Understanding Medicare can be a confusing process, especially for those of us who are entirely new to it. There are dozens of plan options and health insurance terms that can be overwhelming if you’re learning about Medicare for the first time. What’s important to know is that if you’re confused, you’re not alone! We’re here to break down the basics of Medicare. Keep reading for more information and answers to the most frequently asked questions about Medicare.

Key Takeaways

  • Medicare is a federal health insurance program that provides healthcare to seniors aged 65+, younger people with disabilities, and people diagnosed with End-Stage Renal Disease (kidney failure) or Amyotrophic Lateral Sclerosis (ALS).
  • Part A and Part B of Original Medicare do not cover prescription drugs, but Medicare Prescription Drug Plans (Part D) and Medicare Advantage (Part C) do.
  • While there is no legal mandate, we recommend purchasing supplemental coverage to help with the benefit gaps and cost-sharing requirements found in Original Medicare.
  • Supplemental coverage is available through Medicare Advantage (Part C) or Medigap policies.

What is Medicare?

Medicare is a federal health insurance program that provides adequate healthcare to adults aged 65 and up. It was implemented in 1965 with seniors’ health in mind, but has since been expanded to additionally cover individuals under 65 with long-term disabilities. Medicare helps cover medical services, prescription drugs, home healthcare, and routine doctor’s visits for eligible participants. The program has two parts: Part A, which covers inpatient hospital services, and Part B, which covers outpatient medical services. It provides coverage for individuals regardless of income level, health status, or medical history.

How Can Someone Qualify for Medicare?

Medicare is available to seniors 65+, younger people with disabilities, and people diagnosed with End-Stage Renal Disease (kidney failure) or Amyotrophic Lateral Sclerosis (ALS). Within these characteristics, however, there are additional requirements that determine which plan option you qualify for and plan pricing.

If you’re 65 or older, you are eligible for full Medicare benefits if you:

  • Are a U.S. citizen or have been a permanent legal resident for at least 5 years
  • Receive Social Security or Railroad Retirement payments or are eligible to receive them
  • Paid Medicare payroll taxes while working
  • You or your spouse is a government employee/retiree

If you’re under 65, you are eligible for full Medicare benefits if you:

  • Have been entitled to Social Security disability benefits for at least 24 months (consecutively or non-consecutively)
  • Receive a disability pension
  • Have Amyotrophic Lateral Sclerosis, also known as ALS or Lou Gehrig’s Disease
  • Have End-Stage Renal Disease and require regular kidney dialysis or need a kidney transplant

When Can Eligible Enrollees Apply for Medicare?

When you first become eligible for Medicare, there is a 7-month long initial enrollment period to sign up for Part A and/or Part B. It begins 3 months before you turn 65 and ends 3 months after you turn 65. In most cases, not signing up for Part B when you’re first eligible may result in a late penalty fee. Additionally, waiting until the same month you turn 65 to enroll could result in Part B coverage being delayed.

If you miss the initial enrollment period, you can apply for Medicare during the General Enrollment Period between January 1st and March 31st each year. You can also consider applying during a Special Enrollment Period if you qualify. Find out all eligibility requirements and dates using the Medicare eligibility tool.

What About Prescription Drugs?

Since 2006, everyone who receives Medicare has been given the optional benefit for prescription drug coverage. There are two primary ways to get prescription drug coverage through Medicare.

  1. Medicare Part D: Part A and Part B of Original Medicare do not cover prescription drugs. Those who have Parts A and/or B can apply for Part D, an additional plan that supplements Original Medicare benefits. Part D plans, also known as PDPs, must cover the most common drugs, but may choose specific drugs to cover. Each plan has a formulary – a list of prescription drugs covered under that policy.
  2. Medicare Advantage (Part C): Medicare beneficiaries have the option to receive benefits through a private health plan, such as an HMO or PPO. Private Medicare-approved insurance providers work in conjunction with the Medicare program, but establish their own coverage rules and regulations. Medicare Advantage plans are all-in-one type packages, as they typically cover Part A, Part B, and Part D benefits.

Do I Need to Purchase Supplement Coverage With Medicare?

Original Medicare covers some healthcare costs, but Parts A and B do not cover all medical services necessary for seniors and those with disabilities. Additionally, many Medicare policies can have high deductibles or no limit on out-of-pocket spending. If you require assistance equipment for a condition, dental, vision, or hearing services, you should consider supplement coverage. You are not legally mandated to purchase supplemental coverage, but we strongly recommend it. Having supplemental coverage can help with the benefit gaps and cost-sharing requirements found in Original Medicare.

Supplement Option: Medigap (Medicare Supplement Insurance)

Medigap is additional health insurance that you can purchase from a private company to pay for the healthcare costs not covered by Original Medicare, such as copayments, deductibles, and healthcare outside of the U.S. To be eligible for a Medigap policy, you must already be enrolled in a Medicare Part A and Part B plan. In addition to the Part B premium, you will have to pay a premium to your Medigap provider. Medigap policies only apply to one person, so if you and your spouse want Medigap, you will have to enroll separately. If you’re interested in purchasing a Medigap plan, the open enrollment period begins six months before your 65th birthday if you are already enrolled in Medicare Part B or are within six months of enrolling in Medicare Part B.

Supplement Option: Medicare Advantage (Medicare Part C)

Medicare Part C or Medicare Advantage plans include Part A (Hospital), Part B (Medical), and Part D (Prescription Drug) services. Most plans offer additional benefits that Original Medicare doesn’t cover, such as vision, dental, and hearing, so many seniors or people with disabilities might consider this an ideal plan. In general, MA plans are more affordable than Original Medicare, with premium prices and out-of-pocket costs generally being lower. Each MA plan has its own rules for out-of-pocket costs, coverage, and patient responsibility, so be sure to read plans thoroughly before enrolling. Medicare Advantage plans can be found on the Medicare plan-finder tool.

Medicare Coverage Gaps

As mentioned previously, we recommend supplemental coverage to help you avoid the financial dangers that come with Medicare. Original Medicare has various cost-sharing requirements that obligate you to pay coinsurance, deductibles, and copayments. Medicare policies don’t usually have an annual limit on out-of-pocket costs. This means you may end up paying thousands of dollars for medical services with no maximum cap. The best way to avoid high out-of-pocket costs is to enroll in supplemental Medicare coverage, such as Medigap or Medicare Advantage.

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