What Medicare Insurance Is
Medicare is a federal health insurance program run by the Centers for Medicare & Medicaid Services (CMS). If you are 65 or older, or if you have end-stage renal disease or ALS regardless of age, you become may be able to access for Medicare. The program has four main parts — Original Medicare (Parts A and B), Medicare Advantage (Part C), and prescription drug coverage (Part D) — and each covers different services.
You do not automatically receive Medicare when you turn 65. You must sign up during your Initial Enrollment Period, which runs for seven months starting three months before the month you turn 65. If you miss this window, you may pay a permanent penalty on your premiums for as long as you have Medicare.
Medicare is not the same as Medicaid. Medicaid is a joint federal and state program for people with low income. Some people may have access to for both programs, called "dual may be able to access" status, but they are separate systems with different rules.
Key Takeaways
- Medicare has four parts: Part A covers hospital stays, Part B covers doctor visits and outpatient care, Part C (Medicare Advantage) bundles A and B with extra benefits, and Part D covers prescription drugs.
- You must sign up during your Initial Enrollment Period — a seven-month window starting three months before you turn 65 — or face permanent premium penalties.
- Original Medicare (Parts A and B) has deductibles and coinsurance you pay out of pocket, while Medicare Advantage plans have copays and often lower out-of-pocket limits.
- Part D prescription drug coverage is separate from Parts A and B, and you choose a plan from private insurers approved by Medicare.
- Your coverage choices affect your costs and which doctors and hospitals you can use, so comparing plans before enrollment matters.
Part A: Hospital Insurance
Part A covers inpatient hospital stays, skilled nursing facility care after a hospital stay, hospice care, and some home health services. Most people do not pay a monthly premium for Part A if they or their spouse paid Medicare taxes for at least 10 years while working.
Part A does have costs you pay when you use it. For a hospital stay in 2024, you pay a deductible of $1,632 for the first 60 days. If you stay longer than 60 days, you pay coinsurance — a daily amount — for days 61 through 90. After 90 days, you can use "lifetime reserve days," which are a limited number of extra days Medicare will cover at a higher coinsurance rate. Once you use your lifetime reserve days, Medicare stops paying for that hospital stay.
Skilled nursing facility care is covered only if you were hospitalized for at least three days first, and only for up to 100 days per benefit period. You pay nothing for the first 20 days, then coinsurance for days 21 through 100. A benefit period starts when you enter the hospital and ends when you have been out of the hospital or skilled nursing facility for 60 days in a row.
Part B: Medical Insurance
Part B covers doctor visits, outpatient services, preventive care, durable medical equipment (like wheelchairs or oxygen), and mental health services. Most people pay a monthly premium for Part B. The standard premium in 2024 is $164.90 per month, but higher earners pay more through Income-Related Monthly Adjustment Amounts (IRMAA).
Part B also has a yearly deductible — $240 in 2024 — that you must meet before Medicare starts to pay. After you meet the deductible, you typically pay 20% coinsurance for most services, and Medicare pays 80%. For some preventive services like annual wellness visits, flu shots, and cancer screenings, you pay nothing if you see an in-network provider.
Part B does not cover routine dental care, vision exams, hearing aids, or long-term custodial care. If you need these services, you can buy a separate Medigap policy or join a Medicare Advantage plan that offers them.
Part C: Medicare Advantage Plans
Part C, also called Medicare Advantage, is an alternative to Original Medicare. Private insurance companies approved by Medicare offer these plans. If you choose Part C, you still have Part A and Part B coverage, but the private plan becomes your primary insurer and manages your benefits.
Medicare Advantage plans often include prescription drug coverage (Part D) built in, and many add dental, vision, hearing, or fitness benefits that Original Medicare does not cover. Out-of-pocket costs are usually capped — meaning once you spend a certain amount in a year, the plan pays 100% of covered services for the rest of that year. Original Medicare has no annual out-of-pocket cap.
The trade-off is that Medicare Advantage plans use networks. You must see doctors and hospitals in the plan's network, except in emergencies. If you travel frequently or have doctors you want to keep, check whether they are in the plan's network before you enroll. Plans also require referrals for specialists in many cases, and they may deny coverage for services they consider not medically necessary.
Part D: Prescription Drug Coverage
Part D is prescription drug coverage offered by private insurers approved by Medicare. If you have Original Medicare (Parts A and B), you must choose a Part D plan separately. If you have Medicare Advantage, most plans include Part D, but you can switch to a standalone Part D plan during the annual enrollment period if you want different coverage.
Part D plans vary widely in which drugs they cover, how much you pay, and which pharmacies you can use. Each plan has a formulary — a list of covered drugs — and drugs are placed in tiers with different copay amounts. A drug on tier 1 might cost $5, while the same drug on tier 3 might cost $50. If your current medication is not on a plan's formulary, you can ask your doctor to request a coverage exception, but the plan can deny it.
Part D has a coverage gap called the "donut hole." In 2024, once you and your plan have spent $5,850 on covered drugs, you enter the gap and pay a higher percentage of drug costs until your out-of-pocket spending reaches $7,050. After that, catastrophic coverage kicks in and you pay a small copay for the rest of the year. The exact amounts change each year.
Medigap: Supplemental Insurance
Medigap (also called Supplemental Insurance) is private insurance that pays some of the costs that Original Medicare does not — deductibles, coinsurance, and copays. Medigap is sold by private insurers and is separate from Medicare itself. You can only buy Medigap if you have Original Medicare (Parts A and B); you cannot use it with Medicare Advantage.
Medigap plans are standardized by the federal government and labeled A through N. Plan G, for example, covers the Part B deductible and 20% coinsurance for most services. Plan N covers similar benefits but requires you to pay a copay for some doctor visits. All Plan G policies offer the same benefits regardless of which company sells it, though premiums vary by insurer and location.
You have the best rates and fewest restrictions if you buy Medigap during your Medigap Open Enrollment Period — the six months starting the month you turn 65 and enroll in Part B. After that window, insurers can deny you coverage or charge higher premiums based on your health history.
Enrollment Periods and important date
Your Initial Enrollment Period for Medicare is a seven-month window: it starts three months before the month you turn 65, includes the month you turn 65, and ends three months after. If you enroll during this period, your coverage starts on the first day of your birth month (or the first of the following month if you enroll in the last three months of the period).
If you miss your Initial Enrollment Period, you can enroll during the General Enrollment Period, which runs January 1 through March 31 each year. Coverage starts July 1. However, if you delay enrollment without a valid reason, you will pay a permanent 10% penalty on your Part B premium for as long as you have Medicare. The penalty is similar for Part D — 1% per month of delay.
Each year, there is an Annual Enrollment Period (AEP) from October 15 through December 7. During this time, you can switch between Original Medicare and Medicare Advantage, change your Part D plan, or add or drop Medigap coverage. Changes take effect January 1 of the following year.
Costs and How to Compare Plans
Medicare costs vary depending on which parts you choose and which specific plans you select. Original Medicare (Parts A and B) has no monthly premium for Part A (for most people), a standard Part B premium of $164.90 per month in 2024, a yearly Part B deductible of $240, and 20% coinsurance after the deductible. Part D premiums range from roughly $5 to $100+ per month depending on the plan and your income.
Medicare Advantage plans have monthly premiums (some as low as $0), annual deductibles, copays for doctor visits and hospital stays, and annual out-of-pocket maximums that cap your total costs. Medigap plans have monthly premiums that vary by insurer and plan type, typically ranging from $100 to $300+ per month, but they reduce or eliminate your out-of-pocket costs for covered services.
To compare plans, use the Medicare Plan Finder tool on Medicare.gov. Enter your current medications, doctors, and hospitals to see which plans cover them and what your estimated costs would be. You can also call 1-800-MEDICARE to speak with a counselor who can walk you through your options.
Frequently Asked Questions
Do I have to enroll in Medicare at 65 if I am still working?
If you or your spouse are still working and have health insurance through your employer, you may be able to delay Part B enrollment without penalty. You must have creditable coverage (coverage as good as Medicare) through your employer. When you do retire and lose that coverage, you have eight months to enroll in Part B without penalty. Contact Social Security to confirm your situation before you decide to delay.
What happens if I do not sign up for Part D when I first become may be able to access?
If you go without Part D coverage for more than 63 days in a row after you become may be able to access, you will pay a permanent penalty of about 1% per month of delay for as long as you have Medicare. The penalty is added to your Part D premium each month. The only exceptions are if you had creditable drug coverage through an employer or union plan, or if you may have access to for Extra Help (a program that helps pay Part D costs).
Can I change my mind about which Medicare plan I chose?
Yes, but only during certain times. If you just turned 65 and are in your Initial Enrollment Period, you can make changes anytime during that seven-month window. After that, you can change plans only during the Annual Enrollment Period (October 15 through December 7) or if you may have access to for a Special Enrollment Period due to a life event like moving, losing employer coverage, or becoming may be able to access for Extra Help.
What is the difference between Original Medicare and Medicare Advantage?
Original Medicare is fee-for-service coverage run directly by the federal government. You can see any doctor or hospital that accepts Medicare, and there is no annual out-of-pocket cap. Medicare Advantage is run by private insurers and uses networks, meaning you must see in-network providers (except emergencies). It usually has lower monthly premiums and an annual out-of-pocket cap, but less flexibility in choosing providers.
Do I need both Part B and Part D?
Part B and Part D cover different things. Part B covers doctor visits and outpatient care; Part D covers prescription drugs. You need Part B to get most medical care. Part D is optional, but if you go without it and later enroll, you pay a permanent penalty. If you have very low income, you may may have access to for Extra Help, which covers Part D costs.