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Medicare is administered by the Centers for Medicare and Medicaid Services (CMS), a division of the U.S. Department of Health and Human Services. Medicare is divided into four parts:
Original Medicare refers to Part A and Part B only. It covers health care from any doctor, health care provider, hospital, or facility that accepts Medicare patients, and usually does not cover prescription drugs. Original Medicare does not require the patient to choose a primary care doctor, nor does it require a referral to see a specialist, as long as the specialist is enrolled in Medicare.
Part A is hospital insurance; Part B is medical insurance.
Medicare is a federal medical expense insurance program for people age 65 and older, even if the individual continues to work. Medicare benefits are also available, regardless of age, to anyone who has been entitled to Social Security disability income benefits for 2 years or who has permanent kidney failure (End Stage Renal Disease — ESRD).
Persons age 65 or older who are recent green card holders or new immigrants who never worked in the U.S. may not immediately qualify for free Medicare. If they don't qualify for free Medicare, they can still purchase it if they:
While an individual becomes eligible for Medicare upon turning age 65, federal law extends primary coverage benefits under the employer's plan to active older employees regardless of age — the employer plan usually continues to be primary coverage, and Medicare is secondary coverage.
Medicare is not part of the Health Insurance Marketplace, the key component of the Affordable Care Act that allows qualified individuals, families, and employees of small businesses to obtain health insurance. Once eligible for Medicare Part A, a person will not qualify for Marketplace tax credits or reductions in cost-sharing. An insured can keep a Marketplace plan after Medicare coverage starts; however, any premium tax credits and reduced cost-sharing through the Marketplace will stop.
The Initial Enrollment Period (IEP) is a 7-month period during which an individual may enroll in Medicare Part B. It usually begins 3 months before the month the individual turns age 65 and ends 3 months after the birthday month. Enrolling after the IEP ends may trigger a late enrollment penalty.
The General Enrollment Period runs from January 1 through March 31 of each year. Individuals who did not sign up for Part B when first eligible may sign up during this period — however, the cost of Part B goes up 10% for each full 12-month period the individual could have had Part B but didn't. The enrollee pays this penalty every time premiums are paid, for as long as they have Part B (a lifetime penalty), and the penalty grows the longer the individual goes without Part B coverage.
Anyone who qualifies for Medicare may also purchase a Medicare Supplement and pay the necessary premium for additional benefits. Under OBRA, Medicare supplement insurance may not discriminate in pricing or be denied based on an applicant's health status, claims experience, receipt of health care, or medical condition. An open enrollment period is a 6-month period that guarantees applicants the right to buy Medigap once they first sign up for Medicare Part B, without going through medical underwriting. To buy a Medigap policy, the applicant must generally have both Part A and Part B. After the open enrollment period ends, insurers may refuse coverage or charge higher premiums based on the applicant's health status. Medicare Supplement policies cannot be used to pay Medicare Advantage (Part C) copayments, deductibles, or premiums, and insurers are prohibited from selling Medicare Supplement policies to anyone already enrolled in Medicaid.
A Special Enrollment Period (SEP) is available to individuals who are eligible for Part B based on their age, but who waited to enroll because they had a group health plan through their own or their spouse's employer. These individuals may sign up for Part B anytime while still covered by the group health plan, or during the 8 months following the termination of the group plan or employment, whichever is first.
Medicare Part A helps pay for inpatient hospital care, inpatient care in a skilled nursing facility, home health care, and hospice care.
An individual is eligible for Medicare Part A, Hospital Coverage, by qualifying for one of the following conditions:
Individuals not receiving those types of benefits need to sign up for Part A, even if they are eligible for premium-free Part A. Monthly Part A premiums are required when a beneficiary is not "fully insured" under Social Security — meaning they have not earned 40 quarters of coverage (the equivalent of 10 years of work) and are therefore not entitled to Social Security retirement, premium-free Medicare Part A, and survivor benefits. A beneficiary who has paid Medicare taxes for fewer than 30 quarters pays a standard Part A premium of $565; a beneficiary who has paid for 30–39 quarters pays a standard Part A premium of $311.
Those who want to sign up for Medicare Part A have three options:
Those not eligible for premium-free Part A can purchase the coverage for a monthly premium. If individuals fail to sign up for Part A when first eligible, the monthly premium may go up 10% unless they become eligible for a special enrollment period. There is also an annual Medicare open enrollment period from October 15 to December 7 each year, during which people with Medicare can review the features of plans offered in their area and add, drop, or switch their Medicare health plan; changes go into effect January 1 of the following year.
Inpatient Hospital Care — hospital insurance helps pay for up to 90 days in a participating hospital in any benefit period, subject to a deductible:
The lifetime reserve days carry a daily set dollar limit twice that of days 61 through 90, and they are nonrenewable. Covered services include a semi-private room, meals, regular nursing services, operating and recovery room costs, hospital costs for anesthesia, intensive care and coronary care, drugs, lab tests, X-rays, medical supplies, appliances, rehabilitation services, and preparatory services related to kidney transplant surgery. Blood is also covered, except for the first 3 pints.
Under the inpatient hospital stay, Part A does NOT include private duty nursing, a television or telephone in the patient's room, or a private room unless medically necessary. Part A only pays for up to 190 days of inpatient psychiatric hospital care provided in a free-standing psychiatric hospital during the patient's lifetime. Sixty (60) days of non-use of the inpatient hospital benefit starts a new benefit period and a new deductible.
The benefit period begins when the insured is admitted as an inpatient in a hospital or a skilled nursing facility. It ends when the insured has not received any inpatient hospital care for 60 consecutive days. If the insured goes to a hospital or a skilled nursing facility after one benefit period has ended, a new benefit period begins. There is no limit to the number of benefit periods; however, the inpatient hospital deductible applies to each benefit period.
| Benefits | Medicare Pays | You Pay |
|---|---|---|
| Hospitalization — first 60 days | All but the deductible | Deductible |
| Hospitalization — days 61–90 | All but daily deductible | Daily deductible |
| Hospitalization — after day 90 (up to 60 days)* | All but daily deductible | Daily deductible |
| Hospitalization — after lifetime reserve days | Nothing | All costs |
| Skilled nursing facility care — first 20 days | 100% of approved amount | Nothing |
| Skilled nursing facility care — days 21–100 | All but daily deductible | Daily deductible |
| Skilled nursing facility care — beyond 100 days | Nothing | All costs |
| Home health care — for as long as Medicare requirements are met | 100% of approved amount; 80% of approved amount for durable medical equipment | Nothing for services; 20% of approved amount for durable medical equipment |
| Hospice care — for as long as doctor certifies need | All but limited costs for outpatient drugs and inpatient respite care | Limited cost-sharing for outpatient drugs and inpatient respite care |
| Blood — unlimited if medically necessary | All but first 3 pints per calendar year | For first 3 pints** |
Medicare Part A: Hospital Insurance Covered Service Reference Chart
For each lifetime reserve day, Medicare pays all covered costs except for daily coinsurance. *To the extent three pints of blood are paid for or replaced under one part of Medicare during the calendar year, they do not have to be paid for or replaced under the other part.
Medicare Part A does not cover outpatient hospital care. That's covered under Medicare Part B.
Medicare Part B pays for doctor's services and a variety of other medical services and supplies that are not covered by hospital insurance. Most of the services needed by people with permanent kidney failure are covered only by medical insurance.
Part B is optional and offered to everyone who enrolls in Part A. Part B is funded by monthly premiums and from the general revenues of the federal government. Most people enrolled in Medicare Part B pay the standard monthly premium; however, if an insured's modified adjusted gross income reported on their IRS tax return is above a certain amount, the insured may be required to pay a higher premium.
When an individual becomes eligible for Part A, they are told that they will get, and have to pay for, Part B unless they decline it. If they later decide they want Part B after initially declining it, they must wait until the next general enrollment period (January 1 through March 31) to enroll.
Enrollment in Medicare Part B may be rejected or delayed when employer coverage is primary due to the active employment of the individual at age 65 (or younger if with ESRD), or their spouse, or a parent of a disabled dependent.
After the annual medical insurance deductible is met, medical insurance will generally pay for 80% of the approved charges for covered expenses for the remainder of the year. There is no maximum out-of-pocket limit on the 20% coinsurance payable for Part B expenses.
Medical insurance under Part B of Medicare does not cover the following:
| Term | Definition |
|---|---|
| Actual charge | The amount a physician or supplier actually bills for a particular service or supply |
| Ambulatory surgical services | Care provided at an ambulatory center — surgical services performed at a center that does not require a hospital stay, unlike inpatient hospital surgery |
| Approved amount | The amount Medicare determines to be reasonable for a service covered under Part B |
| Assignment | A physician or medical supplier's agreement to accept the Medicare-approved amount as full payment for covered services |
| Carriers | Organizations that process claims submitted by doctors and suppliers under Medicare |
| Coinsurance | The portion of Medicare's approved amount that the beneficiary is responsible for paying |
| Deductible | The amount of expense a beneficiary must first incur before Medicare begins payment for covered services |
| Durable medical equipment | Medical equipment such as oxygen equipment, wheelchairs, and other medically necessary equipment that a doctor prescribes for use in the home |
| Excess charge | The difference between the Medicare-approved amount for a service or supply and the actual charge |
| Intermediaries | Organizations that process inpatient and outpatient claims submitted by hospitals, skilled nursing facilities, home health agencies, hospices, and certain other providers |
| Limiting charge | The maximum amount a physician may charge a Medicare beneficiary for a covered service if the physician does not accept assignment |
| Nonparticipating | Doctors or suppliers who may choose whether or not to accept assignment on each individual claim |
| Participating doctor or supplier | A doctor or supplier who has signed an agreement to become Medicare-participating, agreeing in advance to accept assignment on all Medicare claims |
| Peer review organizations | Groups of practicing doctors and other health care professionals paid by the government to review the care given to Medicare patients |
| Benefits | Medicare Pays | You Pay |
|---|---|---|
| Medical expenses — in or out of the hospital | 80% of approved amount after the deductible | Deductible*, plus 20% of approved amount and limited charges above the approved amount |
| Clinical laboratory services — unlimited if medically necessary | Generally 100% of approved amount | Nothing for services |
| Home health care — for as long as Medicare requirements are met | 100% of approved amount; 80% of approved amount for durable medical equipment | Nothing for services; 20% of approved amount for durable medical equipment |
| Outpatient hospital treatment — unlimited if medically necessary | Medicare payment to hospital based on hospital cost | 20% of billed amount after the deductible |
| Blood — unlimited if medically necessary | 80% of approved amount after the deductible, starting with the 4th pint | First 3 pints, plus 20% of approved amount for additional pints after the deductible** |
Medicare Part B: Medical Insurance Covered Services Reference Chart
Once a beneficiary has reached a specified dollar amount in expenses for covered services, the Part B deductible does not apply to any other covered services for the rest of the year. *To the extent any of the three pints of blood are paid for or replaced under one part of Medicare during the calendar year, they do not have to be paid for or replaced under the other part.
The Medicare Modernization Act of 2003 changed the name of Part C from Medicare+Choice to Medicare Advantage. Medicare Advantage plans must cover all of the services covered under Original Medicare except hospice care and some care in qualifying clinical research studies. Part C plans may have lower out-of-pocket costs than Original Medicare, and may also offer extra coverage, such as vision, hearing, dental, and other wellness programs.
To be eligible for Medicare Advantage, beneficiaries must also be enrolled in Medicare Parts A and B. Medicare Advantage is Medicare provided by an approved Health Maintenance Organization or Preferred Provider Organization. Many HMOs or PPOs do not charge premiums beyond what is paid by Medicare. The advantages of an HMO or PPO for a Medicare recipient may be that no claims forms are required, almost any medical problem is covered for a set fee so health care costs can be budgeted, and the HMO or PPO may pay for services not usually covered by Medicare or Medicare supplement policies, such as prescriptions, eye exams, hearing aids, or dental care.
Most Medicare HMOs require that medical services be received through the plan, except in emergencies. A few allow greater freedom of choice through point-of-service plans.
A Medicare Private Fee-for-Service Plan is a Medicare Advantage Plan offered by a private insurance company. Medicare pays a set amount of money every month to the private insurance company to provide health care coverage, and the insurance company decides how much enrollees pay for the services they get.
Special Needs Plans (SNP) are another section of Medicare Advantage that provide more focused and specialized health care for specific groups of people, including those who have both Medicare and Medicaid, who reside in a nursing home, or who have certain chronic medical conditions. If the SNP is also an HMO, insureds generally must get care and services from doctors, other health care providers, or hospitals in the plan's network (except for emergency care, out-of-area urgent care, or out-of-area dialysis), and members may be required to have a primary care doctor. If the SNP is also a PPO, insureds may get services from any qualified provider or hospital, but usually at a higher cost than they would pay for services from a network provider.
Medicare Part C expands Original Medicare benefits through private health insurance programs.
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) was passed in November 2003. This act implemented a plan to add a Part D — Prescription Drug Benefit to the standard Medicare coverages. This optional coverage is provided through private prescription drug plans (PDPs) that contract with Medicare. To receive the benefits provided, beneficiaries must sign up with a plan offering this coverage in their area and must be enrolled in Medicare Part A, or in Parts A and B. In areas where no private plans are offered, the government will offer a standard plan. Medicaid recipients are automatically enrolled.
Medicare beneficiaries will pay an extra 1% penalty for each month (12% per year) they could have signed up for Part D, but didn't.
Medicare beneficiaries may choose between stand-alone plans that offer coverage on a fee-for-service basis, or integrated plans that group coverages together, including PPOs and HMOs (known as Medicare Advantage). The plans offered by private companies are restricted by some standards set by Medicare, but may still be personalized — providers must cover drugs for certain classes, but do not have to cover every drug in each class.
Those who sign up for the standard Prescription Drug Benefit plan will have a monthly premium and a deductible. Through 2024, most Medicare drug plans had a coverage gap (also called the "donut hole") — a temporary limit on what the drug plan would cover for drugs. Starting in 2025, all Medicare plans must include a cap on what beneficiaries pay out-of-pocket for prescription drugs covered by the plan ($2,100 in 2026). Once a beneficiary reaches the out-of-pocket cap, they will automatically get catastrophic coverage, and are no longer required to pay a copayment or coinsurance for medications for the remainder of the calendar year. In addition to the out-of-pocket cap, beneficiaries have the ability to spread drug costs across monthly payments throughout the year, as opposed to all at once. For those with low income, additional assistance is also available.
The term creditable coverage means health coverage an individual had in the past that gives them certain rights when applying for new coverage. Creditable coverage includes, but is not limited to:
Creditable coverage does not include:
Medicare supplemental health insurance offered as a separate policy would not be considered creditable coverage. Creditable prescription drug coverage is coverage that is expected to pay at least as much as Medicare's standard prescription drug coverage. Individuals who have creditable prescription drug coverage when they become eligible for Medicare can usually keep that coverage without paying a penalty if they decide to enroll in Medicare Part D later. Individuals will not have to pay a penalty if they:
As defined by Medicare, a formulary is a list of prescription drugs covered by a prescription drug plan, also known as a drug list. Each plan has its own formulary that must be filed annually. Whenever the plan makes changes to the formulary, insureds must be notified. Medicare drug plans categorize drugs into different tiers, each with a different cost — drugs in a lower tier will cost less than drugs in a higher tier. A formulary must include at least 2 drugs in each treatment category, but it is not required to include all drugs.
Formulary = drug list; must have at least 2 drugs in each treatment category.
If the insured's health care provider accepts Medicare assignments, the insured pays their portion of the bill (coinsurance, deductibles), and the provider files a Medicare claim; Medicare then pays its portion of the bill directly to the provider. If a health care provider does not accept Medicare assignments, the insured may have to pay most of or the entire bill at the time service is rendered — the provider is still required to file a Medicare claim on the insured's behalf, and Medicare then pays its share of the bill to the insured.
If a health care provider does not file a claim on behalf of the insured, the insured may:
When a claim is processed by Medicare, the claimant is mailed an Explanation of Medicare Benefits, which outlines specific services covered and the amounts approved for each, including: the date the explanation was sent; who to contact with questions; the claimant's Medicare card number; the name and address of the claimant; Part B assigned claims; the claim number; the provider's name and address; the date of service; the amount charged; the Medicare-approved amount; the amount Medicare paid the provider; and the amount the claimant may be billed by the provider.
The Medicare Summary Notice (MSN) is a monthly statement that lists the insured's health insurance claims information, the specific services covered, and the amounts approved for each service.
If a Medicare insured uses a health care provider who doesn't accept Medicare payments, the insured may be asked to sign a private contract — a written agreement between the Medicare insured and the health care provider who has decided not to participate in the Medicare program. The private contract only applies to services the insured gets from that provider, and the insured can't be asked to sign one in an emergency situation or when getting urgently needed care. The following conditions apply if the insured signs a private contract with the provider:
Individuals insured under Medicare should talk to someone in the State Health Insurance Assistance Program before signing a private contract.
The insured has the right to appeal any decision about Medicare services. If Medicare does not pay for an item or service an insured has been given, the insured may appeal that decision. The insured may also appeal if they do not receive an item or service they think should be provided.
The following expenses are not covered by Medicare: