Medicare is one of the largest expenditures our federal government has, coming in at $1.5 Trillion, or 17.3% of our 2024 budget, according to USASpending.gov.
It covers more than 48 million people and ensures that they get at least some, if not all of their healthcare needs covered, depending on their situation and health considerations.
Healthcare in the U.S. is a hot-button issue to begin with. In this blog post, I’ll cover What Medicare does and doesn’t cover, how it works, and what you can expect from it when you apply.
There’s a lot to unpack here, so we’ll start with the most basic question first…
Who Is Eligible for Medicare?
The most basic thing you must do to qualify for Medicare is live until you’re sixty-five.
I know, pretty simple, huh?
There is a bit more to it than that. You must also be a US citizen or have been a legal resident for at least five years. And you or your spouse must have paid Medicare taxes for at least ten years.
You can get Medicare benefits if you’re younger than sixty-five, provided that you’re disabled and have been receiving SSDI benefits or disability benefits through the Railroad Retirement Program for at least twenty-four months.
You can also qualify if you have end-stage renal disease or need a kidney transplant.
What Does Medicare Do?
Medicare offers health insurance to those sixty-five and older. It also provides coverage for people with disabilities, kidney failure, and ALS (better known as Lou Gehrig’s disease).
It covers more than 48 million people… but it doesn’t cover all of their medical expenses. Still, for millions of people – especially seniors – it’s their primary means of medical insurance.
Medicare is divided into four parts called, somewhat unimaginatively, Part A, Part B, Part C, and Part D. (Gotta love government efficiency.)
These are usually characterized as follows:
- Part A is called Hospital Insurance.
- Part B is called Medical Insurance.
- Part C is called Medicare Advantage (or fee-for-service).
- Part D is called Prescription Drug Coverage.
Each plays a different role within Medicare. Here’s how it works.
The 4 Parts of Medicare
Each of the four parts of Medicare has its own focuses that add up to the whole. To begin with, let’s start by looking at what Medicare covers in Part A.
Medicare – Part A
Part A of Medicare, which focuses on hospital stays, covers the following:
- A semi-private room
- Meals
- Nursing
- Hospital services
For a stay in the hospital of one to sixty days, you pay up to $1,632 (the 2024 deductible). For the next thirty days, you pay $408 per day. After day ninety, you pay $816 per day while using your sixty lifetime reserve days (60 extra days that you can use any time you need to, but that never get replenished).
Once you use up all your lifetime reserve days, you are responsible for all costs of the stay.
If, after three days in the hospital, you are moved to a skilled nursing facility, Medicare Part A pays for the following:
- A semi-private room
- Meals
- Nursing
- Rehabilitation
- Miscellaneous services
For the first twenty days in such a facility, you pay nothing. For days twenty-one through one hundred, you pay a $200 copay daily. After that, you pay all costs associated with remaining in the facility.
Medicare may also pay for some home-based healthcare services.
These include:
- Part-time skilled nursing care
- Part-time home health aides’ services
- Physical and occupational therapy
- Speech therapy
- Certain medical equipment, such as wheelchairs, crutches, walkers, etc.
You pay 20% of the cost of medical equipment. All providers of this equipment and other services have to be certified by Medicare.
It’s possible that if you have a terminal illness, you’ll be placed in hospice care. Medicare Part A will cover the following elements of that care:
- Doctors’ services
- Nursing
- Medical equipment
- Medical supplies
- Drugs to control your symptoms (you pay up to $5 for each prescription drug)
- Short-term hospital stays
- Therapy, both physical and speech
- Social worker services
- Dietary counseling
- Grief counseling for you and your family
Also, you may be responsible for paying 5% of the Medicare-approved amount for inpatient respite care.
Medicare – Part B
Medicare Part B is sort of like regular health insurance. When you enroll in Part B, you’ll pay a monthly premium, just as you would for any insurance. As of 2024, the standard premium is $174.70 per month.
If you get benefits from Social Security, Railroad Retirement, or Office of Personnel Management, the premium will be deducted from the benefits. Otherwise, Medicare will send you a monthly bill.
If your income is above a certain amount, you pay more for Medicare Part B premiums. The following table, adapted slightly from www.medicare.gov, shows how this increase works.
What Does Medicare – Part B Cover?
Part B of Medicare is designed to cover doctor visits and everyday medical care.
To this end, it will pay for:
- Visits to doctors who accept Medicare patients; this includes visits to hospitals, clinics, doctors’ offices, or care in your home
- Medical equipment, on the same order as what’s covered in Part A
- Tests done outside hospitals
- Preventive measures (for example, flu shots or vaccines)
- Visits to the emergency room
- Outpatient care and some inpatient care (for instance, if you’re being kept under observation at a hospital)
- Ambulance and air rescue services
- Health counseling for lifestyle changes (giving up smoking or drinking, for example, or losing weight)
Medicare – Part C
This is often referred to as Medicare Advantage. It’s where the government system of Medicare and private insurance meet.
If you enroll in Medicare Part C, you sign up for a plan run by a private company. Pretty much, these plans will cover the same things as Medicare Parts A and B, but you may find that there are some advantages to the private plans. For example, they may charge you lower copays or you may have access to different providers. The important thing is to pick the plan that works best for you.
Keep in mind that where you live will have something to do with the Medicare Advantage plan you choose (assuming you decide to go that route). In some rural areas, there aren’t many plans available. People living in urban areas are likely to have many choices when it comes to medical insurance.
The bulk of plans in Medicare Advantage are health maintenance organizations (HMOs) or preferred provider organizations (PPOs). Just like other kinds of health insurance, they’ll come with a list of doctors participating in their plan; if you see someone outside the network, you’ll pay extra.
One good thing about Medicare Advantage is that it caps the annual amount you’ll spend out of pocket, something Medicare Parts A and B don’t do. So, if you’re concerned about your annual healthcare costs as well as your copay (in other words, you anticipate frequent visits to the doctor during the year), Part C may be the way to go.
However, one thing to keep in mind is that like any private plan, those healthcare providers that are participants in Part C can go away—that is, they can decide to withdraw from participation in Part C. If that happens, you’ll have to go back to Part A and B Medicare, at least until you can find another provider or insurer.
Something important to remember is this decision is not set in stone. If you signed up for Part A and B, then you change your mind and decide you’d rather go with one of the private plans in Part C (or vice versa) that’s fine. You can switch during an enrollment period.
Medicare – Part D
Part D of Medicare covers prescription drugs. This is often an increasingly large part of any retiree’s life – but make sure the plan you pick covers the medications you use.
There is also a lot of variation on which drugs are covered by each plan. Make sure to check that your medications are covered before you commit.
As with Part B, you pay a monthly premium. Plan D plans vary from state to state, as do the premiums, but they generally range from $0 to $195 per month, with an average cost of $59 monthly.
Under Part D, you must pay whatever your plan has (though some plans have no deductible). Additionally, you are responsible for copays until their total reaches a specific number ($5,030 in 2024). When you hit that number, you fall into what’s called the “doughnut hole.” In the doughnut hole, you’ll pay no more than 25% of the cost of prescription drugs.
When all your out-of-pocket costs for the year hit $8,000, you get out of the hole and go into catastrophic protection, during which Medicare pays 95% of your expenditures. When you reach the end of the year, the system resets and you start over again.
The open enrollment period for Plan D lasts from October 15 to December 7 every year.
Is There Anything Medicare Doesn’t Cover?
Yes. Quite a bit, in fact.
Although Medicare will pay a lot of your medical expenses in retirement, there’s a lot it doesn’t cover too.
Expenses that you’ll wind up paying for out of your own pocket include:
- Glasses and eye care: Medicare won’t cover the cost of new frames and lenses or eye examinations. Nor does it cover the cost of contact lenses.
- Dental care: Although Medicare will cover some dental operations (usually ones that are performed while you’re in the hospital), it won’t cover routine visits to the dentist. Nor does it cover dentures.
- Hearing aids: Medicare won’t cover routine hearing exams or the charge of getting and maintaining hearing aids.
- Cosmetic surgery: Medicare won’t cover cosmetic surgery, including breast enlargement or reduction unless it’s the result of an illness or accident.
- Long-term care: Medicare doesn’t cover things like nursing homes, assisted living facilities, or adult day care for seniors.
Chiropractic care is covered under Part B—sort of. It covers the manipulation of your spine, provided the service is given by a licensed chiropractor. You pay 20% of the cost plus your deductible. Medicare doesn’t pay for tests ordered by the chiropractor, including x-rays, and therapy.
What If I Need Extra Help with Prescription Costs?
It is a sad fact that for many people in the U.S. medications are too expensive. To the point where many people choose between their medications and paying for food or a roof over their heads.
Even with Medicare helping out, some medical costs are still soaring. One of the most pervasive of these is what people in the United States pay for prescription drugs. In the US, the average person spends about $1,432 a year for prescribed medications.
Part of this is because the US uses more pharmaceuticals than the rest of the world. If you’ve got a condition, there’s probably a pill you can take for it. Another reason is that in the United States drugs cost a lot more—sometimes as much as 30% to 40% more than what they cost in places like France or Germany—because the pharmaceutical industry in America has gone unregulated in regard to price.
But the Inflation Reduction Act of 2022 may bring about welcome changes for costs of drugs (specifically those with Medicare in certain parts).
How Can I Get Extra Help If I Need It?
Recognizing these problems, Medicare offers the Low-Income Subsidy program, also called the Extra Help program, to help people manage the cost of prescription drugs. However, this assistance is only given to people with low incomes who might not be expected to afford the medicine that many of them need.
This financial assistance, worth approximately $8,000 per year, includes things such as prescription copays, monthly premiums, and deductibles.
To qualify for this assistance:
- You must be a resident of the United States.
- Your resources must be lower than $17,220 for an individual and $34,360 for a couple. By “resources” the SSA means any stocks or bonds you hold, and any money in your bank account(s). This does not include your house, car, or life insurance policy.
- Your annual income must be equal to or less than $22,590 for an individual and $30,660 for a couple.
As with most other Social Security–based programs, you can apply for this assistance online by downloading and filling out SSA’s Application for Help with Medicare Prescription Drug Plan Cost (SSA-1020). You can also call the agency at 1-800-772-1213.
A Little Bit of Extra Help
Even if your income or resources exceeds the limits outlined by the prescription drug assistance program, it’s possible you could qualify for some extra financial help with your prescriptions.
If you or your spouse give financial support to someone else (typically a child or a parent), or if you live in Alaska or Hawaii, you may qualify for the Extra Help program. It’s something worth discussing with your local Social Security office.
Earlier in this post, I mentioned that failure to enroll on time in Medicare Part D, the prescription drug part of the program, results in a penalty. However, if you apply for and receive Extra Help, that penalty won’t apply.
Okay, So Then What’s This Thing Called Medigap?
Because Medicare does not cover all medical procedures, many people purchase additional insurance plans to deal with the gaps in coverage. These plans are known as Medigap, and they vary by state.
Depending on the policy, Medigap plans may cover things like Medicare copayments and deductibles and foreign travel emergency care.
I’m not going to go into a lot of detail about Medigap in this blog post. You can find out more about Medigap here on the Medicare website.
Information You Need to Know, So That You Can Thrive in Retirement
As boring and dry as Medicare information may be, these are programs that you can benefit from.
But to do that, you have to know how they work and how to take advantage of them for your personal circumstances.
I cover all of this in my book, Social Security 101, 2nd Edition.
I walk you through every aspect of our Social Security system, from where it started to where it’s going, as well as how you can, and should, use the many benefits it provides, like Medicare, Medicaid, and more.
This is one of those books you’ll wish you’d had sooner, because it explains how the system works so clearly that you can actually use that system when you need it.
Click on the button below to find out more about Social Security 101, 2nd Edition and get your copy now.