Medicare Coverage Basics: What You Need to Know

Introduction: What Is Medicare?

Medicare is a federally run health insurance program that serves seniors (age 65 and up). The program also covers people of any age who are permanently disabled or who have end-stage renal disease (people with kidney ailments requiring dialysis or a kidney transplant) or Lou Gehrig’s disease (ALS).

Medicare insures more than 66 million Americans and, as of 2023, spent more than $1 trillion a year on their care. Medicare is an entitlement program, meaning it is not based on financial need.

Each year, Medicare issues a comprehensive handbook detailing all aspects of the program.

Is Medicare Free?

Many believe Medicare is provided at no cost, but this is not accurate. Although Medicare was originally conceived as a program that would relieve seniors of the burden of paying for health care, Medicare beneficiaries now pay a greater percentage of their incomes for out-of-pocket health care expenses than they did before Medicare was enacted in 1965.

In addition to paying a monthly premium, Medicare recipients often must pay a portion of the cost of the services they receive in the form of a deductible or coinsurance amounts. Deductibles, coinsurance, and premiums typically increase each January.

Many services and items, such as long-term unskilled nursing home or in-home care, are not covered by Medicare. To help with this cost-sharing and the items that Medicare does not cover, Medicare beneficiaries often purchase private insurance policies called Medigap policies.

Generally, Medicare pays only for “acute” care – care that the program views as reasonable and necessary to diagnose or treat an illness or injury. It does not pay for most preventive care or unskilled care to treat chronic conditions.

What Are the Different Parts of Medicare?

Medicare consists of four major programs:

• Part A, which covers hospital stays;
• Part B, covering physician fees;
• Part C, which permits Medicare beneficiaries to receive their medical care from among a number of delivery options; and
• Part D, which covers prescription medications.

Medicare Part A

Sometimes referred to as hospital care or hospital insurance, Medicare Part A covers inpatient health care costs. This includes inpatient hospitalization, rehabilitation services, skilled nursing facility services, and aspects of home hospice care. (Together, Part A and Part B comprise what is often called Traditional, or Original, Medicare.)

Eligibility for Part A begins at age 65. If you currently receive Social Security retirement or disability benefits, your enrollment in Part A is automatic.

The costs for Medicare Part A in 2025 are as follows:

• Monthly Part A premium = $0 for most people (those who have paid into Social Security during their employment for at least 10 years)
   
• Annual inpatient hospital deductible = $1,676
   
• Coinsurance for hospital stay
  • Days 1 to 60 = $0
  • Days 61 to 90 = $419 per day
  • Days 91 onward = $838 per day
• Coinsurance for skilled nursing facility
  • Days 1 to 20 = $0, after an inpatient hospital stay of at least three days
  • Days 21 to 100 = $209.50 per day

Medicare Part B

Medicare Part B focuses on outpatient medical care and preventative care. It covers a range of outpatient surgeries, cognitive assessments, medically necessary treatments, medical equipment such as walkers, and vaccinations; an initial Welcome to Medicare health visit; and an annual wellness visit. (As mentioned above, Part A and Part B together make up Traditional, or Original, Medicare.)

You become eligible for Part B when you are 65. As with Part A, if you are receiving Social Security retirement or disability benefits, your enrollment in Part B is automatic. (If you are still working and have an employer or union group health insurance plan, you may not need to enroll immediately. However, beware of the late enrollment penalty.)

Costs for Medicare Part B in 2025 include:

• Monthly Part B premium = $185
• Annual Part B deductible = $257

Medicare Part C

Medicare Part C, also known as Medicare Advantage or managed care, is an alternative to Traditional Medicare (Parts A and B). Part C plans are offered by private insurers that contract with Medicare, so the coverage benefits – as well as the costs – will vary according to the specific Medicare Advantage plan you choose.

If you have Medicare Parts A and B (Traditional Medicare), you do have the option to join a Medicare Advantage (Part C) plan instead. However, once enrolled in a Medicare Advantage plan, you can change your plan only at certain times of the year. (For more information, refer to the section below titled When You Can Sign Up for Medicare.)

Again, Part C costs may vary widely depending on the plan you select. Nationwide, the average monthly premium for a Medicare Advantage plan is currently $17 but can be as high as $200 or more a month. Out-of-pocket costs can also differ from one Medicare Advantage plan to the next.

Medicare Part D

Medicare Part D encompasses coverage for most prescription drugs. Although you may not yet rely on any prescriptions, you might in the future. So, consider enrolling in Part D prescription drug coverage when you are first eligible, as it’s possible you could face a permanent late enrollment penalty if you wait too long.

Part D is available only through private insurers. The monthly cost can vary, as there are various plan options available.

You can obtain Medicare drug coverage through Medicare Part D or you may find that it is included as part of your Medicare Advantage plan.

When You Can Sign Up for Medicare

Generally, once you turn 65 years old, you are eligible for Medicare coverage. Several months before your 65th birthday, you’ll receive a “Welcome to Medicare” packet that will outline the enrollment process.

Initial Enrollment Period

• Medicare’s Initial Enrollment Period will be your first chance to sign up for Medicare.
• This period is seven months long; it begins three months before your 65th birthday and remains open for you through the three months after you turn 65.
• If you do not sign up during your Initial Enrollment Period, you will have to wait until the General Enrollment Period or a Special Enrollment Period to sign up. (Continue reading for more information on these enrollment periods.)

Medicare Open Enrollment Period

• The Medicare Open Enrollment Period runs every year from October 15 to December 7. Changes made during this time take effect the following January 1.
• If you have already enrolled in Medicare, you can use this time to shop around and compare your current Medicare plan benefits with that of other plans. Changing plans is not required but could save you a major headache – and money. For example, you want to ensure that your preferred physicians and any prescription medications you take are still part of your current plan. If not, this may prompt you to change plans.

Medicare General Enrollment Period

• The Medicare General Enrollment Period runs from January 1 to March 31. If you missed the Initial Enrollment Period, you can sign up during this time for Medicare Part A coverage, Part B coverage, or both through the Social Security Administration (SSA).
• If you enroll in Medicare during this period, your coverage will begin the first day of the month after you enroll.

Medicare Special Enrollment Periods

• If you encounter specific life events, you may be able to enroll in certain parts of Medicare during a Special Enrollment Period, allowing you to forgo late enrollment penalties.
• Events that may make you eligible for a Special Enrollment Period include missing enrollment because you were facing a natural disaster, were incarcerated, or lost your coverage.

Medicare Advantage Open Enrollment Period

• This is different from the Medicare Open Enrollment Period outlined above. The Medicare Advantage Open Enrollment Period, which occurs annually from January 1 through March 31, applies if you have a Medicare Advantage plan and wish to change to a different Medicare Advantage plan or switch to Traditional Medicare.
• You are not required to make any changes during this period.
• Read more about entering and leaving Medicare Advantage plans in a related article.

Where to Find Help With Medicare

Numerous resources are available to address your questions regarding Medicare:

• Medicare.gov website, including its Plan Finder tool
• Call 1-800-MEDICARE (1-800-633-4227); for TTY users, 1-877-486-2048 (available 24/7, except some federal holidays)
• Medicare’s live online chat (available 24/7, except some federal holidays)
• SSA website or call 1-800-772-1213 (weekdays 8 a.m. to 7 p.m.)
• Your local State Health Insurance Assistance Program (SHIP) location, where you can connect with trained counselors providing objective, one-on-one guidance on your Medicare questions and issues; or call 1-877-839-2675
• An elder law attorney in your area