How Medicare Coverage Works

Medicare is a federal program that provides health coverage for Americans 65 years old and older, with some exceptions. There are different parts to Medicare, with each covering certain services like hospital stays, doctor visits and prescription drugs.

Keep reading to learn about how Medicare coverage works, when you can enroll and how much it costs.

What Is Medicare?

Original Medicare is a federal health insurance program that provides health coverage for U.S. citizens 65 years old and younger persons with qualifying conditions like End Stage Renal Disease or those receiving Social Security disability benefits.^[1] While Medicare is the federal program, you can purchase Medicare Advantage (Part C) instead, which is health insurance that follows Medicare guidelines but is sold through private insurers and may offer additional benefits.

How Is Medicare Different From Standard Health Coverage?

Medicare is provided by the federal government, while standard health coverage comes from private insurers. Medicare has stricter eligibility requirements, available to those age 65 or older or with qualifying conditions, whereas you can buy a marketplace plan as soon as you're an adult. In addition, standard health coverage can typically be extended for other family members but Medicare doesn’t allow for family coverage.

How Does Medicare Work?

With Original Medicare, you can visit any healthcare provider that accepts Medicare and receive coverage, which includes 98% of available providers as of 2023.^[2] Similar to a standard marketplace health insurance plan, Medicare will cover most approved necessary health care services and supplies and some preventive services (e.g., shots and vaccines). In addition, you are also responsible for meeting your deductible and paying coinsurance and copays for most services.

A unique characteristic of Medicare is that coverage is divided into parts. Read on for an overview of the different parts of medicare.

Medicare Part A

Also called hospital insurance, Medicare Part A pays for several hospital services, including:

• Inpatient hospital care: Covers general nursing, drugs, meals and semi-private rooms. If you’ve already paid your deductible, you pay $0 for the first 60 days, $408 to $816 each day for days 61 to 150 and then the full cost for all days after.^[3]
• Skilled nursing facility care: Covers nursing and therapy services, meals, semi-private rooms and medically necessary services and supplies. After meeting your deductible, Medicare will cover the full cost for the first 20 days. You will then pay $204 each day for days 21 to 100 and then the full cost for all days after.^[3]
• Hospice care: Includes durable medical equipment, drugs and services for pain relief, symptom management and homemaker services.
• Some home health care: Covers nursing care, physical therapy and occupational therapy services.
• Blood: Free if the hospital gets blood from a blood bank.

Medicare Part B

Also called medical insurance, Medicare Part B covers several types of medical services:

• Alcohol misuse screenings and counseling: Includes up to four face-to-face counseling sessions each year.^[4]
• Ambulance services: Covers ground ambulance transportation to a hospital or other healthcare facility.
• Bariatric surgery: Covers some procedure costs related to morbid obesity, such as gastric bypass surgery or laparoscopic banding surgery.
• Preventative services: Covers services to prevent illness or detect it early, such as flu shots, glaucoma tests and screenings for HIV and Hepatitis B and C.
• Acupuncture: Covers up to 12 acupuncture visits in 90 days for eligible chronic low back pain.^[5]
• Other healthcare services: Covers some of the costs of services like chemotherapy, chiropractic and chronic care management.

Medicare Part C

Often called a "Medicare Advantage plan" or "MA plan," Part C is a privately sold health plan that bundles Part A, Part B and sometimes Part D of Medicare and is sold by private insurance companies.

The benefit of getting an MA plan is that they usually include additional benefits like vision, hearing and dental coverage, which are otherwise excluded by Original Medicare.

Unlike Original Medicare, however, you’re only covered by healthcare providers within your MA plan's network so be sure to confirm that all of your preferred providers are in-network before opting for an MA plan.

Medicare Part D

Also called drug coverage, Medicare Part D can cover generic and brand-name drugs. Part D can be added at an additional cost for Original Medicare plans and for an MA plan, it is often bundled into the plan’s cost. Unlike Part A or Part B, Part D plans are offered through private insurers approved by Medicare. Each plan may offer different coverage options for various prescriptions, copayment expectations and other costs.

Medigap

Medigap, also called Medicare Supplement Insurance, is Medicare insurance that pays for "gaps" in Original Medicare coverage that would otherwise be paid out of pocket, including copayments, coinsurance and deductibles. Medigap may also cover medical care services or supplies while traveling outside the U.S. Medigap is only available for Original Medicare plans and cannot be applied to a Medicare Advantage plan.

Medigap, also sold by private insurers, has a separate monthly premium. In addition, Medigap coverage is for only one person — your spouse must buy it separately if they want the additional coverage.

Medicare Costs

See the below table for an outline of what each part of Medicare will cost you. Keep in mind that if you do not enroll when you are first eligible for Medicare, then you will face a late enrollment penalty that will increase your costs.^[3][6][7][8]

Late Penalty Example

Your initial enrollment period ended in December 2021 and at that time, it cost $174.70 for Part B coverage. However, you waited until March 2024 to enroll. Since two 12-month periods have elapsed, your premium increased by 20% to $209.64. You will have to pay this rate hike for however long you maintain Part B Coverage.

Who Is Eligible for Medicare?

If you meet at least one of the following criteria, you should be eligible to enroll in Medicare:^[1]

• You are at least 65 years old
• You have a qualifying condition like Lou Gehrig’s disease (ALS) or End Stage Renal Disease
• You have received Social Security Disability benefits for at least 24 months

When Can You Enroll in Medicare?

Most people will initially be eligible to sign up for Part A and Part B of Medicare three months before turning 65 until three months after.^[9] So, if you turn 65 in July, you must apply during initial enrollment between April 1st and Oct. 31st if you want to avoid any late enrollment penalties. Coverage will begin the month you turn 65 if you enrolled in the three months before your birth month – otherwise, it will begin on the first day of the month following enrollment.

If you don’t sign up during your initial enrollment period, you can enroll in Original Medicare or a Medicare Advantage plan during the general enrollment period, which runs from October 15 to December 7. Coverage begins on January 1.^[9]

Meanwhile, you can either switch from one MA plan to another or switch from an MA plan to Original Medicare from January 1 to March 31, with coverage beginning on the first of the month after you enroll.^[9]

You can still make changes to your Original Medicare or Medicare Advantage coverage outside of these enrollment periods but only if you experience a qualifying event like moving to a new zip code or losing Medicaid or COBRA coverage. These events trigger a special enrollment period.