Medicare

Medicare is the federal health insurance program created by Title XVIII of the Social Security Act. Its hospital coverage reaches three groups, set out at 42 U.S.C. 1395c: people aged 65 or over who are eligible for Social Security or railroad retirement benefits, people under 65 who have been entitled to those benefits on the basis of a disability for not less than 24 months, and people medically determined to have end stage renal disease. Amyotrophic lateral sclerosis is treated separately: 42 U.S.C. 426(h) removes the 24-month wait so entitlement begins with the first month rather than the twenty-fifth.

The single most useful thing to understand about Medicare is that it was never designed as one policy. Hospital coverage came first and carries the statutory name Hospital Insurance; outpatient coverage was a separate, voluntary program alongside it; private plan alternatives and drug coverage were added decades later. That history is why the program is described in parts, why they have different premiums and different enrollment rules, and why a beneficiary has assembly work to do rather than a single form to sign.

The parts, in one sentence each. Part A pays for inpatient hospital care, skilled nursing facility care after a qualifying hospital stay, home health services and hospice. Part B pays for physician and outpatient services, preventive care, laboratory work and durable medical equipment. Part D pays for outpatient prescription drugs through private plans. Part C, marketed as Medicare Advantage, is not additional coverage at all: it is a private plan that delivers the Part A and Part B benefits in place of the government, generally bundling drug coverage and applying its own network and prior-authorization rules.

The structural choice. A beneficiary either stays with Original Medicare, which pays any provider that accepts Medicare anywhere in the country but has no annual limit on what the beneficiary can be asked to pay, or takes a Medicare Advantage plan, which caps annual out-of-pocket spending but restricts which providers and which authorizations count. Because Original Medicare has no out-of-pocket maximum, most people who stay with it add two things: a Part D drug plan and a Medigap supplement. A Medigap policy is designed to work alongside Original Medicare and cannot be used to fill gaps in a Medicare Advantage plan. The comparison in full, including the supplement decision, belongs to the Medigap and Medicare Advantage entries.

Enrollment is automatic for some people and not for others, and the distinction matters more than almost any other administrative fact about the program. Under 42 C.F.R. 406.6, someone already entitled to monthly Social Security or railroad retirement benefits when they reach 65 needs to file nothing; the same is true after 24 months of disability benefits. Someone who reaches 65 without having claimed Social Security must apply. That is precisely the position of anyone deliberately delaying a benefit claim to 67 or 70, and it is the most commonly reversed sentence in consumer coverage of Medicare. Late enrollment is also not costless: a beneficiary who signs up later than required, without qualifying coverage in the meantime, can carry a premium surcharge for as long as they hold the coverage. The windows themselves, and the arithmetic of the surcharge, belong to the Medicare enrollment periods and late enrollment penalty entries.

Two boundaries worth stating plainly. Medicare is not Medicaid: Medicare eligibility turns on age, disability status and work record and is administered federally, while Medicaid is a joint federal and state program with income and, for some categories, asset tests. A person can qualify for both. And Medicare does not pay for long-term custodial care. It pays for a limited period of skilled nursing care after a qualifying hospital stay, which is a different thing from indefinite help with daily living; Medicaid is the primary payer for long-term care in the United States, and long-term care insurance exists to cover the same risk privately.

What each part does

• Part A, statutorily Hospital Insurance — inpatient hospital care, skilled nursing facility care following a qualifying inpatient stay, home health services, hospice. Premium-free for most people, because it was paid for through payroll taxes during working life.

• Part B — physician and outpatient services, preventive care, labs, durable medical equipment. Carries a monthly premium for everyone, and a higher one at higher incomes.

• Part C, Medicare Advantage — a private plan that delivers Part A and Part B benefits instead of the government, normally including drugs.

• Part D — outpatient prescription drugs, through private plans.

The one choice everyone makes

• Original Medicare — Parts A and B directly from the government, any participating provider nationwide, no cap on annual out-of-pocket spending. Usually paired with a Part D plan and a Medigap policy.

• Medicare Advantage — one private plan with a network, an annual out-of-pocket cap, and prior-authorization rules. Not combinable with Medigap.

What Medicare does not do

• It does not pay for long-term custodial care.

• Eligibility is not means-tested, and it is not Medicaid. Income affects what the outpatient and drug premiums cost, never whether coverage is available.

• It is not free, and Original Medicare has no out-of-pocket maximum.

A hypothetical, to show why two people the same age face different tasks. Ruth claimed Social Security at 64. About three months before her 65th birthday a Medicare card arrives without her doing anything, because she is already drawing a monthly benefit for the enrollment to attach to; her remaining decisions are whether to add drug coverage and a supplement, or to take a Medicare Advantage plan instead. Priya is the same age and is deliberately delaying Social Security to 70 to grow her benefit. Nothing arrives in her mail, and if she waits for it she will be late. Same birthday, same program, entirely different to-do list.

This entry deliberately carries no premium, deductible or coinsurance figures. Every one of them is reset by the Centers for Medicare and Medicaid Services each autumn, so the only reliable place to read a current amount is medicare.gov.

Strengths

• Coverage is guaranteed at 65 by statute regardless of health history, with no underwriting and no pre-existing condition exclusion.
• Part A is premium-free for the large majority of beneficiaries, having been prepaid through payroll taxes.
• Original Medicare is accepted by most physicians and hospitals nationwide, which matters for anyone who travels or splits the year between two states.
• Beneficiaries can restructure their drug and Advantage coverage each year rather than being locked in for life.

Gaps and limits

• Original Medicare has no annual out-of-pocket maximum, which is the gap Medigap and Medicare Advantage each address differently.
• It pays nothing toward long-term custodial care, the single largest uninsured expense many retirees face.
• Routine dental, vision and hearing care are largely outside Original Medicare.
• Premiums for outpatient and drug coverage rise with income, using a tax return from two years earlier, so a one-off spike in income raises premiums later.
• The program requires active choices with permanent consequences, and the penalty for getting the timing wrong attaches to a premium for life rather than being a one-time fee.