Medicare is a form of government health insurance in the United States that offers coverage primarily to people aged 65 and older, as well as younger people who have certain specific disabilities.
First established in 1965 as part of President Lyndon B. Johnson’s “Great Society” program, Medicare covers around 44 million people today. This makes it one of the biggest and most important parts of the U.S. healthcare system.
It’s important to note that Medicare is not the same thing as Medicaid, which is a federal and state-funded program that helps people with low incomes gain access to healthcare services. Eligibility for Medicare, on the other hand, has nothing to do with income.
Read on to learn more about Medicare, including who is eligible, how the program works, the differences between “Original Medicare” and a Medicare Advantage Plan and how you can apply for Medicare if you need to.
Who Is Eligible for Medicare?
U.S. citizens, as well as permanent legal residents who have lived in the country for more than five years and are 65 or older are eligible to receive Medicare.
Individuals of any age who have been receiving Social Security Disability Income (SSDI) for 24 months are automatically enrolled in Medicare at the beginning of the 25th month.
Those with end-stage renal disease (ESR) — again, regardless of age — also have Medicare eligibility.
People with amyotrophic lateral sclerosis (ALS, also known as “Lou Gehrig’s disease”) can enroll. In fact, if you receive SSDI checks because you have ALS, you will automatically be enrolled in Medicare.
How Does Medicare Work?
Some people are automatically enrolled once they turn 65, while others have to enroll “manually” to start receiving benefits. But what do those benefits actually entail?
In general, Medicare covers most doctors and hospitals throughout the country, though some doctors do choose to opt out of the program and only take private insurance.
The program is not entirely free, though it will certainly help by greatly reducing costs.
Medicare is divided into four parts, each of which covers a different area of healthcare services. You’ll have to determine which part(s) to opt for when you sign up.
Medicare Part A
Medicare Part A is “hospital insurance,” providing coverage for inpatient care. Coverage under Medicare Part A includes hospital stays, operations, nursing facility care and hospice care.
A person receiving Medicare Part A benefits may have to pay a monthly premium if they or their spouse did not pay Medicare payroll taxes for at least 10 years. Additionally, although it is very inexpensive compared to private insurance plans, Part A does involve a deductible.
Medicare Part B
Medicare Part B is called “medical insurance” and covers outpatient care, which includes doctor’s visits and home health services. It also covers “durable medical equipment,” which are assets a person may require for their health. Examples of durable medical equipment are wheelchairs, canes and ventilators.
Part B is technically optional, though most Medicare recipients opt to take it. A monthly premium is mandatory with Part B. If you make more than a certain amount of money, you’ll have to pay an added fee in the form of an “Income Related Monthly Adjustment Amount” (IRMAA).
It’s important to note that Medicare Part A and Part B are sometimes collectively referred to as “Original Medicare” because they were both parts of the original Medicare law passed in 1965.
Medicare Part C
Medicare Part C includes what are called “Medicare Advantage Plans.” These plans are run by private insurers that work with the federal government. By law, they are required to provide both Part A and Part B coverage, and usually offer Part D coverage.
If you had private insurance through your employer or on the open market, you can think of Medicare Advantage Plans as a hybrid of what you used to have and Original Medicare. It can offer various perks but also have downsides as compared to Original Medicare (more about this more below).
Since you would still be covered through Medicare, you’ll have to pay a Part B premium as well as a Part A premium if this applies to you.
Medicare Part D
Medicare Part D is prescription drug coverage and was added to the program back in 2006. Part D is offered through private companies.
If you are covered under Original Medicare, you will have to choose a PDP (prescription drug plan) depending on which premiums and deductibles work best for you.
Alternatively, if you’re choosing to be covered with a Part C Medicare Advantage Plan, you’ll want to opt for a Medicare Advantage Prescription Drug Plan (MAPDP).
Original Medicare vs. Medicare Advantage Plans
The main difference between Original Medicare and a Medicare Advantage Plan is that Original Medicare (Parts A and B) is administered entirely by the government, while a Medicare Advantage Plan (Part C) is operated by a private company in tandem with the government.
So, why would anyone opt for Part C over Original Medicare?
One reason is that costs are potentially lower or at least more comprehensive and tailored to you. Just like any private insurer, Medicare Advantage Plans determine their own premiums, coinsurance costs, deductibles, etc.
Another benefit of Medicare Advantage Plans is that they can include coverage for services that are not covered by Original Medicare, such as dental, vision, hearing and others.
One drawback of a Medicare Advantage Plan, however, is that you can only use doctors who are in the plan’s network. This means you may have to drive out of your way to get to someone who will accept your plan.
Original Medicare, on the other hand, gives you access to most of the country’s doctors and hospitals, as mentioned earlier.
It’s important to keep in mind that if you have Original Medicare, you can get supplemental insurance (Medigap) which can help you cover out-of-pocket costs.
Both Original Medicare and Medicare Advantage Plans have benefits and drawbacks. In order to determine which is best for you, you’ll have to look at your individual health needs, research separate Medicare Advantage Plans, figure out how much you’ll save by opting for an Advantage Plan over Original Medicare or vice versa.
