Learn About Medicare Rates and Coverage Options

Understanding Medicare: What It Is and How It Works

Medicare is a federal health insurance program run by the Centers for Medicare & Medicaid Services (CMS) that provides coverage to millions of Americans. As of 2024, approximately 67 million people have Medicare coverage. The program was created in 1965 under President Lyndon B. Johnson and has grown to become one of the largest insurance programs in the United States.

Medicare operates differently than private health insurance. Instead of being offered by insurance companies, it is a government-administered program funded through payroll taxes and general revenues. Workers and their employers contribute to Medicare throughout their working years through a tax on wages. This means the program is built on a contributory system where people help fund it during their careers.

The program has four main parts, each covering different types of care. Part A covers hospital stays, skilled nursing facilities, hospice care, and some home health services. Part B covers doctor visits, outpatient care, medical equipment, and preventive services. Part D covers prescription drugs, while Part C (Medicare Advantage) is an alternative way to receive Medicare benefits through private insurance companies. Understanding which parts cover what services helps people make informed decisions about their healthcare needs.

Medicare is available to people age 65 and older, regardless of income or health status. Some younger people with disabilities, end-stage renal disease, or amyotrophic lateral sclerosis (ALS) may also receive Medicare. The program does not cover all healthcare costs, which is why many people choose additional coverage options to help manage out-of-pocket expenses.

Practical Takeaway: Medicare has distinct parts covering different services. Learning what each part covers helps you understand what services have coverage and what costs you may face out of your own pocket.

Medicare Part A: Hospital and Facility Care Coverage

Medicare Part A is the hospital insurance portion of the program. It helps pay for inpatient hospital stays, including room and board, nursing care, medications given in the hospital, and meals. In 2024, Medicare Part A covers the full cost of hospital care after a patient pays an initial deductible, which was $1,632 for each benefit period. A benefit period begins the day you enter the hospital and ends 60 days after you leave without returning.

Part A also covers skilled nursing facility care when it follows a hospital stay. A skilled nursing facility is a facility that provides care beyond what can be given at home but does not provide the full range of services a hospital does. This might include physical therapy, wound care, or medication management. Medicare covers up to 100 days per benefit period in a skilled nursing facility. The patient pays nothing for days 1 through 20, then pays a daily coinsurance amount (set at $408 per day in 2024) for days 21 through 100.

Home health services are also covered under Part A when certain conditions are met. The person must be homebound or have a medical reason for being unable to leave home, need skilled care like nursing or therapy, and be under a doctor's care with a written plan of treatment. Part A covers the full cost of home health services with no deductible or coinsurance when using a Medicare-approved provider.

Hospice care is another Part A benefit for people with terminal illnesses. Medicare covers hospice services including doctor and nursing care, pain management, counseling, and medications related to the terminal condition. Patients typically pay little to nothing for hospice services, though they may pay small copayments for medications and respite care.

Practical Takeaway: Part A primarily covers facility-based and skilled care rather than routine doctor visits. Understanding what settings and situations Part A covers helps you prepare for potential out-of-pocket costs during hospital stays or extended care needs.

Medicare Part B: Doctor Visits and Outpatient Services

Medicare Part B is the medical insurance portion that covers services from doctors, nurse practitioners, physician assistants, and other healthcare providers. It pays for office visits, diagnostic tests, surgeries, emergency room care, and outpatient hospital care. Part B is optional, but most people choose to enroll because it covers many essential services that Part A does not.

In 2024, Part B has a monthly premium that varies based on income. For people with higher incomes, the premium is higher due to income-related monthly adjustment amounts. Most people pay $174.70 per month in 2024, though those with lower incomes may pay less. In addition to premiums, Part B has an annual deductible ($240 in 2024) and coinsurance amounts. After paying the deductible, patients typically pay 20% of the cost of services while Medicare pays 80%.

Part B covers preventive services at no cost, including an annual wellness visit, cancer screenings, cardiovascular disease screenings, and diabetes screenings. These preventive services are designed to catch health problems early when they may be easier and less expensive to treat. The annual wellness visit is a chance to review your health history, current medications, and health concerns with your doctor.

Durable medical equipment like walkers, wheelchairs, oxygen equipment, and diabetic supplies are covered under Part B. Mental health services, including therapy and psychiatric care, are also covered. Rehabilitation services such as physical therapy and occupational therapy are covered when medically necessary. Laboratory tests and imaging services ordered by a doctor are covered as well.

Practical Takeaway: Part B covers most routine doctor visits and outpatient services but requires you to pay premiums, a deductible, and coinsurance. Planning for these out-of-pocket costs helps you budget for healthcare expenses throughout the year.

Medicare Part D: Prescription Drug Coverage Options

Medicare Part D helps pay for prescription medications at pharmacies. It is administered through private insurance companies that contract with Medicare, which means there are many different Part D plans available, and coverage varies by plan and location. In 2024, approximately 32 million people had Part D coverage. The program was established in 2006 and has significantly changed how Medicare beneficiaries access medications.

Part D works through a coverage gap structure that typically includes different cost stages. When you first start using Part D, you pay a monthly premium and an annual deductible (which can vary by plan but was often around $405-$500 in 2024). After meeting the deductible, you enter an initial coverage phase where you pay coinsurance or copayments for drugs. Once you and your insurance have spent a certain amount on drugs together (around $4,700 in 2024), you enter a coverage gap sometimes called the "donut hole."

In the coverage gap, you pay a higher percentage of drug costs, though manufacturers provide rebates for brand-name drugs that reduce your out-of-pocket costs. Once your out-of-pocket costs reach a certain threshold (around $7,050 in 2024), you enter catastrophic coverage where Medicare pays most of the remaining costs for the year. These numbers change yearly, so checking your specific plan details is important.

Choosing a Part D plan requires reviewing the formulary, which is the list of drugs each plan covers. Different plans cover different medications, and some medications require prior authorization or step therapy before coverage begins. Because drug prices and plan offerings change annually, comparing plans each year during the annual enrollment period from October 15 to December 7 can help you find the plan with the lowest costs for your specific medications.

Practical Takeaway: Part D coverage varies significantly by plan and changes each year. Reviewing which medications your plan covers and understanding the coverage gap structure helps you anticipate pharmacy costs.

Medicare Part C: Medicare Advantage Plans and How They Differ

Medicare Part C, also called Medicare Advantage, is an alternative way to receive Medicare coverage. Instead of using the Original Medicare program (Parts A and B), you can choose a Medicare Advantage plan offered by a private insurance company that contracts with Medicare. These plans must cover everything Original Medicare covers, plus they often include additional benefits like vision, dental, and hearing care that Original Medicare does not provide.

In 2024, there were over 3,700 Medicare Advantage plans available to beneficiaries, with enrollment reaching approximately 28 million people—representing roughly 42% of all Medicare beneficiaries. These plans appeal to many people because they may offer lower monthly premiums than Original Medicare combined with supplemental coverage, and they often include dental and vision benefits.

Medicare Advantage plans typically have a network of doctors and hospitals you