Medicare, passed in the US in 1965, is a Federal government program that provides health care to the elderly (over 65), disabled (two years after first finding of disability), and those with End Stage Renal Disease (ESRD) that is dialysis-dependent. Contrary to those Americans who want “the government to keep their hands off my Medicare”, it is most definitely a government entitlement program that is run by the Federal Centers for Medicare and Medicaid Services (CMS), a part of the Department of Health and Human Services.

This section of the web site attempts to briefly and simply answer some of the most common Medicare questions. Some items are covered in much greater detail in other sections. 

Medicare is funded by payroll tax contributions from employers and employees and by general tax revenues. 

Medicare original consisted of Part A, hospital insurance, and Part B, medical insurance. This combination is now called “Original Medicare.” 

The program has been amended over the years and now includes, in addition to Parts A and B, Part C, Medicare Advantage Plans, and Part D, Prescription Drug Coverage. Part C is an alternative to Parts A and B and some Part C plans include prescription drug benefits. For the full spectrum of coverage, one needs Parts A and B and C, or Part C or (depending on the Part C plan selected) Part D.

Who Is Eligible for Medicare?

United States Citizens and lawfully admitted permanent residents are eligible for Medicare, provided that they have worked enough quarters in covered occupations to quality. Those who have fewer than 40 quarters of coverage can obtain Part A by paying a monthly premium of $274 if they have between 30 and 39 quarters and $499 per month if they have fewer than 30. 

If you are eligible for Part A, you are eligible for Part B. The Part B premium in 2022 for the vast majority of people is $170.10. (Some higher-income earners pay more.)

How Can One Enroll in Medicare?

If you are receiving Social Security, you are automatically enrolled when you turn 65. If not, you can apply online at www.medicare.gov. If you are automatically enrolled, you will be enrolled in Part A (hospital insurance) and Part B (medical insurance) at the same time. If you do not want Part B, you will have to contact Medicare to refuse it. To have Part C, one must also enroll in Part B. It is not necessary to enroll in Part B in order to have Part D.

Does Medicare Have an Out-of-Pocket Limit?

Original Medicare does not, and this is one of its biggest defects. Medicare Advantage Plans do have an out-of-pocket limit, which is set at no more than $7,550, although plans are allowed to offer lower limits. 

It is important to understand that in dealing with Medicare, the only way to definitely control one’s out-of-pocket costs is to enroll in a Medicare Advantage Plan. Original Medicare and Medigap plans simply do not have out-of-pocket limits.

Does Medicare Cover Care Outside the US?

Sadly, no. Your Medigap plan or Medicare Advantage Plans may, but are not required to. So you cannot get your care in Mexico and expect Medicare to pay for it.

Can One Have Medicare and Medicaid?

The answer is “yes.” People who have both programs are called “dual eligibles.” For them, Medicaid pays some of the costs of Medicare, and Medicare pays some of the costs of Medicaid. Dual eligible can enroll in Medicare Advantage Plans. 

Because Medicare is a Federal program and Medicaid is a state/Federal partnership program, the relationship can get complicated, and is highly dependent on one’s state of residence. 

Original Medicare, in the form the program was passed in 1965, was limited in what it would pay for – basically, Part A (hospital care) and Part B (80% of other medical care.) It excluded long-term nursing home care, extended rehabilitation, care outside the United States, and prescription drugs, to name just a few. 

In the intervening years, both the Federal government and the private sector developed enhancements to Medicare, all of which are regulated, but none of which are run, by the Federal government. These include:

• Medicare supplemental insurance, or “medigap” plans.
• Medicare Advantage Plans (“Part C” of Medicare.)
• Prescription drug coverage (“Part D” of Medicare.)

This website explains each of these. By way of introduction, medigap plans pay for some of what Medicare doesn’t pay for. There are a variety of them, and two of them have an out-of-pocket limit; the rest do not, meaning that even with the supplemental plan, care can be very expensive. 

Medicare Advantage plans all have an out-of-pocket limit, some require no additional premium over Part B, some offer additional benefits such as hearing, dental, vision, and prescription drugs. 

Prescription drug coverage, part D, is a standalone product that is intended to work with Parts A and B, or Medicare Advantage plans that do not offer prescription drugs. 

What Do They Cost?

As is true with U.S. healthcare in general, costs vary widely and wildly. Not all plans are available in all areas. For general purposes, the average premium for a medigap plan – keep in mind that they differ greatly in coverage – was $125.93 per month in 2019. However, in every state, one can find plans that are as low as 50% of the highest-cost plan. Of course, as always, you get what you pay for. 

 For Medicare Advantage Plans (remember, many have no premium) that average in 2020 ranged from $20 per month to $47 per month for those plans that had premiums, with plans that had more doctors generally having higher premiums. All Medicare Advantage plans require one to pay the $170.10 2022 Part B premium: some refund all or part of it. 

Part D Plans, in 2021, had an average premium of $40 per month. Keep in mind that these, too, vary widely in cost. 

The one general rule is that the more generous and more convenient the plan is, in terms of access to providers, the most expensive it is likely to be. 

If one wishes to go “bare bones” with only Part B, the cost will be $148.50 per month. The typical medigap plan plus Part B will be $274.43. Part D plus part B will be around $188.50 per month. On the other hand, one can find a Medicare Advantage Plan that includes prescription drugs and rebates the Part B premium. In that case, one gains $148.50 per month, or $1,782 dollars per year, over the cost of Original Medicare with only Part B. 

Medigap plans are standardized by the Federal government and state governments into several flavors. The current list runs from A through N with a lot of omissions, for a total of six. (Plan F, high-deductible Plan F, and Plan C were closed to new members after 01/01/2020.)

Please note that in some states, there are high-deductible versions of some plans available. These can save you money on premiums, but at the risk of higher out-of-pocket expenses.

Plan A

Medigap Plan A pays the following, after Original Medicare has paid the maximum for a particular episode of care:

• 100% of the Part A hospital deductible and the full amount of the copayment, and hospital costs, and for up to 365 days after Medicare Part A benefits are exhausted.
• 100% of Part B insurance copayment, with a few exceptions (see below).
• 100% of the cost of the first three pints of blood; and, 
• 100% of the Part A hospice coinsurance or copayment.

The Plan does not pay for:

• The Part A hospital deductible
• The Part B deductible.
• Part B excess charges.
• Skilled nursing facility coinsurance.
• Any charges for emergencies in foreign travel.

Plan B

Medigap Plan B pays the following, after Original Medicare has paid the maximum for a particular episode of care:

• 100% of the Part A hospital deductible and the full amount of the copayment, and hospital costs, and for up to 365 days after Medicare Part A benefits are exhausted.
• 100% of Part B insurance copayment, with a few exceptions (see below).
• 100% of the cost of the first three pints of blood; and, 
• 100% of the Part A hospice coinsurance or copayment.

The Plan does not pay for:

• The Part B deductible.
• Part B excess charges.
• Skilled nursing facility coinsurance.
• Any charges for emergencies in foreign travel.

Plan G

Medigap Plan G pays the following, after Original Medicare has paid the maximum for a particular episode of care:

• The full amount of the Part A hospital deductible and copayment, and hospital costs, and for up to 365 days after Medicare Part A benefits are exhausted.
• The full amount of the Part B insurance copayment.
• The full cost of the first three pints of blood; and, 
• The full amount of the Part A hospice coinsurance or copayment.
• Skilled nursing facility coinsurance.
• 80% of the charges for emergencies in foreign travel, up to the plan limits. 

The Plan does not pay for:

• The Part B deductible.

Please note that Plan G in some states offers a high-deductible version in which you pay Medicare-covered costs up to $2,370 in 2021 and a $250 deductible per year for expenses for emergencies during foreign travel. 

Plan K

Medigap Plan K pays the following, after Original Medicare has paid the maximum for a particular episode of care:

• 50% of the Part A hospital deductible and the full amount of the copayment, and hospital costs, and for up to 365 days after Medicare Part A benefits are exhausted.
• 50% of Part B insurance copayment.
• 50% of the cost of the first three pints of blood; and, 
• 50% of the Part A hospice coinsurance or copayment.
• 50% of the skilled nursing facility coinsurance.

The Plan does not pay for:

• The Part B deductible.
• Charges for emergencies in foreign travel.

Please note that Plan K has an out-of-pocket expense limit of $6,620 for 2022. This is one of only two Medigap plans (the other being Plan L) that has an out-of-pocket limit. 

Plan L

Medigap Plan L pays the following, after Original Medicare has paid the maximum for a particular episode of care:

• 100% of the Part A hospital deductible and the full amount of the copayment, and hospital costs, and for up to 365 days after Medicare Part A benefits are exhausted.
• 100% of Part B insurance copayment.
• 100% of the cost of the first three pints of blood; and, 
• 75% of the Part A hospice coinsurance or copayment.
• 75% of the skilled nursing facility coinsurance.
• 80% of the charges for emergencies in foreign travel. 

The Plan does not pay for:

• The Part B deductible.

Please note that Plan L has an out-of-pocket maximum of $3,310 for 2022.

Plan N

Medigap Plan N pays the following, after Original Medicare has paid the maximum for a particular episode of care:

• 100% of the Part A hospital deductible and the full amount of the copayment, and hospital costs, and for up to 365 days after Medicare Part A benefits are exhausted.
• 100% of Part B insurance copayment, with a few exceptions (see below).
• 100% of the cost of the first three pints of blood; and, 
• 100% of the Part A hospice coinsurance or copayment.
• 100% of the skilled nursing facility coinsurance.
• 80% of the cost of emergencies in foreign travel, up to the plan limits.

The Plan does not pay for:

• The Part B deductible.
• Part B excess charges.
• Skilled nursing facility coinsurance.

The Pain of Too Many Choices

One of the more interesting speculations about the stress of modern life is that part of it comes from having too many choices. One might add that, in the case of Medicare, it comes from having too many choices with too many consequences. The two main areas that might be affected by choice are finances and availability of care.

What You Can Choose From

Basically, there are three types of Medicare add-ons: Medigap insurance, Medicare Advantage Plans, and Part D prescription drug plans. To add to the confusion, some, but not all, Medicare Advantage plans include a prescription drug benefit. 

Medigap plans pay a portion, but not all, of what Medicare doesn’t pay, and may include a few additional benefits, such as out-of-country coverage (Medicare only works within US borders.) 

Medicare Advantage Plans’ additional benefits, which vary from plan to plan, are its biggest selling point, as is the full or partial refund of some of your Part B premiums. 

Part D prescription drug plans offer – you guessed it – prescription drugs.
 

You Get What You Pay For

…and you pay for what you get. Plans with higher premiums usually have lower deductibles and copayments. Plans that have a narrow provider panel may have cheaper premiums but may make it harder to get the care you need. In the end, only you and your Medicare insurance agent can balance all these factors to decide on the best plan for you.

What Are Your Biggest Concerns?

We can say a few things, based on experience with plans to date. Many health care consumer advocates say Medicare Advantage plans tend to ration care for beneficiaries with high costs. If you are one of those and you are worried about access, a Medigap plan with an out-of-pocket limit may be the best choice for you. On the other hand, if you are relatively healthy and want to make sure that your out-of-pocket costs are limited, a Medicare Advantage plan may be your best choice; all of them have out-of-pocket limits.

You May Pay a Zero Premium

If you don’t want to pay a premium, there are a number of Medicare Advantage plans that do not charge one. If you are relatively health but use a lot of prescription drugs, either a Medicare Advantage Plan with a drug benefit or a Medigap plan plus a Part D plan may be best for you.

Know Your Real Out-of-Pocket Expenses

It is important to keep track of your expenses during the year so that you have a realistic baseline to consider plan changes during the next open season. It is always better to work with real numbers if you have them. 

Want Extra Benefits?

If you want extra benefits such as dental, vision, hearing, or fitness, which are not included in Original Medicare, one of the many Medicare Advantage Plans should be your choice.