Last Updated on
October 6, 2016
Medicare was created by the Social Security Act of 1965 and provides health insurance benefits to eligible adults aged 65 and older and other qualifying individuals in the United States. It is administered by the Centers for Medicare and Medicaid Services (CMS). While those aged 65 and older are the largest portion of enrollees, certain people under age 65 might have access to the program as well. See our Medicare eligibility article for more information on who qualifies to enroll in Medicare and receive Medicare benefits.
What is Medicare?
Medicare is a federal health insurance program that provides basic health insurance benefits for U.S. citizens and legal permanent residents of at least five continuous years who are age 65 or over, and for people who are younger than age 65 who have:
- Amyotrophic Lateral Sclerosis (ALS or Lou Gehrig’s disease)
- End-stage renal disease (kidney failure)
- Received disability benefits for 24 continuous months or more from the Social Security Administration (SSA) or the Railroad Retirement Board.
What Medicare coverage choices are available?
There are four parts to the Medicare Program:
- Medicare Part A (hospital insurance) – provides coverage for inpatient hospital stays, skilled nursing facility care, hospice care, and some home health care.
- Medicare Part B (medical insurance) – provides coverage for physicians’ services, outpatient care, radiology, laboratory tests, medical supplies, and preventive services.
Medicare Part A and Part B are often referred to as “Original Medicare.”
- Medicare Part C (Medicare Advantage) – provides Medicare beneficiaries an alternative way to receive their Medicare benefits. Medicare Advantage plans are offered by private insurance companies contracted with Medicare to provide beneficiaries at least the same benefits as Part A and Part B with the exception of hospice care, which remains covered by Part A. Many Medicare Advantage plans offer extra benefits such as routine vision, hearing, dental and Part D prescription drug coverage.
- Medicare Part D – provides prescription drug coverage, which is made available to beneficiaries from stand-alone Medicare Part D Prescription Drug Plans and Medicare Advantage Prescription Drug plans offered by Medicare-approved private insurance companies.
If you decide to stay with Original Medicare, another option you may have is to sign up for a Medicare Supplement (Medigap) plan to help pay for Original Medicare’s out-of-pocket costs. Different Medigap plans pay for different amounts of those costs, such as copayments, coinsurance, and deductibles.
Common ways many Medicare beneficiaries choose to structure their Medicare coverage:
- Original Medicare (Part A & Part B) plus Medicare Part D (prescription drug coverage).
- Medicare Advantage plan. Medicare Advantage provides all of your Part A and Part B coverage through a private company approved by Medicare. Medicare Advantage Plans often include prescription drug coverage (Medicare Part D).
- Original Medicare (Part A & B) plus Medicare Part D (prescription drug coverage) plus Medicare Supplement (Medigap) insurance.
Medicare Part C – Medicare Advantage
What is Medicare Advantage?
Medicare Advantage plans are offered by private insurance companies that contract with Medicare. While these plans must provide at least the same coverage as Original Medicare (excluding hospice care, which remains covered through Medicare Part A), Medicare Advantage plans may include additional benefits, such as routine vision, hearing, dental, and prescription drug coverage. Not every Medicare Advantage plan has prescription drug coverage; however, many do and these are referred to as Medicare Advantage Prescription Drug plans (sometimes abbreviated as MA-PDs). These plans provide all of your health and prescription drug coverage in one plan.
To enroll in a Medicare Advantage plan, you must have Medicare Part A and Part B and must select a Medicare Advantage plan that is available where you live.
People who enroll in a Medicare Advantage plan continue to pay their Medicare Part B premium and may have a Medicare Advantage plan premium as well.
Medicare Part D – Prescription Drug Coverage
Medicare Part D prescription drug coverage is available not only from Medicare Advantage Prescription Drug plans but also from stand-alone Medicare Part D Prescription Drug Plans. To enroll in a Medicare Part D Prescription Drug Plan you must have Medicare Part A and/or Medicare Part B. Each plan has a formulary, which is a list of prescription medications covered by that plan. Formularies and costs will vary by plan, so it’s a good idea to compare the plans available where you live to identify the one that best suits your needs. A plan’s formulary may change at any time. You will receive notice from your plan when necessary.
If you’d like to sign up for a Medicare Prescription Drug Plan, the best time to do so is usually during your Initial Enrollment Period when you first become eligible for Medicare Part B or Part A and Part B. You can also sign up during the Annual Election Period (from October 15 to December 7), but if you don’t sign up when you’re first eligible, you could pay a Part D late-enrollment penalty if you are without creditable coverage for at least 63 consecutive days after your initial enrollment period ends. Creditable coverage means prescription drug coverage that provides approximately the same coverage as Medicare Part D.
To enroll in a stand-alone Medicare Part D Prescription Drug Plan you must have or be eligible to have Medicare Part A and/or Part B. To enroll in a Medicare Advantage Prescription Drug plan, you must have both Medicare Part A and Part B. You must also select a plan that is available where you live.
People who enroll in a Medicare plan with prescription drug coverage continue to pay their Part B premium, if they have Part B coverage, and may also pay a premium to the Medicare Part D Prescription Drug Plan.
Medicare Supplement plans (Medigap coverage)
Medicare Supplement (Medigap) plans help pay for some of your out-of-pocket costs under Original Medicare, including cost-sharing expenses and emergency overseas travel coverage. Plan benefits are standardized across 10 plan types (labeled letters A through N), and each plan includes different benefits and level of coverage. In 47 states, including North Carolina, Medigap plans offer the same standardized benefits for plans of the same letter type.
These plans can only be used to help with Original Medicare costs, and you’ll need to stay enrolled in Part A and Part B for your hospital and medical coverage. In addition, keep in mind that prescription drug coverage isn’t included in these plans, so if you want help with your medication costs, you should enroll in a stand-alone Medicare Prescription Drug Plan.
Specific plan types and premium amounts may vary depending on where you live in the state.
Medicare beneficiaries may have choices concerning their Medicare benefits. To make an informed decision about which Medicare plan options might meet your personal health coverage needs, it’s a good idea to compare the benefits and cost of plans available where you live.
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