Introduction to Medicare

medical doctor drawing medicare

In 2021, 63,964,675 Americans used Medicare health insurance. 36,045,321 use the original Medicare option, while 27,919,354 use some form of Medicare Advantage program.

You might be wondering about the difference between these two Medicare insurance options. Why choose one over the other?

If you're close to eligibility for Medicare, you may be looking into it and may feel overwhelmed. While there's much to unpack about Medicare, don't despair. 

Read on for a complete introduction to Medicare and learn what you need to know to make informed decisions about Medicare.

What Is Medicare?

At a glance, you might think Medicare is the alphabet soup of health insurance. But it isn't the kind of soup that makes your belly feel warm and full. Instead, it's a long list of letters to sort through to understand your health care coverage. 

Medicare is a government-funded healthcare program for people aged 65 and over. It also covers some individuals under age 65 who suffer from certain illnesses or disabilities. 

Medicare is often referred to as the alphabet soup of health care because it's broken into four parts, Part A, Part B, Part C, and Part D.

Understanding each of the parts of Medicare helps you to understand what's covered under the program and what's not and what it will cost. 

Medicare Myths

You might be surprised to hear that Medicare has a cost associated with it since it's mainly intended for individuals who reach the age of 65. That's one of the many myths about Medicare. 

Most people assume that since it's a health care plan for those age 65 and older, it would cover all of their health care needs. Coverage under Medicare has several gaps to be aware of. 

For example, the following things are not covered under traditional Medicare:

  • Hearing aids
  • Podiatry
  • Dental
  • Vision care
  • Nursing home care

There are ways to increase the coverage you receive by enrolling in a Medicare Advantage plan. More on this shortly.

The other big myth associated with Medicare is that it's free. In fact, when you enroll in Medicare, you will pay premiums for coverage. Several factors impact the cost of those premiums, including the plan chosen and the income level of the enrollee. 

History of Medicare

President Lyndon B. Johnson signed into law the Medicare bill in 1965. This law enacted what became Medicare and Medicaid as we know them today.

The program's goal then remains closely linked to what it still does today. Its goal was to provide healthcare coverage to seniors who found themselves in a gap for coverage compared to people who were still working and could have healthcare coverage through their work.

Now all recipients of Social Security are eligible for coverage under Medicare. 

The original plan included Medicare Part A and Medicare Part B in similar forms to their current stature. The program has increased its coverage modestly since its inception.

Original Medicare Vs. Medicare Managed Plan

As you begin to understand some basics about Medicare, you'll hear the term traditional Medicare and Managed Medicare. Understanding the difference between them is the first step in understanding Medicare. 

Original Medicare is how the plan worked at its inception and how many still use it. Medicare covers both hospitalization and doctor visits with some premiums and deductibles. 

You must see a doctor who accepts Medicare insurance. You will pay the same amount for your care as long as you receive care from someone who accepts Medicare insurance.   

In 2003, some additions were made to Medicare through the Medicare Modernization Act. This allowed Medicare beneficiaries to enroll in a Medicare Advantage Plan (Part C).

Medicare Advantage is similar to enrolling in a private health care plan you might have had before Medicare. Medicare Advantage plans have networks requiring you to see certain providers and have a different pay structure for service. 

If you sign up for a Medicare Advantage plan, you still get Medicare. The insurance company must follow the government rules and guidelines, yet a private insurer provides coverage to administer your health coverage. 

Parts of Medicare

Let's go further with this introduction to Medicare by looking at the different parts of Medicare and what they cover.

Understanding this helps define how Original Medicare differs from Medicare Advantage plans.

Here are the different parts of Medicare and what they cover. 

Medicare Part A

Medicare A is one of the two parts of Medicare you automatically are eligible for when you reach the age of 65. 

Medicare Part A is the hospitalization part of the coverage. You are covered for the following:

  • Hospital stays
  • Skilled nursing facility care
  • Nursing home care (inpatient care in a skilled nursing facility that's not custodial or long-term care)
  • Hospice care
  • Home health care

It's important to note there are limits attached to the care.  For example, you might be in a nursing home recovering from surgery.  Medicare won't allow an extended stay. 

Medicare Part B

Medicare Part B is the medical coverage part of the health care plan.  It covers you in two ways. 

First, it covers medically necessary supplies and services.  This includes diagnosis and treatment for a medical condition.

The second part of the coverage includes preventative care.  This is for care to prevent illness, like vaccines, and for early detection care.  This might include a mammogram or colonoscopy, for example.

Part B will cover things including:  

  • Ambulance services
  • Durable medical equipment (DME)
  • Mental health, including outpatient, inpatient, and some hospitalization
  • Some outpatient prescription drugs

If your doctor accepts Medicare or a Medicare Advantage plan, they should know if something is covered under Part B coverage. 

Part D Prescription Drug Plan

Understanding Part D is important.  It is the part of Medicare that covers prescription drug costs. 

Individuals are not required to sign up for a Part D Prescription Drug Plan, but if they do not and do not have credible prescription drug coverage through another program (Example, VA Benefits), then they are subject to financial penalties for failing to sign up for coverage. 

If you sign up for a Medicare Advantage plan, it may come with prescription coverage as part of the plan.  Remember, the insurer is providing the coverage but must abide by Medicare rules and regulations for coverage. 

Medicare Supplemental Insurance (Medigap)

If you choose Original Medicare, you need to know that there are some gaps in the coverage. 

Medicare Supplemental Insurance or Medigap is Medicare's way of letting those on Original Medicare get a plan to fill in the gaps in coverage. 

The plans that are available are standardized.  So, it doesn't matter which private insurer provides; they're required to have the same coverage as other Medigap options.

Medicare Supplement plans do not provide prescription coverage.  If you need prescription coverage and are on a Medicare Supplement, you must enroll in a standalone Part D Prescription Drug Plan.

Medicare Advantage (Part C)

A Medicare Advantage plan is still Medicare; its coverage is provided through a private insurer.  Medicare Advantage plans come with Part A and Part B and may include Part D coverage.

Since the advantage plan is covered through a private company, often, the providers are part of a network. 

They often include coverage for things not covered in Original Medicare, like vision, dental and hearing services. 

Medicare Costs

Remember, one of the myths about Medicare is that it is free healthcare. In fact, there are some important costs to understand about Medicare. 

Which plan option you choose will impact your costs. It's important to note that costs adjust yearly. Let's take a closer look at the current costs associated with each part of the Medicare plans. 

Medicare Part A Premiums and Deductibles

Remember Part A is hospitalization coverage for most people, this part of Medicare coverage is usually free. In order for it to be free, you need to have qualified by working for at least ten years. 

You might recall when you get paid, you pay FICA, which contributes to Medicare costs. 

If you haven't worked enough to qualify for free Part A coverage, then you can buy it. 2023 costs to buy Part A coverage is $278 or $506 each month, depending on if you're covering just yourself or a spouse too. If you buy Part A coverage, you must also sign up for Part B coverage which also has some costs.

Part A does come with a deductible and co-pays. Part A deductible is $1,600 each time you have a hospital admission before Medicare coverage kicks in to cover you.

Inpatient hospital stays have no co-pays after the deductible is paid. After 60 days in the hospital, co-pays begin and get progressively higher the longer the hospital stay. It's a $400 per day co-pay starting on day 61 of an inpatient hospital stay.

Medicare Part B Premiums and Deductibles

Part B covers your medical care, and it does come with premiums. The 2023 rates are $164.90 each month, whether you use the Part B services or not. This rate can be slightly higher, depending on your income level.

Medicare places high importance on signing up on time when you turn 65. If you sign up late, you can face steep penalties. 

The late penalty fees include:

  • Extra 10% for each year you could have signed up for Part B and didn't start at age 65
  • Penalty fee is added to the monthly premium
  • Not a one-time fee, it remains part of your monthly premium

You can qualify for a Special Enrollment Period for Parts A and B if you or your spouse were still working at age 65 and qualified for health care coverage through work.

Original Medicare Part B services include a yearly $226 deductible (2023 rate). It also includes a 20% co-pay for services after you've paid the yearly deductible. 

Medicare Part D Premiums and Deductibles

Part D helps to cover prescription drug care costs. This premium varies depending on both your income level and the plan you choose. 

You can face some penalties from Part D if you don't sign up for Part D when you get Medicare at age 65 or if you go longer than 63 days with no prescription coverage. You may also avoid penalties by being enrolled in other creditable coverage. 

The penalties are worth noting because they are not a one-time fee. You pay 1% per month of late enrollment or 12% per year. This late penalty is added to your yearly premiums. 

Most plans come with deductibles and co-pays for the prescriptions. In most plans, there are no standard rates, but instead, the rates vary depending on the medication you need. 

This can make planning for costs a little tricky. Since the late fees are steep, you want to do your research early, before the age of 65, and consider your likely use of prescription drugs to calculate costs and the best plan option for you. 

Often the different plan options will offer cost calculators to help you anticipate your costs. 

Medicare Supplemental Insurance (Medigap) Premiums and Deductibles

Often Medicare beneficiaries purchase a Medigap supplemental insurance plan to help offset potential costs associated with Medicare. 

Medigap costs vary depending:

  • Which policy you buy
  • Where you live
  • Costs can change each year
  • Must pay Part B premiums to have Medigap coverage

Remember, you might purchase Medigap coverage because it helps to offset the out-of-pocket costs in Medicare Part A and Part B. Some Medigap plans also include additional benefits. One example might be coverage for out-of-country travel. 

Medicare Advantage (Part C) Premiums and Deductibles

Medicare Advantage plans are through private insurers that follow Medicare rules and regulations. You'll pay a monthly premium for services. What's covered and what it costs will vary depending on the plan and the availability of plans in your service area. 

Medicare does limit the amount of out-of-pocket costs plans are allowed to charge. You must continue to pay Part B premiums to be eligible for coverage. 

How Does Original Medicare Work

Shortly before you turn 65, you'll need to make decisions about your Medicare options so you're ready to enroll when you reach the age of 65. More on enrollment shortly. 

Your first big decision involves whether you want to sign up for Original Medicare or Medicare Advantage. 

Under Original Medicare, you'll get Part and Part B coverage. You can add Part D coverage and have the option to sign up for Medigap coverage to offset costs. 

When you sign up for Original Medicare, you can see any provider who takes Medicare, and your charges will be the same no matter who you see. 

If you choose to go with a Medicare Advantage plan, you get Part A and Part B coverage with a monthly premium. Plans may include prescription drug coverage. Plans may also include other coverage like vision and hearing services. 

Medicare Advantage puts you in a healthcare plan. So, you need to see providers who accept that healthcare plan.  

Medicare Eligibility

Your eligibility for Medicare starts on the first day of the first month in which an individual reaches the age of 65. This is also the date when a person who isn't eligible for Social Security and Medicare can purchase Medicare coverage. You may be eligible to get Medicare earlier as well if you have a disability, End-Stage Renal Disease (ESRD), or ALS (also called Lou Gehrig’s disease).

Applying to Medicare

When a person applies for Social Security benefits, it will automatically trigger an application for Medicare Part A and Part B. 

Part B isn't an automatic enrollment, though, because remember, Part B requires the payment of a monthly premium. When you apply, you're given the option to decline Part B coverage. 

Medicare Enrollment

Medicare does offer an open enrollment period (OEP) which occurs each year between October 15th and December 7th. 

You can contact Medicare for an “Initial Enrollment Period” if you're not getting Social Security by age 65. Medicare offers this open enrollment period for:

  • Three months before your 65th birthday
  • Your birth month
  • Three months after your 65th birthday

Some people will need to seek out this open enrollment option if they don't choose to start Social Security at age 65 and want to continue working instead. 

You want to be careful about Medicare and getting signed up at 65 because, remember, those late penalty fees can be steep if you don't qualify for a waiver. 

If you sign up for Medicare in the three months before your 65th birthday, your coverage begins on the first day of the month you turn 65. If you sign up for Medicare during the month you turn 65, or during the 3 months after you turn 65, your coverage begins on the first day of the next month. 

Working Beyond Age 65

When Medicare was first signed into law in 1965, it was commonplace for Americans to retire by the age of 65. That's not as common anymore. In fact, many people are choosing to delay Social Security to continue working.

This can have a few implications related to Medicare. You need to seek out an open enrollment period if you want to start Medicare at age 65. 

Medicare also made some changes to its policy for people who continue to work when they reach age 65. If you have medical coverage (employer group health plan or EGHP) through an employer, Medicare can become your secondary coverage. 

If you plan to work at age 65 and have medical coverage, the rules are complicated for enrollment. You want to do your homework to avoid paying long-term penalties for late enrollment. 

What If You Fail to Enroll in Medicare?

You've probably already figured out that not applying to Medicare can have some serious financial implications. Medicare does this so they can anticipate what the coverage needs will be each year. 

Remember, there are penalties for Part A, Part B, and Part D for late enrollment. These are not one-time fees. Instead, they are permanent percentages added to the premiums for coverage.

Over many years, this can be a costly penalty for not getting signed up. 

The other problem with not getting signed up on time is that Medicare won't allow you to enroll until the next year's open enrollment period unless you qualify for a special enrollment period. 

Medicare Vs. Medicaid

Because Medicare and Medicaid sound very similar, they are often confused. These are not the same program, although both are administered by the US Health and Human Services Department of the US government. 

You already know that Medicare is a government healthcare program for individuals who are 65 and older or have a qualifying disability. 

Medicaid is also a government program run jointly by the US government and states.  It's a program available for people who have limited resources and income. 

Generally, each state runs its own Medicaid program with rules from the federal government. Eligibility for Medicaid will vary from state to state. 

How to Get Your Medicare Questions Answered

Medicare, the CHIP program for children, and Medicaid are all administered through the Centers for Medicare & Medicaid Services (CMS), a division of the US Health and Human Services. 

CMS is who sets the yearly rates for Medicare and who handles all coverage plans. 

As you near the age of 65, it's important to start to learn more about your options for Medicare coverage and when you need to get enrolled to avoid late penalties. 

If you have questions about Medicare, there are several places to go for answers. 

Call 1-800-MEDICARE (1-800-633-4227) to get Medicare information. This source can provide you with important phone numbers for additional Medicare information.

You can also visit for information about the specific parts of Medicare. This site will also have links for Medicare health and prescription drug plans in your area.

Medicare also releases a “Medicare & You” handbook each year. You can request this handbook through their website to learn about changes to Medicare coverage and get information about coverage.

Learn All You Need to Know in This Introduction to Medicare

While Medicare and all the plans can feel intimidating, use this introduction to Medicare to learn the basics so you know where to begin when you make your Medicare selections. 

If you're interested in learning more about Medicare supplemental plans and getting your Medicare insurance questions answered, we can help. Contact us to learn more about your Medicare insurance options and how they'll cover your healthcare needs.


We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area.  Please contact or 1-800-MEDICARE to get information on all of your options. Not affiliated with or endorsed by the government or Federal Medicare Program. This is a solicitation for insurance. Calling the number above will direct you to a licensed insurance agent.