Medicare 101: Your Complete Guide

Part A

Medicare Part A, Hospital Insurance

Medicare Part A is often referred to as “hospital insurance” because it primarily covers inpatient care. If you are admitted to a hospital for a medical procedure, surgery, or observation that qualifies as an inpatient stay, Part A helps pay for that care. But hospital stays are only one piece of the puzzle. Part A also covers skilled nursing facility care following a qualifying hospital stay, hospice care for individuals with a terminal illness, and certain home health care services when ordered by a physician. For many people turning 65, Part A is their first introduction to the Medicare program, and understanding what it does and does not cover is essential for avoiding unexpected medical bills.

The good news is that most people qualify for premium-free Part A. If you or your spouse paid Medicare taxes through payroll deductions for at least 10 years (40 quarters), you will not owe a monthly premium for Part A coverage. People who do not meet the 40-quarter threshold may still be able to enroll in Part A, but they will pay a monthly premium that varies based on how many quarters of coverage they have earned. Eligibility typically begins at age 65, although younger individuals who receive Social Security Disability Insurance (SSDI) benefits may qualify after a 24-month waiting period, and those with End-Stage Renal Disease (ESRD) or ALS may qualify sooner.

While Part A does not have a monthly premium for most enrollees, it is not entirely free. There is an inpatient hospital deductible that applies each benefit period, which is the amount you pay out of pocket before Part A begins covering your hospital costs. After the deductible is met, Part A covers the first 60 days of an inpatient hospital stay in full. Days 61 through 90 require a daily coinsurance payment, and days 91 through 150 draw on your “lifetime reserve days,” which come with a higher daily coinsurance and are limited to 60 days over your lifetime. For skilled nursing facility stays, Part A covers the first 20 days in full, with coinsurance applying for days 21 through 100. Understanding these cost-sharing details is important, because they are one of the main reasons many people choose to add supplemental coverage such as a Medigap plan.

Part B

Medicare Part B, Medical Insurance

While Part A handles inpatient and facility-based care, Medicare Part B covers the services you are more likely to use on a day-to-day basis. Part B pays for doctor visits, outpatient procedures, lab tests, diagnostic imaging, durable medical equipment (such as wheelchairs, walkers, and oxygen equipment), mental health services, and a wide range of preventive care. In fact, Medicare Part B covers many preventive services at no cost to you, including annual wellness visits, flu shots, cardiovascular screenings, diabetes screenings, mammograms, and certain cancer screenings. These preventive benefits are an important part of staying healthy and catching potential issues early.

Unlike Part A, Part B does require a monthly premium. The standard Part B premium is set annually by the Centers for Medicare & Medicaid Services (CMS) and is typically deducted directly from your Social Security check. Most enrollees pay the standard premium amount, but higher-income individuals may pay more through an Income-Related Monthly Adjustment Amount (IRMAA). In addition to the monthly premium, Part B has an annual deductible. Once you have met the deductible, Medicare generally covers 80 percent of the Medicare-approved amount for covered services, and you are responsible for the remaining 20 percent. This 20-percent coinsurance has no cap under Original Medicare, which is another reason many people choose to pair their coverage with a Medigap plan.

Enrolling in Part B at the right time is critical. Your Initial Enrollment Period (IEP) is a seven-month window surrounding your 65th birthday, and signing up during this window ensures your coverage begins without delay. If you miss your IEP and do not have qualifying coverage through an employer, you may face a late enrollment penalty, an additional 10 percent added to your Part B premium for every 12-month period you were eligible but did not enroll. This penalty is permanent, meaning it stays with you for as long as you have Part B. The penalty is designed to encourage timely enrollment and prevent people from waiting until they are sick to sign up, so it is important to understand your enrollment windows and act within them.

Part C

Medicare Part C, Medicare Advantage

Medicare Advantage (also called Part C) is an alternative way to receive your Medicare benefits. Instead of getting coverage through Original Medicare (Parts A and B) directly from the federal government, you enroll in a plan offered by a private insurance company that contracts with Medicare. Medicare Advantage plans are required to cover everything Original Medicare covers, but most plans also include additional benefits that Original Medicare does not, such as prescription drug coverage, dental care, vision exams and eyewear, hearing aids, fitness programs, and even transportation to medical appointments. Many people are drawn to Medicare Advantage because of these extra benefits and the convenience of having everything bundled into a single plan with one card.

Medicare Advantage plans come in several types, including Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), Private Fee-for-Service (PFFS) plans, and Special Needs Plans (SNPs). Each type has different rules about whether you need referrals to see specialists and whether you must use in-network providers. Many Medicare Advantage plans have low or even zero-dollar monthly premiums (in addition to your Part B premium), but they use cost-sharing structures like copays, coinsurance, and annual out-of-pocket maximums that differ from Original Medicare. Choosing the right Medicare Advantage plan depends on your health needs, preferred doctors, prescription medications, and budget.

Part D

Medicare Part D, Prescription Drug Coverage

Medicare Part D provides outpatient prescription drug coverage to help reduce the cost of medications. Part D plans are offered by private insurance companies approved by Medicare, and each plan maintains its own formulary, a list of covered drugs organized into cost tiers. When choosing a Part D plan, it is important to make sure your current medications are included on the plan’s formulary and that your preferred pharmacy is in the plan’s network. Part D plans charge monthly premiums, annual deductibles, and copays or coinsurance that vary depending on the specific plan and the tier your medication falls under.

Like Part B, Part D has a late enrollment penalty for people who go without creditable prescription drug coverage for 63 or more consecutive days after their Initial Enrollment Period ends. The penalty is calculated based on the number of months you went without coverage and is added to your monthly Part D premium permanently. If you have drug coverage through an employer or union plan that is considered “creditable” (meaning it is at least as good as a standard Part D plan), you typically will not face a penalty when you eventually enroll. Understanding whether your existing coverage qualifies as creditable is an important step in making informed enrollment decisions.

Medigap

Medicare Supplement Plans (Medigap)

Medicare Supplement Insurance, commonly known as Medigap, is designed to fill the “gaps” in Original Medicare coverage. When you have Original Medicare (Parts A and B), you are still responsible for out-of-pocket costs like deductibles, coinsurance, and copayments. A Medigap policy helps pay for some or all of these remaining costs, depending on the plan you choose. Medigap plans are standardized by the federal government, meaning Plan G from one insurance company covers the exact same benefits as Plan G from another company, but premiums can vary significantly between insurers. The most popular Medigap plans today include Plan G and Plan N, each offering a different balance of coverage and premium cost.

One of the most important things to understand about Medigap is that it works only with Original Medicare. You cannot pair a Medigap plan with a Medicare Advantage plan. Additionally, Medigap plans do not include prescription drug coverage, so you will typically need to enroll in a standalone Part D plan alongside your Medigap policy. The best time to purchase a Medigap plan is during your Medigap Open Enrollment Period, which begins the month you turn 65 and are enrolled in Part B. During this six-month window, insurance companies cannot deny you coverage or charge you more based on pre-existing conditions. Outside of this window, insurers may use medical underwriting, which could result in higher premiums or even denial of coverage.

Enrollment

Medicare Enrollment Periods

Understanding when you can enroll in or change your Medicare coverage is critical. Here are the key enrollment windows.