Medicare is the federal health insurance program primarily for Americans age 65 and older. Signed into law in 1965, Medicare currently covers more than 65 million people. Aimed at retirement-age people, it helps make health coverage more affordable and less costly than private health insurance. There are no monthly premiums for many Medicare recipients, specifically those who are eligible for Social Security benefits.
There are four different types of Medicare. Medicare Part A, also called hospital insurance, covers inpatient care; Medicare Part B, also called medical insurance, covers outpatient care. Together, they make up Original Medicare.
Medicare Part C, commonly referred to as Medicare Advantage, is an alternative to Original Medicare. Participants get many of the same benefits of traditional Medicare and more (like dental and vision, for example). Coverage is provided by private health insurers approved by the program. Medicare Part D is a prescription drug plan.
Medicare is not the same as Medicaid, a jointly funded state and federal health insurance program for vulnerable and low-income Americans in need of affordable care. (Learn about the differences between Medicare vs Medicaid or see a state-by-state Medicaid guide.) Additionally, while Medicare is typically used by older people, anyone living with certain permanent disabilities may be eligible to get Medicare as well.
While Medicare is often premium-free — beneficiaries will pay deductibles and coinsurance for certain parts of this program.
If you’re already confused, don’t worry. We’ll go into more details about all things Medicare.
Medicare history and background
Medicare was created in 1965 to help elderly Americans pay for health care. At that time, U.S. residents relied almost solely on employers for coverage. These days the majority of Americans still get health coverage through employer-sponsored insurance, but there are alternatives to getting care.
The Medicare program is administered by the Centers for Medicare and Medicaid Services (CMS) and funded by two trusts held by the U.S. treasury — the Hospital Insurance (HI) Trust Fund and Supplementary Medical Insurance (SMI) Trust Fund. These trusts are maintained by taxpayer dollars and premiums paid by Medicare beneficiaries.
Learn more about how Medicare is funded.
Who is eligible for Medicare?
Americans age 65 years old or over automatically qualify for Medicare. Permanent residents of the same age may be eligible as well. Americans under 65 are eligible for Medicare if they are receiving Social Security Disability Insurance (SSDI) for at least 24 months.
Younger Americans with end stage renal disease (permanent or terminal kidney failure) or Lou Gehrig’s disease (amyotrophic lateral sclerosis, or ALS) are also eligible for the federal program.
Type of Medicare | Coverage | Required | Cost |
|---|---|---|---|
Medicare Part A | Hospital care | Yes | Usually no premium. Some procedures require deductible, copay, or coinsurance |
Medicare Part B | Outpatient care | Yes, but can delay | Premium, low deductible, coinsurance |
Medicare Part C | Hospital + outpatient care and more | No | Varies by plan |
Medicare Part D | Prescription drug plan | No, if you have prescription drug coverage | Varies by income and plan |
Medigap | Out-of-pocket costs for Part A and B | No | Premium, deductible, copay |
How do I apply for Medicare?
If you’re 65 and getting Social Security or Railroad Retirement Board benefits, you will be automatically enrolled in Original Medicare (Parts A and B). You can expect your card in the mail three months prior to your 65th birthday.
If you’re 65 and not getting Social Security or Railroad Retirement Board benefits, you’ll need to enroll. You can start signing up when you are 64 years and 9 months old, the start of your seven-month initial enrollment period. It ends three months after your 65th birthday. For example, if your birthday is May 1, then your initial enrollment period is Jan. 1 to July 31. After that, you may need to wait until the next Medicare Open Enrollment period. Medicare Open Enrollment starts Oct. 15, 2023.
Coverage starts on July 1 of the year you enroll. You can apply for Medicare via online application, by visiting your local Social Security office, or calling Medicare at 1-800-772-1213.
You don’t need to reapply for Medicare each year. You can review and change coverage each Open Enrollment period. (Medicare Open Enrollment is separate from Open Enrollment for individual marketplace plans). If you made any changes to your Medicare coverage during this time, those changes take effect on Jan. 1.
Here is a step-by-step guide on how to apply for Medicare.
How much does Medicare cost?
The cost of Medicare varies based on a few factors, including your income, and depends on which part you’re getting. Each type of Medicare has different costs and cost structure.
Most people get Medicare Part A premium-free. This happens when you’ve worked for at least 10 years and paid Medicare taxes, a federal tax that is often automatically deducted from your paycheck. If you don’t qualify for free Part A, you can still get Medicare — you’ll just have to pay a monthly premium.
Additionally, Medicare recipients are responsible for paying a deductible for each benefit period. The deductible is how much you need to spend on out-of-pocket expenses before health insurance begins to cover your medical expenses. You’ll also be responsible for different levels of copayments.
Everyone pays a premium for Medicare Part B. The amount varies, depending on your annual wages.
The cost of Medicare Advantage (Medicare Part C) varies by plan, since it’s offered by private insurers. The cost of Medicare Part D varies by income and plan. Individuals and families with higher income will pay a little bit more.
Learn more about different costs of health insurance, including premiums, deductibles, coinsurance, and copays.
Medicare-approved amount
Medicare helps make health coverage more affordable. Medicare sets an amount to pay a doctor or hospital, called the Medicare-approved amount. When you see a doctor or stay in a hospital that accepts Medicare, they will charge for a service. However the cost of the services may be more than the Medicare-approved amount. You will be responsible for part of this difference, which will be smaller than if you had not had coverage.
Four parts of Medicare
Most Part A recipients don’t pay a premium, but there is a deductible and copay for hospital stays. Medicare Part A and Medicare Part B make up Original Medicare.
Medicare Part A
Medicare Part A is hospital insurance. It covers inpatient care at the following:
Hospital
Skilled nursing facility
Hospice
Home health services
You’ll need a doctor-approved stay for at least two nights. Once you meet a deductible for the benefit period, the first 60 days of your stay at a hospital are generally free. (For 2023, the Medicare Part A deductible is $1,600.) After that, you may have to pay a daily coinsurance cost for each day you remain in the hospital.
While you are receiving care for an extended period of time, this is not considered long-term care which typically refers to non-medical personal care you receive when you have a chronic illness or disability. Long-term care services covered by Medicare Part A must be medically necessary.
Learn more about Medicare Part A, including the costs.
Medicare Part B
Medicare Part B is medical insurance. It covers
Doctor’s visits for outpatient care
Lab services and X-rays
Ambulance services
Recipients pay a monthly premium, which may increase a little depending on your latest income tax filing. In 2023, the minimum Medicare Part B premium is $164.90. There is also a $226 deductible and 20% coinsurance.
Learn more about Medicare Part B.
Medicare Part C (Medicare Advantage)
Medicare Advantage Plans are offered by private health insurers through the Medicare program. Some recipients opt for one of these plans to augment health coverage or lower their out-of-pocket costs. For example, a Medicare Advantage plan might include dental and vision coverage. You have to enroll in Original Medicare first to sign up for Medicare Advantage — which means you’re still paying a Medicare Part B premium in addition to Part C premiums. These vary by plan.
Learn more about Medicare Part C.
Medicare Part D
Medicare Part D is prescription drug coverage provided by approved private insurers. Enrollment is voluntary. Costs vary by insurer and also your income. Medicare rates all participating prescription drug plans on a scale of 1 to 5. The higher the number, the higher the plan’s quality.
Learn more about Medicare Part D.
Medigap
Medigap is supplemental Medicare insurance. You can get a Medigap policy from private insurers to help cover out-of-pocket health care expenses incurred through Original Medicare, like your premiums, copays and deductibles. A Medigap plan does not cover any costs associated with Medicare Part C and Medicare Part D.
Learn more about how to get a Medicare Supplement coverage (Medigap).
Paying Medicare out-of-pocket expenses
If you find that Medicare expenses are too costly, you might be able to get some financial assistance. Medicare offers a few ways to save on health costs if you are low-income.
Medicare Savings Program
A Medicare Savings Program can help pay for premiums, deductibles, copays and coinsurance for Medicare Parts A and B. (These programs don't work in tandem with Medicare Part C.)
Eligibility for a Medicare Savings program is largely dictated by income and assets. Specific requirements can vary by state and you must apply through your state's Medicaid office to see if you qualify for one of the four available programs.
Medicare Extra Help
Low-income Medicare beneficiaries can also apply for Extra Help, a program that helps pay Medicare prescription drug costs covered under Part D. You can apply for this program through the Social Security Administration's website.
