Medicare Basics


  • Medicare Basics

    Whether you’re new to Medicare or just looking for a refresher, you've come to the right place. For the next few minutes, we'll explore:

    • BulletWhat is Medicare
    • BulletWhat Medicare offers (and doesn't offer)
    • BulletWhat you should know before making a Medicare decision

    As the title indicates, we’re covering the basics here, but we also provide links to reliable sources if you need more detail.

    Click the arrow to the right to get started


    Medicare is a federal health insurance program created for individuals age 65 and older, as well as individuals with certain medical conditions or disabilities.

    Medicare is made up of parts. Each part provides a different type of health care coverage. Let's take a closer look at each of these parts, starting with Original Medicare: Part A and Part B.

  • Original Medicare

    The federal government provides Part A and Part B to help cover general health care services received from a qualified health care provider (such as a doctor or a specialist).

    Note: You must be enrolled in Original Medicare before you can sign up for add-on coverage or Medicare Advantage.

    Part A is hospital insurance. It helps cover:

    • BulletInpatient hospital care
    • BulletSkilled nursing facility
    • BulletHospice care
    • BulletHome health care

    Part B is medical insurance. It helps cover:

    • BulletDoctor visits
    • BulletAmbulance services
    • BulletDurable medical equipment

    What does it cost me?

    Part A and Part B have monthly

    , and
    . Most people don't pay the Part A premium, thanks to the Medicare taxes they paid while working. Everyone pays the Part B premium. This amount changes yearly and varies based on income. If you enroll late in Part B, you could have a penalty fee added. Plus, there is no limit on what you pay out of pocket with Orginal medicare

    What's not covered?

    While Original Medicare provides coverage for hospital and medical services, it doesn't cover everything.

    In general, Original Medicare pays for only 80% of covered health care costs. It's up to you to pay the remaining 20%.

    Plus, Original Medicare doesn't cover prescription drugs or other benefits such as vision, dental, or hearing services.

  • Additional Coverage

    Many choose to buy additional insurance to help cover the 20%. Some choose a Medigap plan and/or a Part D prescription drug plan, while others choose a Medicare Advantage plan.

    Let's take a closer look at additional coverage by starting with Medigap and Part D.

  • Add-on plans

    Medigap (also known as Medicare Supplement) and Part D prescription drug plans (PDP) work alongside Original Medicare. These plans are made available through private health insurance companies, although they are regulated by the government.

    In other words, you keep Original Medicare and add either (or both) of these for more comprehensive health care coverage.

    Medigap plans help pay your share of health care costs, such as

    , and
    . They also have their own monthly

    Part D prescription drug plans (PDPs) are stand-alone plans that help pay for medications you buy from a pharmacy or through a mail-order pharmacy service.

    PDPs have their own monthly

    , plus a yearly
    , and

    While Part D is technically "optional" add-on coverage, if you sign up late for a PDP, you'll face a permanent late enrollment penalty tacked on to your premium.

    If you decide to go the path of Original Medicare plus add-on coverage, sign up for Part D as soon as you become eligible.

    Part D plans may feature these pharmacy types as part of their network: Retail chain or big box store pharmacies, mail order, specialty pharmacies, and long term care pharmacies. These plans may also feature preferred pharmacies, where you pay a lower copayment for prescriptions—a real cost savings compared to paying for prescriptions elsewhere.

    What does it cost me?

    Health insurance companies set the prices for these types of coverage. Costs can be determined by things such as age, whether you use tobacco, and your location (ZIP Code).

    Original Medicare and supplemental plans aren't the only option available to you. There's one more we'll cover and that's Part C, also known as Medicare Advantage.

  • Medicare Advantage

    Health insurance companies provide Medicare Advantage plans that are regulated by the government. These plans are sometimes referred to as an "all-in-one" option. They combine Original Medicare services with benefits such as vision, dental, hearing, or prescription drug coverage.

    These plans don't replace Part A and Part B. You still need to enroll in Original Medicare before you enroll in a Medicare Advantage plan.

    Medicare Advantage comes in two flavors: Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs).

    Both HMOs and PPOs
    • Provide Part A and Part B benefits (hospital and medical insurance)
    • Typically offer prescription drug coverage
    • Have in-network provider and pharmacy networks
    • Require you to have Original Medicare and live in service area
    • Feature out-of-pocket maximums, unlike Original Medicare

    You must keep paying your Part B monthly premium; a Medicare Advantage plan’s monthly premium doesn’t replace the Part B premium.

    And here's how HMOs and PPOs differ in general:

    • No out -of-network provider or pharmacy coverage (except in medical emergencies)
    • Feature lower monthly premiums, copayments, and deductibles
    • Can sometimes require you to select a primary care physician (PCP)
    • Referrals required for in-network specialists
    • Cover out -of-network providers also but at a higher cost
    • Feature higher monthly premiums, copayments, and deductibles
    • Flexibility in seeing any in-network provider
    • No referrals for specialists required

    Other HMO/PPO considerations

    Before picking either an HMO or PPO Medicare Advantage plan, make sure the plan covers your area, the doctors you prefer to see, and the services you need. Find out the rules involved with emergency medical situations. Know your costs! What are the monthly

    , and
    ? Having a clear sense of these details will help you decide which is the better option for you.

    What does it cost me?

    Medicare Advantage costs and coverage can differ from plan to plan. Most plans have a monthly

    (although some are as low as $0),

    With a Medicare Advantage plan, you still have to pay your monthly Part B premium.

  • Choosing additional coverage

    While Medigap/Part D and Medicare Advantage help pay the health care costs Original Medicare doesn't cover, they differ quite a bit.

    We'll explain some of these differences to help you understand which Medicare coverage might be your best match.

    Choosing add-on plans means:

    Add-On Plans (Medigap/Part D)
    • Separate monthly premiums for Medigap and Part D
    • Limited out-of-pocket costs for hospital and medical care
    • No network restrictions seeing a doctor or going to the hospital
    • Extra benefits (dental, vision, hearing, etc.) purchased separately

    These may be good for those who:

    • BulletAre comfortable paying higher monthly premiums in order to limit out-of-pocket spending on health care
    • BulletWant the freedom to access doctors/hospitals throughout the US
    • BulletCan afford to buy extra benefits separately

    Picking a Medicare Advantage plan means:

    Medicare Advantage
    • Premiums as low as $0
    • A maximum out-of-pocket limit for hospital and medical care
    • Network restrictions for seeing doctors or going to the hospital
    • Prescription drug coverage and extra benefits are often included

    These may be good for those who:

    • BulletWant a lower monthly premium and are comfortable paying copays and deductibles for health care services
    • BulletAre comfortable seeking care within a defined provider network
    • BulletWant prescription drug coverage and extra benefits (dental, vision, hearing, etc.) included
  • Enrollment

    Let’s move on to another important topic: how (and when) you should sign up for Medicare.

    Most people become eligible to sign up for Medicare 3 months before and 3 months after their 65th birthday. As you near 65, you should ask yourself "Do I need Medicare coverage right now?"

    Some individuals may still have health insurance through an employer and want to continue that coverage. Others may be coming off their health insurance and need to switch to Medicare.

    If you plan to make Medicare your primary source of health insurance, you should enroll in Part A and Part B as soon as you become eligible and start considering the additional options we've covered.

    We recommend you contact Social Security to enroll in Part A and Part B and determine how you'll pay for it (usually the premiums are deducted from your Social Security check, although direct bill is another option).

  • Enroll in a plan

    Talk to a Medicare Advisor

    Learn more about Medicare

    Visit the Fidelity Learning Center

    Go to the Medicare website


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