Medicare basics

Medicare has a lot of parts, a lot of letters, and a lot of rules. Here’s a plain-English introduction to how the pieces fit together.

Nothing on this page is specific to any one plan. It’s the general framework — the vocabulary you need before the details make sense.

Original Medicare: Parts A and B

Original Medicare is the federal health insurance program, administered by the government. It has two parts.

Part A — hospital insurance. Covers inpatient hospital care, skilled nursing facility care, hospice, and some home health care. Most people don’t pay a monthly premium for Part A, because they or a spouse paid Medicare taxes while working.

Part B — medical insurance. Covers doctor visits, outpatient care, preventive services, and durable medical equipment. Part B has a monthly premium, and most people pay it directly to Medicare.

Original Medicare doesn’t cover everything, and it doesn’t include prescription drug coverage. That’s where the other pieces come in.

Part C: Medicare Advantage

Medicare Advantage plans are offered by private insurance companies approved by Medicare. If you enroll in one, you’re still in the Medicare program — the plan takes over administering your Part A and Part B benefits, and many plans include prescription drug coverage as well.

A few things that are generally true of Medicare Advantage:

• Plans are approved county by county, so what’s available depends on where you live.
• Most plans use provider networks, so which doctors and hospitals you can use matters.
• Plans can change from year to year — benefits, costs, networks and drug lists.
• Some plans include benefits beyond what Original Medicare covers. What’s included varies by plan and by location.

Whether a Medicare Advantage plan fits your situation depends on your doctors, your prescriptions, your travel habits and your budget. There’s no universal answer.

Part D: prescription drug coverage

Part D is prescription drug coverage, offered through private plans. You can get it as a standalone plan alongside Original Medicare, or as part of a Medicare Advantage plan that includes drug coverage.

Every Part D plan has a formulary — a list of the drugs it covers and how it covers them. Formularies differ from plan to plan and can change from year to year. This is why reviewing your prescriptions matters more than almost anything else when comparing coverage.

If you go without creditable prescription drug coverage after you’re first eligible, you may face a late enrollment penalty that stays with you. Worth knowing before you decide to skip it.

Medicare Supplement insurance (Medigap)

Medicare Supplement policies — often called Medigap — are private insurance policies that help pay some of the costs Original Medicare doesn’t cover, such as coinsurance and deductibles.

Some things to understand about Medigap:

• Policies are standardized and identified by letter. A given lettered plan covers the same things regardless of which company sells it.
• Medigap works alongside Original Medicare. It is not compatible with a Medicare Advantage plan — you have one or the other.
• Medigap policies don’t include prescription drug coverage, so you’d typically add a standalone Part D plan.
• There’s a Medigap Open Enrollment Period: six months beginning the month you turn 65 and are enrolled in Part B. During that window you can buy any Medigap policy sold in your state without medical underwriting. Outside that window, in most cases, your health history can affect whether you can get a policy and what it costs.

That last point catches a lot of people off guard, which is why it’s worth understanding your options before the window closes rather than after.

When you can enroll

Initial Enrollment Period. A seven-month window around your 65th birthday: the three months before your birthday month, your birthday month, and the three months after.

General Enrollment Period. January 1 through March 31, for people who didn’t sign up when first eligible.

Annual Enrollment Period. October 15 through December 7 each year. This is when anyone with Medicare can change their Medicare Advantage or Part D coverage for the following year.

Medicare Advantage Open Enrollment Period. January 1 through March 31, for people already enrolled in a Medicare Advantage plan.

Special Enrollment Periods. Certain life events — moving, losing other coverage, and others — can open a window outside the usual times.

If you’re still working at 65 and covered by an employer plan, the rules work differently, and getting it wrong can mean a permanent penalty. That’s a conversation worth having before you make a decision.

Where to learn more

The official source for all of this is Medicare.gov, where you can also compare what’s available in your area.

You can also call 1-800-MEDICARE (TTY: 1-877-486-2048), available 24 hours a day, 7 days a week, or contact your local State Health Insurance Assistance Program for free, unbiased counseling.

And if you’d rather talk it through with someone local — that’s what I’m here for.

Last reviewed: [PUBLICATION DATE]. Source: Medicare.gov.