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Understanding Medicare Coverage

Medicare is a government-sponsored health insurance program for American citizens and permanent legal residents (of at least five years in a row) who are 65 years old or more, or who qualify by disability or certain conditions, such as end-stage renal disease (permanent kidney failure requiring continuous dialysis treatment or a kidney transplant) or Lou Gehrig’s disease (amyotrophic lateral sclerosis). The basic program is called Original Medicare and includes Part A (hospital insurance) and Part B (medical insurance).

What does Medicare cover?

When we say that Medicare covers a service or item, we mean that Medicare may pay at least a portion of the service or item under certain conditions. In most cases, a service must be delivered in a Medicare-enrolled facility by a Medicare-assigned provider.

  • Medicare Part A, hospital insurance, covers services such as (but not limited to) inpatient hospital care, skilled nursing facility care, hospice services, and limited home health care.

  • Medicare Part B, medical insurance, covers services and supplies such as (but not limited to) outpatient care, mental health services, lab tests, doctor visits, durable medical equipment, and preventive services.

What are my Medicare coverage options?

In a nutshell, here are your basic choices for Medicare coverage.

  • Stay with Original Medicare (Part A and Part B) and do nothing else. A few things to be aware of:

  • You get Medicare Part A premium-free if you’ve worked at least 10 years, or 40 quarters, while paying Medicare taxes.

  • Most people pay a monthly premium for Medicare Part B. You can decide not to enroll in this part of Original Medicare. Some people “opt out” of Part B coverage if they have group health coverage through an employer, for example. You can sign up for Part B later when you stop working or your group coverage ends. But you must be enrolled in Part B if you want to sign up for a Medicare Advantage plan or a Medicare Supplement plan. If you delay enrollment in Part B, you might face a late-enrollment penalty for as long as you have the coverage, unless you qualify for a Special Enrollment Period.

  • Outside of certain specific situations, Original Medicare doesn’t cover prescription drugs. Medicare plan options to cover prescription drugs are discussed below.

  • Original Medicare does come with certain out-of-pocket costs. Medicare Part A and Part B have deductibles and sometimes coinsurance, copayments, and certain coverage limits.

  • Stay with Original Medicare and add a Medicare Supplement (Medigap) plan to help pay for Original Medicare’s out-of-pocket costs.

  • Stay with Original Medicare and sign up for a stand-alone Medicare Part D Prescription Drug Plan, available from private, Medicare-approved insurance companies.

  • Get your Medicare Part A and Part B benefits through a Medicare Advantage plan instead of directly from the government. Many Medicare Advantage plans also cover routine vision or dental care or other benefits. Hospice care is covered directly by Medicare Part A when you have a Medicare Advantage plan.

  • The types of Medicare Advantage plans available in your area may include Preferred Provider Organization (PPO) plans, Health Maintenance Organization (HMO) plans, and others.

  • Most Medicare Advantage plans include prescription drug coverage; these are called Medicare Advantage Prescription Drug plans. If you enroll in this type of plan, you can get all your Medicare benefits through a single plan. You still need to keep paying your monthly Medicare Part B premium, besides any premium the Medicare Advantage plan may charge.

How do I get Medicare?

Many people don’t have to do anything to get enrolled in Original Medicare. If you’re already receiving Social Security or Railroad Retirement Board retirement benefits, you’re automatically enrolled when you turn 65. If you’re disabled, you’re automatically enrolled when you reach your 25th consecutive month of receiving disability benefits. You may also qualify for Medicare under the age of 65 if you have amyotrophic lateral sclerosis (also known as Lou Gehrig’s disease) or end-stage renal disease (ESRD).

Once you’re enrolled in Original Medicare, you can decide to add to your coverage by enrolling in a Medicare Part D Prescription Drug Plan and/or a Medigap plan. Or, you might decide to enroll in a Medicare Advantage plan. There are different enrollment periods for these options.

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