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What's Medicare?

Medicare is the federal health insurance program for:

People who are 65 or older
Certain younger people with disabilities
People with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a transplant, sometimes called ESRD)

What are the parts of Medicare?

The different parts of Medicare help cover specific services:

Medicare Part A (Hospital Insurance)
Part A covers inpatient hospital stays, care in a skilled nursing facility, hospice care, and some home health care.
Medicare Part B (Medical Insurance)
Part B covers certain doctors' services, outpatient care, medical supplies, and preventive services.
Medicare Part D (prescription drug coverage)
Helps cover the cost of prescription drugs (including many recommended shots or vaccines).

Part A & Part B Premiums

Most people don’t pay a monthly premium for Part A.

You usually don't pay a monthly premium for Part A if you or your spouse paid Medicare taxes for a certain amount of time while working. This is sometimes called "premium-free Part A."

If you don't qualify for premium-free Part A, you can buy Part A.

If you don't qualify for premium-free Part A, you can buy Part A. You'll pay up to $458 each month. If you paid Medicare taxes for less than 30 quarters, the standard Part A premium is $458. If you paid Medicare taxes for 30–39 quarters, the standard Part A premium is $252.

Everyone pays a monthly premium for Part B.

Most people will pay the standard Part B premium amount. The standard Part B premium amount in 2021 is $148.20. If your modified adjusted gross income as reported on your IRS tax return from 2 years ago is above a certain amount, you'll pay the standard premium amount and an Income Related Monthly Adjustment Amount (IRMAA). IRMAA is an extra charge added to your premium.

Original Medicare

Original Medicare includes Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance). You pay for services as you get them. When you get services, you’ll pay a deductible at the start of each year, and you usually pay 20% of the cost of the Medicare-approved service, called coinsurance. If you want drug coverage, you can add a separate drug plan (Part D).

Original Medicare pays for much, but not all, of the cost for covered health care services and supplies. A Medicare Supplement Insurance (Medigap) policy can help pay some of the remaining health care costs, like copayments, coinsurance, and deductibles. Some Medigap policies also cover services that Original Medicare doesn't cover, like medical care when you travel outside the U.S.How does Medicare work?

With Medicare, you have options in how you get your coverage. Once you enroll, you’ll need to decide how you’ll get your Medicare coverage. There are 2 main ways:

Medicare Advantage

Medicare Advantage is an “all in one” alternative to Original Medicare. These “bundled” plans include Part A, Part B, and usually Part D. Most plans offer extra benefits that Original Medicare doesn’t cover — like vision, hearing, dental, and more. Medicare Advantage Plans have yearly contracts with Medicare and must follow Medicare’s coverage rules. The plan must notify you about any changes before the start of the next enrollment year.

Each Medicare Advantage Plan can charge different out-of-pocket costs. They can also have different rules for how you get services.Medicare prescription drug coverage (Part D)

Medicare prescription drug coverage (Part D)

Medicare drug coverage helps pay for prescription drugs you need. To get Medicare drug coverage, you must join a Medicare-approved plan that offers drug coverage (this includes Medicare drug plans and Medicare Advantage Plans with drug coverage).

Each plan can vary in cost and specific drugs covered, but must give at least a standard level of coverage set by Medicare. Medicare drug coverage includes generic and brand-name drugs. Plans can vary the list of prescription drugs they cover (called a formulary) and how they place drugs into different "tiers" on their formularies.

Plans have different monthly premiums. You’ll also have other costs throughout the year in a Medicare drug plan. How much you pay for each drug depends on which plan you choose.

How Medicare works with other insurance

If you have Medicare and other health insurance or coverage, each type of coverage is called a "payer." When there's more than one payer, "coordination of benefits" rules decide which one pays first. The "primary payer" pays what it owes on your bills first, and then sends the rest to the "secondary payer" (supplemental payer) to pay. In some rare cases, there may also be a third payer.

What it means to pay primary/secondary

The insurance that pays first (primary payer) pays up to the limits of its coverage.
The one that pays second (secondary payer) only pays if there are costs the primary insurer didn't cover.
The secondary payer (which may be Medicare) may not pay all the uncovered costs.
If your employer insurance is the secondary payer, you may need to enroll in Medicare Part B before your insurance will pay.

If the insurance company doesn't pay the claim promptly (usually within 120 days), your doctor or other provider may bill Medicare. Medicare may make a conditional payment to pay the bill, and then later recover any payments the primary payer should've made.

What Medicare Part D drug plans cover

All plans must cover a wide range of prescription drugs that people with Medicare take, including most drugs in certain protected classes,” like drugs to treat cancer or HIV/AIDs. Information about a plan’s list of covered drugs (called a “formulary”) isn’t included in this handbook because each plan has its own formulary. Many Medicare drug plans and Medicare health plans with drug coverage place drugs into different levels called “tiers” on their formularies. Drugs in each tier have a different cost. For example, a drug in a lower tier will generally cost you less than a drug in a higher tier.

Your actual drug coverage costs will vary depending on:

Your prescriptions and whether they’re on your plan’s list of covered drugs ( formulary ).
What “tier” the drug is in.
Which drug benefit phase you’re in (like whether you’ve met your deductible, or if you’re in the catastrophic coverage phase).
Which pharmacy you use (whether it offers preferred or standard cost sharing, is out of network , or is mail order). Your out-of-pocket drug costs may be less at a preferred pharmacy because it has agreed with your plan to charge less.
Whether you get Extra Help paying your drug coverage cost.

Starting January 1, 2021, if you take insulin, you may be able to get Medicare drug coverage that offers savings on your insulin. You could pay no more than $35 for a 30-day supply.

What's Medicare Supplement Insurance? (Medigap)

Medigap is Medicare Supplement Insurance that helps fill "gaps" in Original Medicare and is sold by private companies. Original Medicare pays for much, but not all, of the cost for covered health care services and supplies. A Medicare Supplement Insurance (Medigap) policy can help pay some of the remaining health care costs, like:

Copayments
Coinsurance
Deductibles

Note

Note: Medigap plans sold to people who are newly eligible for Medicare aren’t allowed to cover the Part B deductible. Because of this, Plans C and F aren’t available to people newly eligible for Medicare on or after January 1, 2020. If you already have or were covered by Plan C or F (or the Plan F high deductible version) before January 1, 2020, you can keep your plan. If you were eligible for Medicare before January 1, 2020, but not yet enrolled, you may be able to buy one of these plans that cover the Part B deductible.

Some Medigap policies also cover services that Original Medicare doesn't cover, like medical care when you travel outside the U.S. If you have Original Medicare and you buy a Medigap policy, here's what happens:

Medicare will pay its share of the Medicare-approved amount for covered health care costs.
Then, your Medigap policy pays its share.

Medicare will pay its share of the Medicare-approved amount for covered health care costs.
Then, your Medigap policy pays its share.

8 things to know about Medigap policies

You must have Medicare Part A and Part B.
A Medigap policy is different from a Medicare Advantage Plan. Those plans are ways to get Medicare benefits, while a Medigap policy only supplements your Original Medicare benefits.
You pay the private insurance company a monthly premium for your Medigap policy. You pay this monthly premium in addition to the monthly Part B premium that you pay to Medicare.
A Medigap policy only covers one person. If you and your spouse both want Medigap coverage, you'll each have to buy separate policies
You can buy a Medigap policy from any insurance company that's licensed in your state to sell one.
Any standardized Medigap policy is guaranteed renewable even if you have health problems. This means the insurance company can't cancel your Medigap policy as long as you pay the premium.
Some Medigap policies sold in the past cover prescription drugs. But, Medigap policies sold after January 1, 2006 aren't allowed to include prescription drug coverage. If you want prescription drug coverage, you can join a Medicare Prescription Drug Plan (Part D). If you buy Medigap and a Medicare drug plan from the same company, you may need to make 2 separate premium payments. Contact the company to find out how to pay your premiums.
It's illegal for anyone to sell you a Medigap policy if you have a Medicare Advantage Plan, unless you're switching back to Original Medicare.

Insurance plans that aren't Medigap

Some types of insurance aren't Medigap plans, they include:

Medicare Advantage Plans (like an HMO, PPO, or Private Fee-for-Service Plan)
Medicare Prescription Drug Plans
Medicaid
Employer or union plans, including the Federal Employees Health Benefits Program (FEHBP)
TRICARE
Veterans' benefits
Long-term care insurance policies
Indian Health Service, Tribal, and Urban Indian Health plans