Your Medicare Benefits 101: What You Need to Know

What is Medicare?

Original Medicare is the federal health insurance program covering people age 65 and older, though some may qualify if they’re younger than 65 with specific disabilities or conditions. It includes Parts A and B. In general, Original Medicare covers your routine healthcare needs.

Medicare explained in four parts

Medicare consists of four parts: A, B, C, and D. Original Medicare includes Parts A and B, while Part C is a separate plan which bundles your Part A and Part B coverage through a private plan approved by Medicare. And Part D is an optional prescription drug plan which can be added to Parts A, B, or C. Let’s explore each:

• Medicare Parts A and B: Known as Original Medicare, Parts A and B provide basic health coverage for people age 65 and older. Part A mainly covers inpatient hospital care and skilled nursing facility care. For most members, Part A is premium-free, though there is an annual deductible and inpatient hospital stays have an additional cost. Part B focuses on coverage for outpatient care, home health care, durable medical equipment, and preventive care.
• Medicare Part C: Also known as Medicare Advantage, Medicare Part C is sold by private insurers. It retains everything covered in Medicare Parts A and B, plus adds benefits such as dental, hearing, and vision care.
• Medicare Part D: This coverage option is a federal-run program sold through private insurers that helps you pay for prescriptions. The coverage can be purchased as a stand-alone plan or added to Medicare Parts A, B, or C.
  

What does Original Medicare cover?

Original Medicare — Parts A and B — covers your basic health care needs. This includes primary care physician (PCP) visits, hospital care, preventive services, and certain outpatient medical services. In general, Part A covers hospital stays and inpatient care, while Part B covers doctor visits, outpatient care, medical supplies, and preventive services.

Although many people qualify for premium-free Part A, there are still deductibles and cost-sharing for hospital stays. With Part B, there’s an 80%/20% split. This means Medicare covers 80% of all approved costs in Part B, but you pay the remaining 20% as coinsurance (commonly referred to as the “gap”).

What Original Medicare covers

• Inpatient hospital care: medical care you receive after being admitted for at least one night in a hospital or other clinical facility
• Skilled nursing facility care: rehabilitation and medical treatments at a specialized facility after a qualifying hospital stay for an illness or injury
• Home health services: a wide range of services you can get in your home for an illness or injury
• Oxygen equipment and accessories: rental of prescribed oxygen equipment and accessories for use in your home

What Original Medicare doesn’t cover

• Dental, vision, hearing, and long-term care for daily-living assistance
• Out-of-pocket expenses
• Expenses after meeting deductible and coinsurance payment

What is Medicare Advantage?

Medicare Advantage plans, also called Medicare Part C, are sold by private insurance companies. Medicare Advantage has all the benefits of Original Medicare, but can also include prescription drug coverage, vision care, dental, hearing benefits, and coverage when you travel.

Monthly premiums are typically low and the same for everyone — regardless of age, medical history, or income. Medicare Advantage plans also limit your out-of-pocket spending. Medicare Advantage benefits may include:

• Dental coverage: most plans cover basic care (cleanings, X-rays), while some also cover root canals, crowns, and dentures
• Eye exams, eyeglasses, and hearing aids: plans include exams, contacts, eyeglasses, and specialty eyewear not covered by Original Medicare
• Over-the-counter (OTC) medications: plans cover as-needed OTC medications such as cold medicine, aspirin, and vitamins as defined by the plan
• Gym coverage: provides access to a network of fitness facilities at no additional cost·
• Clinical care teams: teams that can coordinate your care, manage expenses, and much more
• Travel care: all plans include worldwide emergency care
• Chronic diseases: additional care support for chronic diseases such as diabetes

Medicare Advantage policies are primarily grouped into PPO (preferred provider organization) and HMO (health maintenance organization) plans. Both types of plans offer comprehensive benefits, but differ in costs and how they provide care.

In-network providers lower costs

Most Medicare Advantage insurance plans are based on using a provider network. These plans partner with trusted doctors and hospitals to offer you high-quality services at a lower cost. Going to in-network providers is usually less expensive.Some PPO plans may also cover costs for you to visit providers outside of your plan’s network.

Original Medicare versus Medicare Advantage

Original Medicare offers two key advantages: basic health coverage and relatively low monthly costs. The disadvantages? There are no limits on your out-of-pocket spending, even if you’ve met your deductible and coinsurance payment. This is where Medicare Advantage has an edge by offering additional hospital coverage and caps out-of-pocket expenses — along with a low monthly premium.

What is Medicare Part D?

Medicare Part D is a coverage option that helps you pay for prescriptions. The coverage can be purchased as a stand-alone prescription plan or added to certain Medicare Advantage policies. Each Part D plan provides a formulary — a list of covered medications — which includes brand-name and generic drugs. This list is ranked by cost, from lowest to highest:

• Tier 1: lowest cost — example: generic prescription drugs
• Tier 2: medium cost — example: preferred, brand-name prescription drugs
• Tier 3: high cost — example: non-preferred, brand-name prescription drugs
• Tier 4: highest cost — example: prescription drugs used to treat chronic or complex conditions

How Medicare enrollment periods work

Whether you’re a new member or need to change your plan, there are different types of Medicare enrollment periods. Be sure to think about your coverage needs before it’s time to enroll — or before you need to make a change to your plan.

Medicare Initial Enrollment Period

If you receive Social Security benefits before you turn 65, you’re automatically enrolled in Original Medicare. If you’re a new applicant, you have a seven‑month window to enroll during the Medicare Initial Enrollment Period in the year you turn 65.

The Medicare Initial Enrollment Period (IEP) is the period when you sign up for Original Medicare. You can also enroll in a Medicare Advantage plan (Part C) and/or a Medicare prescription plan (Part D). Details about IEP:

• Those near the age of 65 can enroll in Medicare coverage (Parts A–D)
• You need to enroll in Medicare during IEP to avoid late-enrollment penalties
• When: open for seven months, starting three months before your 65th birthday month and ending three months after your birthday month. For example: if you were born on April 1, your IEP would run from Jan. 1 through July 31.

Medicare Annual Enrollment Period

Once you’ve enrolled in Original Medicare, you might need to make changes to your coverage down the road. That’s when the Medicare Annual Enrollment Period (AEP) comes in handy. This annual period allows you to increase or decrease your coverage. Details about AEP:

• Any current Medicare member can make changes during this period
• You can make changes to Original Medicare or enroll in Medicare Advantage, add a prescription drug plan, change plans or drop coverage
• When: Oct. 15 through Dec. 7 each year, with coverage effective Jan. 1

Medicare Advantage Open Enrollment Period

For those members already enrolled in a Medicare Advantage plan, this period is when you can make changes to your coverage. The Medicare Advantage Open Enrollment Period (OEP) is when you should review your current plan and then make any changes. Details about OEP:

• Those enrolled in Medicare Advantage can make changes during this period
• You can make changes to your Medicare Advantage plan, switch to another plan or return to Original Medicare
• When: Jan. 1 through March 31 each year, with changes effective the following month

Medicare Special Enrollment Periods

Under certain circumstances, you may qualify for a later enrollment period to make changes to your coverage. Medicare Special Enrollment Periods (SEP) allow you to address these specific situations.

For example: if you or your spouse aren’t planning to retire at 65, there is an SEP to help you avoid penalties or a lapse in coverage. Special conditions include:

• Working past age 65
• Moving to a new home
• Losing current coverage
• Enrolling in other coverage
• Other qualifying special needs

Penalties for Medicare late-enrollment

If you’re late to enroll for Medicare A, B, or D, you may have to pay late-enrollment penalties. These penalties are added to your monthly payment and continue for as long as you are enrolled in Medicare coverage (except for Part A).

In fact, the penalties continue to increase the longer you wait to enroll for Medicare coverage. While alarming, these penalties can easily be avoided by signing up for coverage by the enrollment deadlines.

• Part A penalties: If you enrolled late in Part A after you first qualified, your monthly premium may increase by 10% and you may have to pay the penalty for twice the amount of time you didn’t enroll.
• Part B penalties: A 10% penalty for each year you could have been enrolled in Part B but didn’t sign up for it. And you may also pay a higher premium for late enrollment based on your income level.
• Part D penalties: The good news is you usually don’t pay a penalty if you have creditable drug coverage (prescription coverage through a non-Medicare plan). However, you could owe a 1% per-month penalty — totaling 12% for the year — if you don’t enroll in a Medicare prescription plan when you’re first eligible, or go 63 days or more without creditable coverage.
  

What is Medigap?

Think of Medigap as a supplemental plan that helps with the remaining costs — such as deductibles, copayments, and coinsurance — you’re responsible for under Original Medicare. Many people consider purchasing Medigap insurance to add to Medicare Parts A and B when they need to extend their coverage. It provides predictable monthly costs with flexible coverage.

How Medigap works

Medigap doesn’t replace Original Medicare. Rather, it provides more coverage for your plan. Although you may have a larger monthly premium with Medigap, you’ll pay very little when you visit a provider. This makes it easier to budget for your health care with Medigap plans.

What Medigap pays for and what it doesn’t

Medigap plans pay for Original Medicare deductibles. They also pay for Original Medicare coinsurance. But you must buy separate coverage for prescription drugs (Part D), dental, or vision. Costs can add up, but choosing these plans helps you personalize your coverage. With Medigap, you can also visit any doctors or hospitals in the U.S. if they accept Medicare.

Medigap open enrollment

The open enrollment period for Medigap is six months from the first day of the month of your 65th birthday — as long as you are also signed up for Medicare Part B — or within six months of signing up for Medicare Part B.

Types of Medigap plans

Medigap policies are standardized by the federal government, meaning identical plan letters offer the exact same core benefits. There are 10 standardized Medigap plans available in most states — A–D, F, G, K–N — with Plan G and Plan N currently being the most popular. In general, Plan G provides comprehensive coverage with higher monthly costs, while Plan N offers lower monthly costs but requires copayments for some office and emergency room visits.

Difference between Medigap and Medicare Advantage

If you want more coverage than Original Medicare provides, you have two options: Medicare Advantage or Medigap. You can add Medigap to Original Medicare for a larger monthly premium. Or you can purchase Medicare Advantage, which provides all of the coverage of Original Medicare, plus additional benefits.

The monthly costs and open-enrollment periods are also different for each. Medigap offers access to any U.S. doctor or hospital as long as they accept Medicare. And while Medicare Advantage uses in-network physicians, it includes medical coverage not included in Medigap and has a lower monthly premium.

What is a Dual-Eligible Special Needs Plan?

Medicaid is a joint federal and state program that provides free or low-cost health coverage to millions of Americans with limited income and resources. Eligibility and benefits vary by state, but it primarily covers children, pregnant women, the elderly, and individuals with disabilities.

Those who qualify for both Medicare and Medicaid are considered “dual-eligible.” If you meet this requirement, you are eligible for a Dual-Eligible Special Needs Plan (D-SNP).

With a D-SNP plan, you get even more than Original Medicare — plus help coordinating your care. When you enroll, you receive your hospital, medical and prescription drug coverage through one plan. Your Medicare D-SNP provider also helps you manage your care and maximize your benefits.

Who is eligible for a D-SNP plan?

You may be eligible for a D-SNP plan if you:

• Are a U.S. citizen or a lawful permanent resident.
• Qualify for Original Medicare (Parts A and B).
• Qualify for your state’s Medicaid program.
• Live in an area where D-SNP is offered.

What does D-SNP cover?

D-SNP covers all medically necessary and preventive services offered under Original Medicare Parts A and B. That’s in addition to prescription drug coverage under Part D. Many D-SNP plans also offer extra benefits that Original Medicare doesn’t. These include:

• $0 to low monthly premiums
• Dental, vision, and hearing allowances
• Over-the-counter allowances for aspirin, toothpaste, and antacids
• A dedicated care manager
• Allowances for healthy food and utilities

Medicare can be complicated, and the many coverage options may feel overwhelming. We hope this guide has helped make the process easier to understand and navigate. Feel free to bookmark this handy article for any future questions you might have about Medicare basics.