How Medicare Works

Medicare is a federal health insurance program for eligible adults 65 and older and for those under 65 with a medical disability who qualify. Medicare has four parts — Part A, Part B, Part D and Part C. There’s also Medicare supplement insurance, known as gap insurance or Medigap. It helps cover the gaps in your Medicare coverage as well as your share of the costs for Medicare services.

There are two ways to receive your Medicare coverage: Original Medicare (Part A and Part B) or a Medicare Advantage plan (Part C).

Original Medicare =Part A+ Part B

Medicare Part A acts as hospital insurance. Part A helps pay for inpatient care in hospitals, hospice care, home health care and care provided in a skilled nursing facility if you meet certain requirements. If you or your spouse paid Medicare taxes when you were working, the federal government may pay your premium (monthly fee) for Part A coverage. If ineligible, you can still purchase Part A.

Medicare Part B provides medical insurance. Part B helps cover doctor visits, procedures that don’t require an overnight hospital stay and some preventive care services, such as flu shots. Most people pay a monthly premium for Part B, which is based on their income.

Original Medicare has gaps including deductibles, copays and coinsurance plus it doesn’t cover most prescription drugs or custodial care, such as nursing home stays.
Medicare Part D helps cover your cost for prescription drugs if you have Original Medicare. Part D plans are managed by private Medicare-approved insurers. You must enroll in a private plan to receive Part D services. Part D covered drugs generally:

  • Vary plan to plan
  • Include commonly used brand-name and generic drugs
  • Don’t cover over-the-counter medicines

Medicare Supplement Insurance (Medigap) are private health insurance plans that help pay for the “gaps” in coverage left by Original Medicare including copayments, coinsurance, and deductibles.  In many cases, someone with traditional Medicare must purchase a separate Part D drug plan as well as a Medigap plan to supplement their Medicare benefits. Medigap policies do not work with Medicare Advantage plans (MA) and it is illegal for anyone to sell an MA enrollee a Medigap policy unless they are switching to Original Medicare

Medicare Part C, or Medicare Advantage, integrates Medicare Part A and Part B coverage with additional medical benefits not covered by Original Medicare. Many Medicare Advantage plans include Part D drug benefits. When you enroll into a Medicare Advantage Plan you are simply choosing to assign the administration of your Medicare benefits to a private insurer and will receive your benefits through the plan you join.

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