What is Medicare? The whole program in one page

Medicare is the federal health insurance program for Americans aged 65 and over, and for some younger people with qualifying disabilities or end-stage renal disease. It has been running since 1965, it covers tens of millions of people, and almost everyone arrives at it confused — because it is not one plan, it is four parts that you assemble into an arrangement, and the assembly is left to you.

This page is the orientation. If you read nothing else before your 65th birthday, read this.

Who runs Medicare, and who runs your plan

Medicare itself is administered by the Centers for Medicare & Medicaid Services, a federal agency. Enrollment is handled by the Social Security Administration, which is why you apply for Medicare through Social Security rather than through CMS.

Private insurance companies enter the picture in three places, and this is where most of the confusion starts:

• Medicare Advantage plans (Part C) are sold by private carriers who are paid by Medicare to administer your benefits.
• Part D prescription drug plans are sold by private carriers and regulated by Medicare.
• Medicare Supplement (Medigap) policies are sold by private carriers and are standardised by federal law.

So when someone says “I have Medicare,” they might mean any of several quite different arrangements. Sorting out which one you have — or want — is the whole exercise.

The four parts, briefly

Parts A and B together are called Original Medicare. That is the government program in its base form. Part C — Medicare Advantage — is not an addition to Original Medicare; it is a different way of receiving the same underlying benefits, through a private carrier with a network.

There is a fuller treatment in Medicare Parts A, B, C and D explained.

The gap nobody warns you about

Original Medicare is genuinely good insurance with one significant flaw: there is no annual limit on what you can spend.

Part B pays 80 percent of the Medicare-approved amount for covered services after you meet an annual deductible. You pay the other 20 percent. There is no ceiling on that 20 percent. For a year of ordinary care that is a manageable number. For a year involving a serious diagnosis, a long hospitalisation or a course of infusions, it is not.

Every product sold alongside Medicare exists to address this. A Medigap policy pays that 20 percent for you. A Medicare Advantage plan replaces the whole cost-sharing structure with copays and imposes a hard annual out-of-pocket maximum. Neither is universally correct. Which suits you depends on your doctors, your prescriptions, how much you travel and your budget — the subject of Medicare Advantage vs Medigap.

The two decisions at 65

Almost everything about Medicare can be revisited during a later enrollment period. Two things cannot, and both land within a few months of your 65th birthday.

The first decision is Part B timing. If you are not covered by creditable employer insurance and you miss your Initial Enrollment Period, you pick up a premium penalty that increases with every full twelve months you were eligible and not enrolled, and it stays with you for as long as you have Part B.

The second is your Medigap window. For six months from the date your Part B coverage starts, a Medicare Supplement carrier must sell you any policy it offers, at its standard rate, regardless of your health history. Once that window closes, in most states the carrier can ask about your conditions and decline you. If a Medigap plan is right for you, this is when to buy one.

Both are covered in detail in Medicare enrollment periods and deadlines, and our enrollment window checker will work out your specific dates from your date of birth.

What Medicare does not cover

This list surprises people every year:

• Routine dental care — cleanings, fillings, extractions, dentures
• Routine vision care — eye exams for glasses, and the glasses themselves
• Hearing — routine exams and hearing aids
• Long-term custodial care — help with daily living over months or years
• Most care outside the United States
• Cosmetic surgery, and most alternative medicine

Some of these can be covered by a Medicare Advantage plan’s supplemental benefits, or by a standalone dental, vision and hearing policy. Long-term custodial care is a separate planning problem entirely, and one worth raising early rather than late.

What it costs

Most people pay nothing for Part A, because they or a spouse paid Medicare payroll taxes for at least forty quarters. Part B carries a standard monthly premium that is higher for people above certain income thresholds — the income-related monthly adjustment amount, or IRMAA — plus an annual deductible.

Beyond that, your costs depend on the arrangement you build:

• Original Medicare + Medigap + Part D: Part B premium, Medigap premium, Part D premium, and very little at the point of care.
• Medicare Advantage: Part B premium, often a $0 plan premium, and copays as you use services up to the plan’s out-of-pocket maximum.

The full picture, including IRMAA thresholds and how the Part D cap works, is in what Medicare costs.

Where people go wrong

After several hundred of these conversations, the same handful of mistakes account for most of the damage:

1. Assuming employer coverage is creditable without checking. It usually is at employers with 20 or more employees. At smaller employers, Medicare typically becomes the primary payer at 65, and delaying Part B leaves you exposed for most of your costs.
2. Enrolling from a mailer or a television advertisement without anyone checking whether your doctors are in the network or your prescriptions are on the formulary.
3. Letting the Medigap window close while thinking it over, then discovering that the decision has become permanent.
4. Skipping Part D because you take no medication, and picking up a lifetime penalty for the privilege.
5. Never opening the Annual Notice of Change that arrives each September, and finding out in February that a prescription moved to a higher tier.

None of these are exotic. All of them are avoidable with one conversation.

What to do next

If your 65th birthday is more than six months away, read the turning 65 checklist and put a note in your calendar.

If it is closer than that, work out your dates with the enrollment window checker, then call us. There is no fee for the conversation, and there is no obligation to buy anything at the end of it — we are paid by whichever carrier you eventually choose, and paid nothing at all if the right answer is that you already have what you need.