How Medicare Plans Work
The Four Different Parts of Medicare
Medicare provides millions of U.S. residents age 65 or over, or who meet other specific standards, with health insurance. Enrollees who are under 65 with certain disabilities, or who have end-stage renal disease, also qualify for the program. The United States government controls the Medicare program, which offers a variety of different health care plans depending on the needs of its constituency.
There are four different parts to Medicare that each cover certain services for people who qualify: hospital insurance (Part A), medical insurance (Part B), the Medicare Advantage program Part C), and prescription drug coverage (Part D). Those who qualify can opt for coverage through the Original Medicare program or through Medicare private plans (Medicare Advantage). Most people are automatically enrolled in part A unless an individual explicitly elects to enroll in a Medicare Advantage Plan.
Part A is controlled and administered by the United States government and provides hospital insurance on a fee-for-service basis. Some people get Part A automatically. If you aren’t getting Social Security or RRB benefits (for example, because you’re still working) you may need to sign up for Part A. The hospital insurance covers inpatient care in hospitals and skilled nursing facilities (but not for long term custodial care), as well as home health services and hospice. If you or your spouse paid Medicare taxes while working, you generally do not pay a monthly premium for Part A coverage.
Medicare Part B is medical insurance that covers necessary doctor’s services, outpatient care, home health, and some preventative services. If you already get benefits from Social Security or the Railroad Retirement Board, you automatically enroll in part B the month you turn 65 and receive your red, white, and blue Medicare card in the mail. If you are under 65 and disabled you automatically get part B once you receive disability benefits from Social Security. In order to open out of Part B, you must follow the instructions on the back of the Medicare card and send the card back. If you drop Part B, you generally won’t be able to enroll in Part B again until the next General Enrollment Period (January 1 – March 31st) and you may have to pay a late enrollment penalty.
The Medicare Advantage Plan, or Part C, covers over ten million Americans with private health insurance and Medicare benefits that are approved by Medicare. Part C offers both Part A and B benefits as well as other benefits not covered by Medicare, including prescription drugs, vision, hearing, or dental. Most Medicare Advantage plans have lower co-payments than Original Medicare plans but are not available in all areas of the United States. Most Advantage plans require you to use the doctors or hospitals on that plan’s network. Part C plans include Health Maintenance Organizations (HMOs), Preferred Provider Organization (PPO), Private Fee for Services (PFFS), Special Needs (SNP), or Medicare Savings Accounts (MSA).
Prescription Drug Plans (Part D) are available to anyone with Original Medicare or a Medicare Advantage Plan that does not include drug coverage. Most Medicare Prescription Drug Plans have a coverage gap (also called the “donut hole”). This means there’s a temporary limit on what the drug plan will cover for drugs. Not everyone will enter the coverage gap. The coverage gap begins after you and your drug plan have spent a certain amount for covered drugs. This amount may change each year. Also, people with Medicare who get Extra Help paying Part D costs won’t enter the coverage gap.