Medicare Insurance

How Medicare Works

Learning the Medicare lingo is the first step in understanding how Medicare works. There are lots of letters, plan names and new terms to understand. We want you to feel like you have a good grasp on Medicare so you can choose a plan that's right for you. This page will help you understand the common terms and how the different types of Medicare plans on the market compare to each other.

What's New for Medicare 2021

• The standard Part B premium is expected to increase from $144.60 per month in 2020 to $153.30 per month in 2021.
• Part B deductible is expected to increase slightly.
• Part A premiums, deductibles, and coinsurance will also be higher in 2021.
• Medicare Supplement plans C and F are no longer available for purchase by newly-eligible Medicare beneficiaries.
• The maximum out-of-pocket limit for Medicare Advantage plans is increasing to $7,550 for 2021.
• For Part D prescription drug plans, the maximum allowable deductible increased from $435 in 2020 to $441 in 2021. The out-of-pocket threshold (where catastrophic coverage begins) will increase to $6,550 in 2021, up from $6,350 in 2020. The Part D "donut hole" also was eliminated.
• Medicare has expanded Telehealth and Long Term Care options for 2021.
• Beginning in 2021, beneficiaries with End-Stage Renal Disease (ESRD) can now enroll in Medicare Advantage plans.

Defining Parts A, B, C and D

Medicare has four parts. Parts A and B are called Original Medicare. They're run by the federal government. Medicare Part C is called Medicare Advantage. You buy Medicare Advantage plans from private health insurance companies that contract with the government. They work with Original Medicare coverage. Part D covers prescription drugs. Many Medicare Advantage plans combine Parts A, B and D in one plan. And each Medicare plan only covers one person. Here's an overview of some of the things each part covers.

Part A Original Medicare

• Hospital care
• Skilled nursing facility care
• Hospice
• Home health care

Part B Original Medicare

• Doctor visits
• Mental health care
• Outpatient surgery
• Lab tests
• Medical equipment like wheelchairs and walkers

Part C Medicare Advantage

• Everything parts A and B cover
• Many plans cover prescription drugs
• Many plans cover dental and vision

Part D Prescription

• Prescription drugs

Original Medicare vs. Medicare Advantage

Medicare Advantage plans are popular because of their convenience. Most plans combine medical and prescription coverage on one card. Some offer dental and vision coverage, too. And you're able to predict your out-of-pocket costs better than you can with Original Medicare. When you have Original Medicare, you pay 20 percent of the cost, or 20 percent coinsurance, for most medical services covered under Part B. Medicare Advantage plans use co-pays more than coinsurance. Which means you pay a fixed cost. You might have a $15 copay for doctor office visits, for example. And with Medicare Advantage plans, you have an out-of-pocket maximum. That means once you spend a certain amount of money on health care each year, your plan pays 100 percent of the cost of services it covers. Original Medicare doesn't have this cap. So if you get really sick, you'll end up paying a lot.

Supplement Plans vs. Medicare Advantage

Medicare supplement, or Medigap, plans are another option. In a way, Medicare Advantage replaces Original Medicare and connects all the pieces together on one plan. Supplement plans don't replace Original Medicare. It's more like an extra you can add on top of Original Medicare. For example, your plan might pay the 20 percent coinsurance for doctor office visits. But if you go this route, you'll need to make sure you have prescription drug coverage. That means that if you don't have a Part D plan through an employer or union, you may face a penalty if you don't buy one on your own. And supplement plans don't come with the extra benefits you often get with Medicare Advantage, like dental and vision coverage.

How does Medicare Part D prescription coverage work?

Medicare Part D covers prescription drugs. You get it through a Part D prescription drug plan or through a Medicare Advantage plan. But it works differently from prescription coverage that comes with other health insurance plans. Medicare Part D prescription coverage has something called the coverage gap, or donut hole. The coverage gap is a stage in which you pay much more out of pocket for your prescription drugs. It's not based on a time period. It's based on how much you spend.