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Understanding Medicare: What This Guide Covers

Medicare is a federal health insurance program run by the Centers for Medicare & Medicaid Services (CMS). It primarily serves people age 65 and older, though some younger people with disabilities or specific conditions may also receive Medicare coverage. The program was established in 1965 and currently covers approximately 68 million Americans.

This informational guide explains how Medicare operates, what different parts of the program cover, and what out-of-pocket costs you might encounter. The guide does not determine who may receive Medicare or process any applications—those processes happen directly with Medicare and Social Security. Instead, this resource provides educational information to help you understand the program's structure and learn about options that may be available to you.

Many people find Medicare confusing because it has several different parts, each with different coverage rules and costs. Part A covers hospital stays, Part B covers doctor visits and outpatient care, Part D covers prescription drugs, and Part C (Medicare Advantage) is an alternative way to receive your Medicare benefits. Understanding what each part does helps you make informed decisions about your coverage.

The guide also explains how Medicare works with other insurance. Some people have employer coverage, Medicaid, or private insurance alongside Medicare. Others have neither and rely on Medicare alone. Your specific situation will affect which parts of Medicare you need and how much you might pay out of pocket.

Practical Takeaway: Before using this guide, write down what you already know about Medicare and what questions you have. This helps you focus on the sections most relevant to your situation. The guide's table of contents organizes information by topic so you can jump to sections that matter to you.

Medicare Part A: Hospital and Facility Coverage

Medicare Part A is the hospital insurance portion of the Medicare program. It covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home health services. Understanding Part A is important because hospital costs are among the highest healthcare expenses people face.

For inpatient hospital stays, Part A covers the cost of your hospital room, meals, nursing care, and necessary medical supplies while you are admitted as an inpatient. In 2024, Medicare beneficiaries pay a deductible of $1,632 for each hospital stay. After you pay this deductible, Medicare covers all covered hospital costs for days 1-60 of your stay. For days 61-90, you pay a daily coinsurance amount (currently $408 per day). Beyond day 90, costs increase further.

Skilled nursing facility care is covered for up to 100 days per benefit period if certain conditions are met. A benefit period begins the day you are admitted to a hospital as an inpatient and ends when you have not been an inpatient in any hospital or skilled nursing facility for 60 consecutive days. For the first 20 days, Medicare covers all approved costs. From days 21-100, you pay coinsurance (currently $204 per day in 2024).

Home health services may be covered if you meet certain conditions, including being homebound and receiving care from a Medicare-approved home health agency. These services might include nursing care, physical therapy, occupational therapy, and medical equipment. There is no deductible for home health services, and you typically pay nothing for covered services, though you may pay 20% coinsurance for durable medical equipment.

Hospice care is covered for people with a terminal illness expected to live six months or less. Medicare covers pain management, symptom management, counseling, and other supportive services. You typically pay little to nothing for hospice care, though you may pay small copayments for certain drugs and respite care.

Practical Takeaway: Keep records of any hospital stays or skilled nursing facility admissions, including the dates of admission and discharge. This information helps you understand what your deductible has covered and what your costs might be for future stays in the same benefit period. The guide includes worksheets to track this information.

Medicare Part B: Doctor and Outpatient Services

Medicare Part B covers medical services provided outside of a hospital setting. This includes visits to doctors and specialists, outpatient surgery, diagnostic tests, mental health services, and preventive care. Part B is optional coverage, but most people choose to receive it because it protects against very large medical bills.

In 2024, the Part B monthly premium ranges from $174.70 to $609 depending on your income level—higher earners pay higher premiums through a system called Income-Related Monthly Adjustment Amounts (IRMAA). After paying your premium, you also pay an annual deductible of $240. Once you meet the deductible, you typically pay 20% coinsurance for most services, and Medicare pays 80%.

The guide explains which services are covered and which are not. For example, Medicare Part B covers doctor office visits, lab tests, X-rays, and certain preventive services like mammograms and colonoscopies. However, services like routine dental care, vision exams for glasses, hearing aids, and routine foot care are generally not covered by Part B.

Preventive services covered by Part B include an annual "Welcome to Medicare" visit if you are new to Medicare, annual wellness visits, screenings for cancer and heart disease, vaccinations, and counseling services. Many of these services are covered with no cost-sharing after your deductible is met. Understanding what preventive services are available helps you make use of your coverage.

Mental health services are covered under Part B, including visits to psychiatrists, psychologists, clinical social workers, and nurse specialists. After meeting your deductible, you pay 20% coinsurance for these services. This is important because mental health needs often go unaddressed when people do not understand their coverage.

Practical Takeaway: Review the preventive services section of the guide and mark which ones you may need in the coming year. Many people do not use preventive services even though they are covered at little or no cost. Planning ahead helps you schedule these appointments before the end of the calendar year.

Medicare Part D and Prescription Drug Coverage

Medicare Part D provides prescription drug coverage through private insurance companies approved by Medicare. This coverage is important because prescription medications can be very expensive. Without Part D coverage, a single medication can cost hundreds of dollars per month out of pocket.

Part D coverage has several stages, and your costs change as you move through them. First, you pay the monthly premium set by your insurance plan. Next, you pay a deductible (currently up to $645 in 2024, though your plan may have a lower deductible). After meeting the deductible, you enter the initial coverage stage where you pay coinsurance or copayments while your plan pays its share.

If your drug costs reach a certain threshold ($4,850 in 2024), you enter the "coverage gap" or "donut hole" where your costs increase. During this stage, you pay a larger percentage of drug costs. However, the law provides that you receive a 25% discount on brand-name drugs and pay no more than 25% for generic drugs during the gap. Once your out-of-pocket costs reach $7,050 in 2024, you move to catastrophic coverage where you pay only small copayments for the rest of the year.

The guide includes information about how to compare drug plans and understand your coverage. Different plans cover different drugs, and your costs can vary significantly between plans. For example, one plan might charge $10 for a blood pressure medication while another charges $50 for the same drug. Taking time to compare plans can save hundreds of dollars annually.

Important details about Part D include when you can make changes to your coverage (generally during open enrollment in October-December) and what happens if you do not have Part D coverage when you first become eligible. If you go without creditable prescription drug coverage for more than 63 days, you may pay a lifetime penalty—a permanent increase to your premiums—when you eventually do enroll.

Practical Takeaway: Make a list of all current prescriptions, including the name, dosage, and quantity you use per month. Bring this list when comparing Part D plans. Most Medicare websites have tools that let you enter your medications and show you what different plans would charge for your specific prescriptions. This comparison takes 20-30 minutes but can reveal significant savings.

Medicare Advantage and Private Insurance Alternatives

Medicare Advantage, also called Medicare