Medicare Explained
Medicare can seem complicated at first, but understanding the basics is the first step to making informed decisions about your healthcare coverage. This guide breaks down everything you need to know — from the different parts to costs and financial assistance options.
What Is Medicare?
Medicare is a federal health insurance program administered by the Centers for Medicare & Medicaid Services (CMS). It was established in 1965 to provide health coverage for Americans who need it most.
Who Qualifies?
- •People age 65 or older
- •Certain younger people with disabilities who receive Social Security disability benefits
- •People with End-Stage Renal Disease (ESRD) or ALS (Lou Gehrig's disease)
Parts of Medicare Cheat Sheet
| Part | Name | What It Covers |
|---|---|---|
| A | Hospital Insurance | Inpatient hospital stays, skilled nursing, hospice, home health |
| B | Medical Insurance | Doctor visits, outpatient care, preventive services, medical equipment |
| C | Medicare Advantage | All-in-one alternative to Original Medicare from private insurers |
| D | Prescription Drug Coverage | Prescription medications through private plans |
Hospital Insurance
Coverage for inpatient and facility-based care
What It Covers
- checkInpatient hospital stays (semi-private room, meals, nursing care)
- checkSkilled nursing facility (SNF) care following a qualifying hospital stay
- checkHospice care for terminal illness
- checkHome health care (limited)
2025 Costs
- Premium: $0 for most people (if you or your spouse paid Medicare taxes for 10+ years)
- Deductible: $1,676 per benefit period
- Coinsurance: $0 for days 1–60; $419/day for days 61–90; $838/day for lifetime reserve days
Medical Insurance
Coverage for doctor visits and outpatient care
What It Covers
- checkDoctor and specialist visits
- checkOutpatient procedures and surgeries
- checkPreventive services (screenings, vaccines, annual wellness visits)
- checkDurable medical equipment (wheelchairs, walkers, oxygen)
- checkAmbulance services, mental health care, and some home health care
2025 Costs
- Premium: $185/month (standard); higher for those with higher incomes (IRMAA)
- Deductible: $257/year
- Coinsurance: Typically 20% of the Medicare-approved amount after deductible
Medicare Advantage
All-in-one alternative to Original Medicare
Medicare Advantage plans are offered by private insurance companies approved by Medicare. They provide an alternative way to receive your Medicare benefits — bundling Parts A and B (and usually Part D) into a single plan.
What It Often Includes
- checkEverything in Part A and Part B
- checkPrescription drug coverage (Part D)
- checkExtra benefits: dental, vision, hearing, fitness programs
- checkOver-the-counter (OTC) allowances, transportation, and more
Types of MA Plans
- HMO: Requires using in-network providers and referrals for specialists
- PPO: More flexibility to see out-of-network providers at higher cost
- PFFS: Private Fee-for-Service plans with per-service payment terms
- SNPs: Special Needs Plans for people with specific conditions or circumstances
Tip: Medicare Advantage plans often have network restrictions. Make sure your doctors and preferred hospitals are in the plan's network before enrolling.
Prescription Drug Coverage
Coverage for outpatient prescription medications
Part D helps pay for prescription drugs you take at home. It's offered through private insurance companies — either as a standalone plan (PDP) paired with Original Medicare, or included in a Medicare Advantage plan (MAPD).
Coverage Phases
- Deductible: You pay the full cost until you meet your plan's deductible
- Initial Coverage: You pay copays or coinsurance until total drug costs reach a threshold
- Coverage Gap: Historically the "donut hole" (now largely eliminated)
- Catastrophic Coverage: After reaching out-of-pocket limit, you pay a small amount
2025 Update: Thanks to the Inflation Reduction Act, there's now a $2,000 annual out-of-pocket cap on Part D drug costs.
Tip: Always check a plan's formulary (list of covered drugs) before enrolling to make sure your medications are covered and at what tier.
How the Parts Work Together
Original Medicare
Part A + Part B
You can add Part D for prescription drugs and Medigap (Medicare Supplement) for help with out-of-pocket costs.
Pros: See any Medicare-accepting provider nationwide, no referrals needed.
Medicare Advantage
Part C (includes A + B, often D)
Bundles everything into one plan, often with dental, vision, hearing benefits and fitness programs.
Pros: One card, extra benefits, out-of-pocket limits.
Important: You cannot have a Medigap policy and a Medicare Advantage plan at the same time.
Costs of Medicare (2025)
| Cost Type | 2025 Amount |
|---|---|
| Part A Premium | $0 for most people (up to $518/mo if paying) |
| Part A Deductible | $1,676 per benefit period |
| Part B Premium | $185/month (standard) |
| Part B Deductible | $257/year |
| Part B Coinsurance | 20% of Medicare-approved amount |
| Part D Premium | Varies by plan |
| Part D Out-of-Pocket Cap | $2,000/year (new for 2025) |
About IRMAA: If your modified adjusted gross income is above a certain threshold, you'll pay higher Part B and Part D premiums. The Social Security Administration uses your tax return from 2 years ago to determine if you owe extra.
Financial Assistance Programs
Help is available if you have limited income or resources
Extra Help (Low Income Subsidy)
A federal program that helps pay Part D premiums, deductibles, and copays. Based on income and resources. Can save $5,000 or more per year.
Medicaid
A joint federal-state program for people with limited income. Covers costs Medicare doesn't, may cover long-term care. Eligibility varies by state.
Medicare Savings Programs (MSPs)
State programs that help pay Medicare premiums and other costs. Includes QMB, SLMB, QI, and QDWI programs for qualifying individuals.
SHIP
State Health Insurance Assistance Program — free, unbiased Medicare counseling available in every state to help you understand options.
Enrollment & Eligibility
When You Become Eligible
- •Age 65: Eligible starting 3 months before your 65th birthday
- •Disability: After 24 months of receiving Social Security disability benefits
- •ESRD: When you need dialysis or a kidney transplant, regardless of age
- •ALS: Immediately upon diagnosis (no waiting period)
Automatic vs. Active Enrollment
Automatic: If you're already receiving Social Security benefits when you turn 65, you'll be automatically enrolled in Parts A and B.
Active: If you're not receiving Social Security, you'll need to actively sign up during your Initial Enrollment Period.
Need Help Understanding Your Options?
Our licensed agents are here to guide you through the process — at no cost to you.