Learn About Medicare Options for Older Adults

What Medicare Is and How It Works

Medicare is a federal health insurance program designed primarily for people age 65 and older. Created in 1965, it covers hospital care, doctor visits, prescription drugs, and other medical services. Understanding how Medicare operates is the foundation for exploring which parts might work for your situation.

Learn How to Make Homemade Chili Seasoning →

The program has four main parts, each covering different types of care. Part A covers hospital stays, skilled nursing facility care, hospice, and some home health services. Part B covers doctor visits, outpatient care, medical equipment, and preventive services. Part D covers prescription drugs through private insurance companies. Part C, also called Medicare Advantage, is an alternative way to receive Parts A and B benefits through private insurers.

Medicare is funded through payroll taxes during your working years. When you reach 65, you become eligible to enroll based on your age, disability status, or end-stage renal disease diagnosis. About 67 million Americans were enrolled in Medicare as of 2023, making it one of the largest health insurance programs in the country.

The program operates on a calendar year basis, meaning coverage and costs reset each January 1st. This is important to know because it affects how your deductibles work and when certain coverage changes take effect. Medicare processes claims through regional carriers who handle payments to doctors and hospitals on your behalf.

Unlike some insurance programs, Medicare doesn't cover everything. Long-term care, dental work, vision care, and hearing aids generally aren't included in standard Medicare coverage. This gap is one reason many people explore supplemental insurance options, which we'll discuss in later sections.

What to take away: Medicare has distinct parts serving different purposes. Knowing what each covers helps you figure out which combination might suit your healthcare needs and budget.

Medicare Part A: Hospital and Facility Care

Part A is your hospital insurance. It pays for inpatient hospital stays, care at skilled nursing facilities after a hospital stay, hospice care, and some home health services. Most people don't pay a monthly premium for Part A if they or their spouse paid Medicare taxes for at least 10 years while working.

Learn About New York Food Assistance Programs →

When you're admitted to a hospital as an inpatient, Part A covers your hospital room, meals, nursing care, medications during your stay, and medical supplies. The coverage includes semi-private rooms and intensive care units if medically necessary. However, you'll pay a deductible ($1,600 in 2024) for each hospital stay lasting 1-60 days. For longer hospital stays, you'll also pay daily copayments starting on day 61.

After a hospital stay, if you need continued care at a skilled nursing facility (like rehabilitation for a joint replacement or recovery from a stroke), Part A covers up to 100 days. The first 20 days are fully covered. Days 21-100 require a daily copayment (about $200 per day in 2024). This coverage only applies if you spent at least three consecutive days in the hospital first.

Part A also covers hospice care when you're diagnosed with a terminal illness with a life expectancy of six months or less. This includes pain management, comfort care, and emotional support services. Additionally, it covers home health services when ordered by your doctor—such as nursing care or physical therapy at home—if you're homebound.

One important limitation: Part A doesn't cover custodial care, which is help with daily living activities when medical care isn't the main reason. If you need someone to help you bathe, dress, or take medications but don't need skilled nursing care, Part A won't cover that expense.

What to take away: Part A is automatic for most people and covers hospital and facility care with specific cost-sharing amounts. Understanding these limits helps you prepare for out-of-pocket costs during extended care episodes.

Medicare Part B: Doctor Visits and Outpatient Services

Part B covers doctor visits, outpatient care, medical equipment, and preventive services. Unlike Part A, you typically pay a monthly premium for Part B. In 2024, the standard premium is $174.70 per month, though higher-income beneficiaries pay more. Part B also has an annual deductible of $240 in 2024.

Free Guide to Mixing and Using Whey Protein Powder →

Once you meet your Part B deductible, Medicare generally pays 80% of covered services, and you pay the remaining 20%. This coinsurance applies to doctor visits, specialist visits, diagnostic tests like X-rays and blood work, outpatient surgery, mental health services, and physical or occupational therapy. If your doctor doesn't accept Medicare or charges more than Medicare allows, your costs could be higher.

Part B covers preventive care services at no cost to you, meaning you pay nothing after meeting your deductible. These include annual wellness visits, screenings for cancer and heart disease, vaccinations like flu and pneumonia shots, and bone density tests. Getting these preventive services early can catch health problems before they become serious and expensive to treat.

Medical equipment coverage under Part B includes items prescribed by your doctor: wheelchairs, oxygen equipment, diabetic supplies, and walkers. You'll typically pay 20% of the approved amount after your deductible. Durable medical equipment suppliers must be Medicare-approved to ensure the equipment meets quality standards.

Mental health treatment is covered under Part B at the same 80/20 split as other medical services. This includes visits with psychiatrists, psychologists, clinical social workers, and nurse specialists. Given that depression and anxiety affect many older adults, this coverage is a significant part of comprehensive healthcare.

It's worth noting that you're not required to enroll in Part B when you turn 65. You can delay enrollment if you're still working and covered by your employer's health insurance. However, if you delay beyond your initial enrollment period without an employer plan, you'll pay a lifelong penalty of 10% per year on your Part B premium.

What to take away: Part B covers outpatient care with an 80/20 cost split. Preventive services are free after your deductible, making them a good reason to schedule annual checkups.

Part C and Part D: Medicare Advantage and Prescription Drug Coverage

Part C, called Medicare Advantage, is an alternative to original Medicare. Instead of receiving coverage through the federal government, you enroll in a private insurance plan that contracts with Medicare. These plans must cover everything that original Medicare Part A and B cover, but they often include additional benefits like dental, vision, or fitness programs.

Free Guide to Managing Your Monthly Bill Payments →

Medicare Advantage plans operate with different cost structures than original Medicare. Rather than paying a 20% coinsurance for services, these plans use copays and deductibles similar to employer health insurance. For example, you might pay a $25 copay for a doctor visit instead of 20% of the cost. Many Medicare Advantage plans have lower or zero monthly premiums, though you still pay your Part B premium to Medicare.

The tradeoff with Medicare Advantage plans is restricted networks. You typically must see doctors and use hospitals within the plan's network, except in emergencies. If you have established relationships with specific doctors or specialists, you'll want to verify they're in the plan's network before enrolling. Some plans offer out-of-network coverage but at higher costs.

Medicare Advantage plans also have out-of-pocket maximums, a cap on what you'll pay in a year for covered services. Once you reach this limit, the plan pays 100% of covered services for the remainder of the year. Original Medicare doesn't have an out-of-pocket maximum, which is why many people purchase supplemental insurance instead of choosing Medicare Advantage.

Part D covers prescription medications through private insurance plans. You can add Part D to original Medicare, and it's automatically included if you choose a Medicare Advantage plan. Part D plans vary significantly in which drugs they cover and at what cost, so comparing plans annually is important since your medications might fall into different price tiers.

Part D coverage has a structure called the "donut hole" or coverage gap. In 2024, you pay full price for drugs once you've spent $5,850 on covered drugs. Then there's a gap where you pay about 25% of drug costs until your out-of-pocket spending reaches $7,550, at which point catastrophic coverage kicks in and you pay a small copay for the rest of the year. Understanding this gap can help you plan medication refills strategically.

Many people qualify for Part D subsidies if their income is low enough