Medicare Explained

Medicare is the federal health insurance program for people who are 65 or older. People who have certain disabilities or permanent kidney failure – regardless of age – may also qualify for Medicare.

The program, which is funded in part by payroll taxes and premiums deducted from Social Security checks, was created to assist with the cost of health care. In fact, most U.S. citizens and permanent residents of the United States are eligible for free Medicare hospital insurance (Part A, below).

Medicare has four main coverage options. To find out which option is right for you, here’s a look at what they cover and cost*:

All About Medigap

What is it? Medigap, also known as Medicare Supplemental Insurance, is offered by private insurance companies to fill the health care coverage "gaps" left open by Original Medicare. There are 10 types of Medigap Plans. They are Plans A, B, C, D, F, G, K, L, M and N. Not every insurer offers all 10 plans, and prices can vary, but the amount of coverage is the same across companies.

Why get it? Most find several coverage "gaps" once they enroll in Original Medicare. Supplementing your coverage with a Medigap Plan can greatly reduce the amount you pay out-of-pocket when using medical services. A plan could potentially pay for itself with just one hospitalization or a few doctor's office visits alone.

Medicare Part A: Hospital Insurance

What it covers:

  • In-patient care in hospitals
  • Skilled nursing facility care
  • Hospice care
  • Health care

Cost: Free, for many people. If you or your spouse paid Medicare taxes while working, you typically do not have to pay a monthly premium for Part A coverage. If you don't qualify for premium-free Part A coverage, you can still recieve Part A coverage by paying a premium for it.

If eligible, you will be automatically enrolled in Part A if you already recieve benefits from Social Security or from the Railroad Retirement Board. Otherwise, you may need to apply for this coverage.

Medicare Part B: Medical Insurance

What it covers:

  • Services from doctors and other health care providers
  • Outpatient care
  • Home health care
  • Durable medical equipment
  • Some preventive services

Cost: Part B coverage is optional. You'll pay a standard monthly premium (which varies by state) if you want to add it on.

Medicare Part C: Medicare Advantage

  • Includes all benefits and services covered under Parts A and B
  • Usually includes Medicare prescription drug coverage (Part D) as part of the plan
  • Run by Medicare-approved private insurance companies
  • May include extra benefits and services for an extra cost

Cost: To get the extra coverage provided in this plan, you'll have to pay a monthly premium (which varies by state) - in addition to your Part B premium.

Medicare Part D: Prescription Drugs

  • Helps cover the cost of prescription drugs
  • Run by Medicare-approved private insurance companies
  • May help lower your prescription drug costs and help protect against higher costs in the future

Cost: This prescription drug coverage is optional, though it is typically already included in your Part C plan. You can also add Part D coverage to your Part A/B plan.

*All Medicare coverage information is from the Department of Health and Human Services and Healthcare.gov.

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