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Sometimes called “the alphabet soup of healthcare,” Medicare can be challenging to unravel at first glance. This guide will take the mystery out of Medicare for you and help you with your initial enrollment or change your elections when you are eligible.

Perhaps you’re approaching age 65, or you’d like to understand Medicare better to help out a friend or family member. Whatever your situation is, you are automatically eligible to enroll in Medicare when you reach age 65. If you’re already receiving Social Security benefits when you turn 65, you’ll automatically be enrolled and will receive your card in the mail.

Also, if you have been approved and are receiving Social Security disability income benefits for at least two years, you then qualify for Medicare Parts A and B.

How does Medicare work?

We’ve just mentioned two parts of Medicare, Parts A and B; however, there are two other parts you need to know about, Parts C and D. Several of the parts are mandatory, and several aren’t. Let’s take a look at each.

Medicare Part A: Hospital Insurance

Medicare Part A’s primary purpose is to cover the costs of hospitalization. You automatically receive Part A when you enroll in Medicare. Most people have no monthly cost for Part A, but you must meet your deductible, which is $1,484 in 2021.

Some of the services covered under Part A include:

  • Inpatient care in hospitals
  • Surgeries
  • Skilled nursing facilities
  • Home healthcare services
  • Hospice care (at home)
  • Inpatient care in a religious non-medical healthcare institution

Although there is a deductible for hospitalization, if your stay in the hospital is 60 days or longer, you must pay a portion of each day’s expenses. Multiple hospital stays during the same year may result in having to pay a deductible each time you’re admitted.

Medicare Part B: Doctors and Tests

There is a long list of medical services covered by Medicare Part B, including:

  • Doctor’s office visits
  • Outpatient care
  • Outpatient procedures
  • Medical equipment
  • Mammograms
  • Purchase of blood
  • Cancer treatment
  • Cardiac rehabilitation

There is an annual deductible for Part B in 2021 of $203. Once your deductible is met, you’ll pay 20% of the Medicare-approved service cost by a provider who accepts Medicare assignments. But, be advised that there is no annual out-of-pocket maximum or cap on your 20% portion of the cost of services. There is also no lifetime maximum out-of-pocket expense limit.

Under Part B, you won’t pay anything for most preventive services, including flu shots and diabetes screenings.

It’s also important to note that long-term care is not covered by Medicare Part A or Part B. If you develop a chronic condition requiring long-term personal care assistance, such as the kind that would require the services of an acute-care hospital, Medicare won’t cover any of the cost unless you’re transferred from a critical care unit or intensive care unit.

Long-term care insurance or a life insurance policy with a long-term care rider are designed to cover long-term care expenses, which Medicare was never intended to cover.

Medicare Part C: Medicare Advantage

Medicare Part C, also known as Medicare Advantage, is an alternative to traditional Medicare coverage. Part C typically includes everything covered in Parts A and B, a prescription drug plan (Part D), and other possible benefits depending on which Advantage Plan you select.

Some Part C plans won’t require you to pay a monthly insurance premium, but you will still need to pay your premium for Part B coverage. Enrolling in a Medicare Advantage plan is not mandatory, but many people find them to be more economical and provide more benefits than paying separately for Parts A, B, and D. Part C and Part D premiums can be deducted from your Social Security check if you’d like.

People who choose not to enroll in Part C coverage and have only Medicare Parts A, B, and D can face sizable medical bills not covered by Medicare. In that case, they may consider a Medigap insurance policy. Medigap only supplements Medicare and is not considered a stand-alone policy, meaning if your doctor doesn’t accept Medicare, your Medigap insurance won’t pay for the procedure.

Medicare Part D: Prescription Drugs

Medicare Part D, prescription drug coverage, is administered by private insurance companies and is also not mandatory. Some Part D plans carry an annual deductible and may also have a co-pay.

Medicare prescription drug plans have a coverage gap, a temporary limit on what the drug plan will cover (often called the “doughnut hole).” This limit kicks in after you and the plan you selected have spent a certain amount in combined costs on prescriptions, which is $4,130 in 2021.

With Part D, you’ve reached a “catastrophic level of coverage” if your out-of-pocket costs reach $6,550 in 2021. When that happens, you are then out of the “doughnut hole,” and your Part D coverage will begin paying the majority of your prescription drug expenses again.

Medicare.gov can provide you with additional details on how Medicare works, what it covers, and how to get started with Medicare.

How much does Medicare cost?

The costs of Medicare Parts A and B in 2021:

  • Part A Premium. Premium-free with qualifying work history; $471/month without.
  • Part A Deductible & Coinsurance.

    • You pay: $1,484 deductible per benefit period.
    • Days 1-60: $0 coinsurance per benefit period.
    • Days 61-90: $371 coinsurance per benefit period.
    • Days 91+: $742 coinsurance per each lifetime reserve day after day 90 for each benefit period (up to 60 days)
  • Part B Premium. The standard Part B premium is $148.50.
  • Part B Deductible & Coinsurance. $203/year, plus 20% of the Medicare-approved amount.

Courtesy of Boomer Benefits

Medicare Part C costs are determined by several factors, like premiums, deductibles, co-payments, and co-insurance. Depending on these factors, monthly costs can range from $0 to $200 or more.

Below is a small sample of Medicare Part C plan costs from major insurance providers in cities around the United States:

Plan nameCityMonthlypremiumHealth deductible, drug deductiblePrimary doctor copaySpecialist copayOut-of-pocket max
Anthem MediBlue StartSmart Plus (HMO)Los Angeles, CA$0$0, $0$5$0–$20$3,000 in network
Cigna True Choice Medicare (PPO)Denver, CO$0$0, $0$0$35$5,900 in-network, $11,300 in and out of network
Humana Choice H5216-006 (PPO)Madison, WI$48$0, $250$10$45$6,000 in-network, $9,000 in and out of network
Humana Gold Plus H0028-042 (HMO)Houston, TX$0$0, $195$0$20$3450in network
Aetna Medicare Premier Plan (PPO)Nashville, TN$0$0, $0$0$40$7,500 in-network, $11,300 out of network
Kaiser Permanente Medicare Advantage Standard MD (HMO)Baltimore, MD$25$0, $0$10$40$6,900 in network

The estimates are courtesy of Healthline. They are for 2021 and are only a sampling of the many plan options offered in each area.

For a more personalized estimate of Medicare Part C plan costs based on your individual healthcare situation, visit this Medicare.gov plan finder tool and enter your ZIP code to compare plans near you.

Medicare Part D costs depend on several factors, such as your income when you enroll, the type and amount of drugs you take, and if the pharmacy is in-network or preferred.

Part D costs include monthly premiums, deductible, and co-insurance or co-pays.

Premiums for Part D will vary depending upon the plan you select. In 2021, premiums ranged from an average of $7 to 89 per month. Premiums could be higher if you earned more in 2019 than $87,000 as a single filer or $174,000 if you’re married filing jointly.

How to sign up for Medicare

The Initial Enrollment Period is your first chance to sign up for Medicare. It lasts for seven months, starting three months before you turn age 65 and ending three months after the month you turn 65.

Coverage begins depending upon which month you signed up during the open enrollment period but always starts on the first of that month.

If you sign up:Coverage starts:
Before the month you turn 65The month you turn 65
The month you turn 65The next month
1 month after you turn 652 months after you sign up
2 or 3 months after you turn 653 months after you sign up

Courtesy of medicare.gov

Medicare vs. Medicaid

Medicare and Medicaid are two distinctly different government-run programs. They’re funded and operated by different parts of the government, and they primarily serve different groups.

  • Medicare is a federal program. It provides health coverage if you are age 65 and over or under 65 and have a disability, regardless of your income level.
  • Medicaid is a state and federal program designed to provide health coverage if you have a very low income.

You can be eligible for both Medicare and Medicaid (dually eligible) if you meet certain eligibility requirements. They work in tandem and can lower your health care costs.

Even though they are both health care programs administered by the government, there are significant differences in covered services and cost-sharing. To learn more about Medicaid and Medicare costs and coverage (especially if you are dually eligible), call 1-800-MEDICARE or contact your local Medicaid office.


Having grown up in upstate New York, Bob Phillips spent over 15 years in the financial services world and has been making freelance writing contributions to blogs and websites since 2007. He resides in North Texas with his wife and Doberman puppy.

The information and content provided herein is for educational purposes only, and should not be considered legal, tax, investment, or financial advice, recommendation, or endorsement. Breeze does not guarantee the accuracy, completeness, reliability or usefulness of any testimonials, opinions, advice, product or service offers, or other information provided here by third parties. Individuals are encouraged to seek advice from their own tax or legal counsel.

Insurance
Published September 30, 2021