DEFINITION
Medicare is a health insurance program provided by the federal government for people who are at least 65 years old, those who are younger but receiving Social Security disability benefits, or those who are younger and have end-stage renal disease (ESRD) or amyotrophic lateral sclerosis (ALS). Medicare helps the elderly and disabled afford the health care they need.
How Medicare Works
You’ll typically be enrolled in Original Medicare (Parts A and B) automatically if you’re receiving Social Security benefits. This program provides hospital and medical insurance that can help pay for the care you need.
Medicare Part B could help pay the bill if you’re 65 or older and need to see your doctor because it covers preventive and diagnostic services. You’d use Medicare Part A, which covers hospital stays, if you fall ill and need temporary inpatient care.23
Medicare can help lower your out-of-pocket health care costs, but it doesn’t cover all medical expenses. You can address some of these gaps by applying for a Medicare supplement (Medigap) policy or a Medicare Advantage plan.
Out-of-Pocket Maximums
Original Medicare doesn’t set an out-of-pocket limit on your annual expenses, but some Medigap policies include an out-of-pocket maximum that applies to your Original Medicare coverage.
You can also opt for Medicare Advantage in place of Original Medicare, which does limit your out-of-pocket costs. The maximum in-network out-of-pocket costs for most Medicare Advantage plans is $7,550 in 2022.
Drug Coverage
Most Medicare Advantage plans and all Part D plans provide prescription drug coverage. Plans are administered by private insurance companies and can have different coverage, premiums, deductibles, and other features. You can compare Medicare Advantage plans and Part D drug plans with Medicare’s Plan Finder.
An Example of Medicare
You’ll generally pay your deductible first when you receive health care services or supplies from a medical provider or supplier. Then your Medicare coverage kicks in and you’ll just pay a coinsurance percentage or a flat dollar amount after that, depending on the service.
You would pay your Part B deductible ($233 in 2022, decreasing to $226 in 2023) then Medicare would pay 80% of the approved amount if you need to get a back brace. You would pay the other 20%.78 You’d pay $233 (in 2022) plus 20% of $677 ($900 – $233 = $677), which is $135, for a total of $368 if the approved amount for the brace you need is $900.
Original Medicare vs. Medicare Advantage
You have two options when you sign up for Medicare. You can opt for Original Medicare or Medicare Advantage. Original Medicare is Parts A and B, and it’s managed by the federal government. You can see any doctor or go to any hospital in the U.S. that accepts Medicare when you have this coverage. You can also add a separate Medicare drug plan (Part D) and supplemental coverage, such as Medigap, to help limit your out-of-pocket costs.
Medicare Advantage (MA) plans are Medicare-approved policies offered by private insurance companies. You receive most of your Parts A and B benefits through an MA policy if you elect one, except for hospice care, which is provided through Original Medicare.
How To Get Medicare
The route you’ll take to apply for and get Medicare will depend on how you qualify.
You’ll automatically apply for Medicare when you apply for disability or retirement benefits from the Social Security Administration or Railroad Retirement Board. You’ll automatically be enrolled in Parts A and B coverage if you’ve received those benefits for at least four months before you turned 65.
You can sign up for Medicare online or over the phone with the Social Security Administration or by contacting your local Social Security office if you’re older than 65. Late enrollment penalties may apply if you’ve missed your initial enrollment period and don’t have other health insurance, including prescription drug coverage.