How Medicare Works

Medicare Defined: Medicare is a federal program that offers health insurance to American citizens and other eligible individuals. The program is often called Original Medicare. It has two parts—Part A and Part B.

U.S. citizens and legal residents.
Legal residents must live in the U.S. for at least 5 years in a row, including the 5 years just before applying for Medicare.

You must also meet one of the following requirements:

  • Age 65 or older
  • Younger than 65 with a qualifying disability
  • Any age with a diagnosis of end-stage renal disease (ESRD) or amyotrophic lateral sclerosis (ALS).

Original Medicare

Part A covers inpatient hospital and skilled nursing care.

Part B covers doctor visits and outpatient care.

Private Medicare plans are optional and provide more coverage.
Medicare Advantage plans (Part C) combine Part A and Part B coverage. They often include drug coverage and other benefits you don’t get with Original Medicare.

Medicare prescription drug plans (Part D) help pay for medications. You can get a standalone Part D plan or get a Medicare Advantage plan that includes drug coverage.

Medicare supplement insurance (Medigap) helps pay some or all costs not paid by Original Medicare (deductibles, copays and coinsurance).

You can add coverage to Original Medicare or choose a Medicare Advantage plan instead.

Original Medicare

You may add a standalone Part D plan, a Medicare supplement plan or both to Original Medicare (Parts A & B).

Parts A + B

Parts A + B plus Part D prescription coverage

Parts A + B plus a Medicare supplement plan

Parts A + B plus both Part D prescription coverage and a Medicare supplement plan

Medicare Advantage

You may choose to get your benefits through a Medicare Advantage plan (Part C). Many plans come with built-in prescription drug coverage.

Part C with no drug coverage

Part C with built-in Part D prescription coverage

Part C plus a standalone Part D prescription coverage plan in limited circumstances

Medicare and many Medicare plans charge premiums—a fixed amount that you pay each month for your coverage.

You also pay a share of the cost for health care services you receive. There are three types of payments you may have:

Deductible: A set amount you pay out of pocket for covered services each year before Medicare or your plan begins to pay.

Copay: A fixed amount you pay at the time you receive a covered service. For example, you might pay $20 when you visit the doctor or $12 when you fill a prescription.

Coinsurance: A percentage of the cost for a covered service that you pay when you receive it. For example, Medicare might pay 80% of the covered service and the remaining 20% would be paid by you.