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Medicare is the United States' health insurance plan for citizens over the age of 65 and some others with certain health conditions. It covers many, but not all, of the costs of health care for these populations.
Health care costs become increasingly significant with age or with certain health problems. These situations often coincide with an inability to work and earn income, so Medicare is an important part of long-term care plans for many Americans. Learn more about how the basics of Medicare and how you qualify.
If you are eligible for Medicare and are ready to look at plans, eHealth Medicare, an independent insurance broker and partner of The Balance, has licensed insurance agents at <877-711-0180 TTY 711> who can help connect you with Medicare Advantage, Medicare Supplement Insurance, and Medicare Prescription Drug Part D plans.
What Is Medicare?
Medicare is the U.S. federal health insurance program for people age 65 and older, and it's funded by taxpayers. Every working American pays a portion of their income in Medicare taxes. In 2021, the withholding rate for Medicare is 1.45% (2.9% if you're self-employed). If you pay these taxes for at least 40 quarters (10 years), you'll receive basic Medicare coverage for free when you reach age 65.
If you are within three months of turning 65, you can apply for Medicare. Your basic Medicare options come in four types: Parts A, B, C, and D. Part C is also known as Medicare Advantage. Each part covers different items and comes with different costs. Original Medicare (Parts A and B) does not cover all your health care expenses, so most retirees will want additional coverage in the form of a Medicare Supplement policy or Medicare Advantage plan, as well as some form of long-term care insurance.
Medicare does not cover the costs of every single service or prescription. It's important to understand what's automatically covered and what services require additional paid coverage.
How Medicare Works
Basic Medicare coverage starts with Parts A and B.
- Part A is referred to as hospital insurance. This is free for most people because they spent their working years paying into Medicare. If you paid Medicare taxes for 39 quarters or less, you'll have to pay a premium for Part A.
- Part B is referred to as medical insurance. It covers additional services and supplies needed to treat medical conditions as well as some preventative services. You must pay a monthly premium for Part B.
Medicare Parts A and B comprise what is referred to as Original Medicare. Expect Original Medicare to cover a moderate portion of your total health care expenses—primarily medically necessary services and preventative services. To find out if a service is covered, you can use the coverage check feature on the Medicare website.
With Original Medicare, as with most other insurance plans, you still have deductibles, copays, and coinsurance expenses as well as prescription costs. That’s where Medicare Parts C and D come in to offer additional coverage you can purchase.
- Part C is called a Medicare Advantage Plan or Medicare Health Plan. It is private insurance that provides coverage in a single plan that includes Medicare Parts A and B, and may also include prescription drug coverage (Part D). Medicare Advantage plans may also include extra covered services such as vision, dental, and hearing. Some of these plans may cost less than other options if you do not have frequent medical needs.
- Part D refers to prescription drug coverage that you can add to your basic Medicare Part A and B benefits.
When enrolling in Medicare you will have to decide if you want Original Medicare or a Medicare Advantage Plan. You'll need to consider your location, budget, lifestyle, and care providers when making this decision.
Am I Eligible for Medicare?
To be eligible for Medicare you must have:
- Entered the United States lawfully
- Lived in the U.S. for five years
- Be 65 or older or have certain disabilities or permanent kidney failure
How Much Does Medicare Cost?
Medicare costs depend on which coverage options you choose and how long you paid Medicare taxes.
Medicare Part A
Most people don’t have to pay a monthly premium for Medicare Part A because they or a spouse paid Medicare taxes while working in the United States for 10 years or more. If you don’t automatically get premium-free Part A, you may still be able to enroll by paying a premium. In 2021, the Part A premium is $259 per month for people who are not otherwise eligible for premium-free hospital insurance and have 30–39 quarters of Medicare-covered employment. For those with less than 30 quarters of Medicare withholdings, the premium is $471 per month.
Medicare Part B
For those enrolling in Medicare in 2021, you will pay the standard Medicare Part B premium of $148.50 per month unless your modified adjusted gross income is greater than $88,000 for single filers or $176,000 for joint filers. Medicare Part B and D premiums are means-tested, so if your income exceeds these amounts you will pay gradually more depending on your income level.
Medicare Part C
Premiums for Medicare Advantage Plans vary. You can use Medicare's online plan finder tool to search your location and see estimated premiums and benefits.
Medicare Supplement Policies
If you go with Original Medicare, you will probably want to purchase a Medicare Supplement policy, sometimes called "Medigap" policies. Premiums vary depending on the plan you choose.
Original Medicare is not sufficient to pay for your medical needs. Because of gaps in Original Medicare, you will be left with sizable bills without the help of a Medicare Advantage or Medigap policy. Before making a decision, make sure you completely understand your Medicare benefits and the benefits of any supplemental policy in which you may enroll.
Medicare vs. Medicaid
Medicare is often confused with Medicaid, which is an entirely different program. Medicaid is a joint federal and state program that provides assistance to low-income Americans of any age. Coverage and qualification requirements vary by state, but Medicaid generally covers most or all healthcare costs for children, pregnant women, and parents under certain income levels, as well as some people with disabilities. It can also supplement Medicare coverage for low-income seniors.
|Health insurance for people 65 and older or with certain health conditions||Healthcare assistance for low-income seniors, parents, children, and certain disabled people|
|Federally run, same in every state||Jointly federally and state run—coverage and qualifications vary|
|Patient may pay significant costs||Patient pays little or nothing|
|Variety of options available||Can be combined with Medicare for low-income seniors|
- Medicare is health insurance for most U.S. residents over the age of 65 or with certain health conditions.
- There are several different types of coverage, and the costs vary depending on the plan you choose and the number of years you paid Medicare taxes.
- Most seniors will want to purchase Medicare Advantage or Medigap coverage to supplement the limited coverage that Original Medicare offers.
- Medicare should not be confused with Medicaid, which is a health care assistance program for certain U.S. residents.