As a federal health insurance program, Medicare may be straightforward, but navigating its various components and supplemental options can be a challenge.
Generally, U.S. citizens and legal residents 65 and older are eligible for Medicare. People younger than 65 who receive Social Security Disability Insurance, or those with end-stage renal disease or ALS, also qualify. Medicare is made up of many different “parts.” Original Medicare constitutes Parts A and B. Part D, which covers prescription drugs, is optional, as is Medicare Supplement insurance, also called Medigap. Then there’s Medicare Advantage, often called Medicare Part C, a separate insurance plan that includes Parts A and B, usually Part D and other benefits.
“It can be a little daunting,” says Scott Salmon, an independent insurance agent who helps people figure out what Medicare plans best suit their needs. “What makes Medicare Advantage increasingly popular is the lower cost as well as the additional benefits not covered by Medicare.”
The biggest misconception about Medicare, he says, is that it’s free. It’s not. And Medicare alone doesn’t cover all health care expenses.
There’s no monthly premium for Medicare Part A, also known as “hospital insurance,” for people who have paid Medicare taxes in the United States for at least 10 years. But there’s a standard monthly premium for Part B – which covers doctor visits, emergency care and other medical services – that can cost several hundred dollars, depending on one’s income. Original Medicare only covers about 80% of health care expenses, excluding prescription drugs.
“If you don't have additional coverage, you're responsible for the remaining 20%, and there’s no cap,” Salmon says. “This could really expose you financially if you had a major medical issue.”
Here’s what you need to know about Medicare: when to sign up, how to make sense of the various parts, and the ins and outs of supplemental insurance, as well as Medicare Advantage.
When to sign up for Medicare
People are eligible to enroll in Medicare during a seven-month window called the “initial election period” around their 65th birthday – three months before, the month of, and three months after. However, those who have health insurance through their employer or their spouse’s employer (provided it’s a company with more than 20 workers) can continue with that existing coverage. After retirement, they have eight months to enroll in Medicare to avoid “late enrollment penalties” that continue in perpetuity.
People who are not employed or who work for a company with fewer than 20 employees generally must enroll in Medicare during the seven-month window of eligibility to avoid these fees.
Salmon says some people enroll in Medicare Part A at age 65 even if they won’t be using it because they still get health coverage through their employer, just to get in the system and avoid late enrollment penalties down the road.
Understanding Original Medicare: Parts A and B
Original Medicare comprises Parts A and B. Part A is for hospitalization, hospice and skilled nursing home care. Part B helps cover doctor visits, emergency care and routine outpatient hospital services, such as diagnostic tests and lab and radiology services. When someone enrolls in Medicare, they are enrolling in these two parts, which together cover about 80% of health care expenses, except for prescription drugs.
There is a monthly fee for Part B, which is typically deducted from one’s Social Security check. People who aren’t receiving Social Security are billed quarterly for their Part B premiums. The premium for Part B is based on standard adjusted gross income, which Medicare modifies every year.
Because Original Medicare only covers about 80% of health care expenses, most people opt for a supplemental insurance plan to cover the other 20%, Salmon says. Various insurance companies offer Medicare Supplement policies, with premiums typically determined by a person’s age and where they live.
Parts A and B and Medicare Supplement insurance still don’t cover prescription drugs outside of a medical setting. So, for example, anesthesia or chemotherapy drugs received while in the hospital are covered, but not the cholesterol medication or blood thinners you may take at home. Prescription coverage comes under a separate plan, known as Part D, sold by private carriers.
Even with a Medicare Supplement coverage plan, Original Medicare doesn’t include vision or dental benefits, which are sold separately.
What is Medicare Advantage?
Medicare Advantage is also a separate insurance plan – one that bundles Parts A and B, typically Part D drug coverage, as well as other ancillary benefits.
“Medicare Advantage is an all-in-one separate insurance plan option,” Salmon says. “All the top plans in L.A. have some form of routine dental, routine vision and hearing aid coverage included.”
Medicare Advantage plans may also offer additional benefits such as an over-the-counter allowance to cover the cost of vitamins, allergy medications and pain relievers; chiropractic and acupuncture treatments; transportation to and from medical visits; and gym memberships, he adds. Different plans offer different benefits.
The most common Medicare Advantage plans are of the HMO – or Health Maintenance Organization – variety, which uses a network of providers for services. The other option is PPO, or Preferred Provider Organization, which also relies on a network of providers, but allows for out-of-network visits for an additional cost.
Salmon explains the difference between the two options using a Major League Baseball analogy:
If you go with an HMO, “you’re now on the Dodgers,” who are part of the National League, he says, and your primary care provider is the manager. “If you’re going to see a specialist, you’re going to see a Dodger” through a referral from your primary care doctor, Salmon says. With a PPO plan, on the other hand, “you can see any doctor in the National League,” he says. “If you want to go to the American League, you’re going to pay more, because they’re out of network.”
People often mistakenly believe that Medicare Advantage plans are automatically PPOs, Salmon says. They can be, but you must choose that option when you sign up.
“People have to understand that when they sign up for a Medicare Advantage plan, they’re assigning their Medicare benefits – that Part A and B card from the government – to the plan they’re enrolling in,” Salmon says. “You’re agreeing to get all your care through that plan.”
Enrollment periods
Just like with medical insurance provided by an employer, there are limited times during the year when individuals can change their coverage or choose a different plan. Initial enrollment in Medicare and any additional plans, however, is timed to one’s 65th birthday or retirement from employer-provided insurance after age 65.
The Medicare annual enrollment period is Oct. 15 to Dec. 7, when people can join, drop or switch plans. People with Medicare Advantage can make changes during the Medicare Advantage open enrollment period from Jan. 1 to March 31.
People enrolled in Medicare Advantage or a standalone Part D drug plan should look out for a “big, thick booklet” called the Annual Notice of Change in their mailbox by the end of September, Salmon says. This document outlines the changes being made to plans each year. So, if the medication you need or the provider you love is no longer covered by your plan, you know to change things up during the open enrollment period.
“This is especially important for 2025, because of changes as a result of the Inflation Reduction Act for Medicare Part D,” Salmon says. “Be sure you read the Annual Notice of Change because there may be changes to your plan that impact your prescription drug coverage.”
The good news is you don’t have to navigate all this information alone. The services of a health insurance agent are free to consumers, Salmon says. Such agents can help individuals consider what combination of plans best suit their needs.
“Medicare can be confusing to navigate, but that’s why I’m here,” Salmon says, “to get straight to the point, answer questions and become a trusted adviser so people know they’re making the right decisions for themselves.”
