Medicare without a penalty.

However, the rules depend on the type of coverage and, in some situations, the size of the employer.

Do not assume that having health insurance means you can safely delay Medicare. COBRA, retiree insurance, and some other forms of coverage do not necessarily give you the same enrollment protections as insurance based on current employment.

Before delaying Medicare, confirm the rules that apply to your particular coverage.

Medicare Does Not Cover Everything

This is one of the most important things to understand about Medicare.

Depending on how your coverage is structured, Medicare may not cover or fully cover:

• Routine dental care
• Routine eye exams and eyeglasses
• Hearing aids
• Most long-term custodial care
• Most personal care or homemaking services when that is the only care needed
• Healthcare received outside the United States, except in limited circumstances

This is why planning for healthcare in later life involves more than simply signing up for Medicare.

Medicare and Long-Term Care Are Not the Same Thing

Many families assume Medicare will pay for ongoing home care or nursing home care. In most situations, Medicare does not pay for long-term custodial care.

Medicare may cover certain short-term skilled services when specific medical requirements are met. That is different from ongoing assistance with daily activities.

For longer-term care, people may need to explore other options, including:

• Medicaid
• State home- and community-based service programs
• Long-term care insurance
• Veterans benefits for those who qualify
• Private payment
• Local aging-service programs

Understanding this difference before a crisis occurs can help families plan more effectively.

Can You Have Both Medicare and Medicaid?

Yes.

Some people qualify for both Medicare and Medicaid. This is sometimes called being dual eligible.

In general, Medicare pays first for Medicare-covered services, while Medicaid may help with certain premiums, deductibles, copayments, and services that Medicare does not cover, depending on the person’s eligibility and state Medicaid program.

There are also programs that may help people with limited incomes pay Medicare expenses.

These programs are worth investigating because many people may qualify for assistance without realizing it.

Programs That May Help With Medicare Costs

If Medicare premiums, prescriptions, or other healthcare expenses are difficult to afford, help may be available.

Programs include:

Medicare Savings Programs — These state-administered programs may help eligible people pay certain Medicare costs.

Extra Help — This federal program helps eligible people with Medicare prescription drug costs.

Medicaid — Depending on income, assets, state rules, and other eligibility requirements, Medicaid may provide additional healthcare coverage and access to certain long-term services and supports.

Do not assume that your income is too high to qualify for assistance without checking. Eligibility rules can change, and different programs have different financial requirements.

Where Can You Get Free, Unbiased Medicare Help?

You do not have to figure out Medicare alone.

Every state has a State Health Insurance Assistance Program, commonly known as SHIP. These programs provide free, unbiased Medicare counseling.

In Massachusetts, this program is called SHINE — Serving the Health Insurance Needs of Everyone.

A trained counselor can help you understand your Medicare options, compare plans, review prescription drug coverage, and identify programs that may help with costs.

You can also use the official Medicare website or call Medicare directly for information about your coverage and available plans.

A Simple Way to Think About Medicare

If all the different parts still seem confusing, think of Medicare this way:

Part A = Hospital care

Part B = Doctors and outpatient medical care

Part D = Prescription medications

Medigap = Helps fill certain financial gaps in Original Medicare

Medicare Advantage (Part C) = An alternative way to receive your Medicare benefits through a private insurance plan

The biggest decision for many people is whether to choose:

Original Medicare + possibly Medigap + Part D

or

A Medicare Advantage plan

There is no single Medicare plan that is best for everyone. Your healthcare needs, finances, medications, doctors, and lifestyle all matter.

Before Choosing a Medicare Plan

Take the time to compare your options carefully. Make a list of your doctors, hospitals, medications, expected healthcare needs, and travel habits. Then look at the total potential cost of coverage — not just the monthly premium.

Medicare decisions can have long-term consequences, particularly when switching between Medicare Advantage and Original Medicare with a Medigap policy.

When you are unsure, consider getting free, unbiased counseling through your state’s SHIP program before making a decision.

This information is provided for general educational purposes and is not individualized Medicare, insurance, legal, or financial advice. Medicare costs, benefits, enrollment rules, and plan availability can change. Always verify current information with Medicare, Social Security, your State Health Insurance Assistance Program, or another qualified professional before making coverage decisions.