Medicare can be a bit of a maze initially, but it’s one of the most important programs for older adults in the United States. Designed to help cover healthcare costs as we age, Medicare is divided into several parts, each covering different services. If you're approaching age 65 or already eligible, it’s crucial to understand Medicare’s ins and outs to ensure you get the best care for your needs.

What is Medicare?

Medicare is a federal health insurance program primarily for individuals 65 or older, though certain younger individuals with disabilities may also qualify. Medicare helps cover the costs of hospital care, doctor visits, and other medical services, but it’s not as simple as one big plan. Medicare is made up of different parts, each offering specific types of coverage.

The Four Parts of Medicare

  1. Medicare Part A covers hospital insurance, helping with the cost of inpatient hospital stays, care in a skilled nursing facility, hospice care, and some home health care. Most people don’t pay a premium for Part A because they or their spouse have paid Medicare taxes while working.
  2. Medicare Part B covers medical insurance, which includes doctor visits, outpatient care, preventive services, and durable medical equipment. Part B has a monthly premium, and the amount depends on your income.
  3. Medicare Part C, also known as Medicare Advantage, is an alternative to Original Medicare (Parts A and B). These plans are offered by private insurance companies and often include additional benefits like dental, vision, and prescription drug coverage.
  4. Medicare Part D provides prescription drug coverage. Like Medicare Advantage, private insurance companies offer these plans and help cover the cost of medications. 

Learn more about the parts of Medicare.

When to Sign Up for Medicare

The Initial Enrollment Period (IEP) is the first opportunity to sign up for Medicare. It begins three months before you turn 65, includes your birthday month, and ends three months after your 65th birthday. If you don’t sign up for Medicare during this window, you may face penalties that increase your monthly premiums later.

If you’re still working or have health insurance through an employer, you might be able to delay signing up for Medicare Part B without penalties. However, it’s essential to understand the rules and avoid gaps in coverage.

Understanding Your Costs

Even though Medicare covers many healthcare costs, it’s not free. Here’s what you might need to budget for:

  • Premiums: These are the monthly payments you make for coverage. Most people don’t pay a premium for Part A, but they do for Part B and Part D.
  • Deductibles: This is the amount you pay out-of-pocket for services before Medicare starts to cover its share.
  • Co-payments and Co-insurance: After meeting your deductible, you may still need to pay a portion of the costs for certain services. For instance, Medicare might cover 80% of a doctor's visit, leaving you to pay the remaining 20%.

Learn more about the costs of Medicare.

Supplementing Medicare

Even with Medicare, you might find that you have significant out-of-pocket costs. That’s where Medigap (Medicare Supplement Insurance) comes in. Medigap policies are sold by private insurance companies and help cover things like co-payments, co-insurance, and deductibles. These policies are designed to fill the “gaps” in Original Medicare coverage, but you must already have Medicare Parts A and B to buy a Medigap policy.

Navigating Medicare Advantage vs. Original Medicare

Deciding between Original Medicare (Parts A and B with or without Medigap) and a Medicare Advantage Plan (Part C) can feel overwhelming. Here’s a basic rundown:

  • Original Medicare: Offers the freedom to choose any doctor or hospital that accepts Medicare. You’ll need to purchase a separate Part D plan for prescriptions and may want Medigap to cover out-of-pocket costs.
  • Medicare Advantage: These plans often have lower out-of-pocket costs but require you to use a network of doctors and hospitals. Many Medicare Advantage Plans bundle prescription drug coverage and other benefits, like vision or dental care, into one plan.

Compare Original Medicare vs. Medicare Advantage.

Get Help with Your Medicare Decisions

As you can see, Medicare is not a one-size-fits-all program. Your healthcare needs, budget, and preferences will determine which parts of Medicare and supplemental plans are best for you. 

Medicare can feel like a confusing system with many moving parts, but you don’t have to navigate it alone. There are resources to help you, such as Medicare.gov, your local State Health Insurance Assistance Program (SHIP).