More than 10,000 people turn 65 every day in the United States, with overall life expectancy and health generally improving each year.1
However, living longer and healthier lives doesn't necessarily mean one's financial health is strong. A recent study concluded some 65-year-old couples could need as much as $325,000 in savings to pay for healthcare expenses in retirement
Knowing some of the healthcare coverage options that may be available to you in retirement could help you plan for a better financial future. One of the more popular healthcare coverage options for those ages 65 and older is Medicare. Let's take a moment to review what healthcare coverage looks like under the Medicare umbrella.
What is Medicare?
Medicare is the federal health insurance program for people 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease.3
Medicare is administered by the Centers for Medicare & Medicaid Services (CMS)
, which is part of the Department of Health and Human Services (HHS)
Some people are automatically enrolled in Medicare. Most people will need to sign up for Medicare through their Social Security Administration office or at the Social Security website
Does Medicare pay for all my medical costs?
No. Medicare helps with the cost of healthcare, but does not cover all medical expenses or the cost of long-term care in most cases.5
What are my Medicare coverage options?
There are two options available to you are to enroll in:
- Original Medicare by itself or paired with a Medicare Supplement insurance plan and/or a Medicare drug plan (Medicare Part D), or
- a Medicare Advantage plan
So we can better understand what coverage each of these options offers, let’s do a quick overview of the “ABCDs” of Medicare.
Overview of the four parts of Medicare
Medicare has four parts. The first two parts of Medicare – Medicare Part A and Medicare Part B – are run by the federal government.4
The second two parts of Medicare – Medicare Part C and Medicare Part D – are highly regulated by Medicare, but run by private insurance companies.
Medicare Part A – Hospital Insurance
Medicare Part A covers, in general:6
- Inpatient hospital stays
- Care in a skilled nursing facility
- Hospice care
- Some home health care
Medicare Part B – Medical Insurance
Medicare Part B covers two types of outpatient services, in general:7
- Medically necessary services – Provider services or supplies needed to diagnose or treat your medical condition and meet accepted standards of medical practice.
- Preventive services – Health care to prevent illness or detect it at an early stage, when treatment is most likely to work best.
Medicare Part B covers, in general, things like:7
- Outpatient doctor office visits
- Some clinical research studies
- Ambulance services
- Durable medical equipment
- Mental health
- Partial hospitalization
- Limited outpatient prescription drugs
Medicare Part C – Medicare Advantage
Medicare Part C is also known as Medicare Advantage. Medicare Advantage plans offer an alternate way to receive Medicare Part A and Medicare Part B coverage other than Original Medicare with or without a Medicare Supplement insurance plan.8
Medicare Advantage plans are essentially public-private partnerships that combine Medicare Part A and Medicare Part B coverage.8
However, there is a lot of variation in coverage between Medicare Advantage plans. We’ll talk about Medicare Advantage Plans in more detail later.
Medicare Part D – Drug coverage
Finally, Medicare Part D can be paired with Original Medicare to help cover prescription drug costs. This includes many shots and vaccines.9
This is not a comprehensive list of what is covered under each part of Medicare.
We now know a little bit about what each part of Medicare entails. Let’s now explore which parts of Medicare are incorporated into Original Medicare
(by itself or paired with a Medicare Supplement insurance policy
) and Medicare Advantage plans
Get a Medicare Supplement plan that allows you to choose your doctor.
Our licensed agents can help you pick a plan based on your needs.
What is Original Medicare?
consists of Medicare Part A
and Medicare Part B
. It is a fee-for-service health plan run by the federal government.10
After you pay a deductible, Medicare pays its share of the Medicare-approved amount. You usually pay your share via coinsurance and deductibles.10
For more information on Medicare costs, visit Medicare.gov
Original Medicare can be paired with a Medicare Supplement insurance policy.
What is a Medicare Supplement insurance policy?
A Medicare Supplement insurance policy – sometimes referred to as “Medigap” – is an insurance policy that can help cover some of the costs Original Medicare doesn't, like copayments, coinsurance, and deductibles.11
All Medicare Supplement plans were created by the federal government and are regulated by state Insurance Departments. Medicare Supplement insurance policies are sold by private companies.11
Original Medicare paired with a Medicare Supplement insurance policy may be an attractive coverage option for you. Another coverage option you may also want to consider purchasing is a Medicare Advantage plan.
What is a Medicare Advantage plan?
A Medicare Advantage plan
is a type of Medicare health plan offered by a private, Medicare-approved insurance company. These plans are sometimes called MA Plans or Part C
plans. Medicare Advantage plans are bundled plans offered as an alternative to Original Medicare.12
Medicare Advantage plans
include Medicare Part A
and Medicare Part B
coverage, and may include prescription drug coverage
. Most Medicare services are covered through your Medicare Advantage plan.12
If you are new to Medicare, you have the choice to sign up either for:
- Original Medicare by itself or paired with a Medicare Supplement insurance plan; or
- a Medicare Advantage plan
What can help me decide what plan is right for me?
Taking several factors into consideration may be helpful when deciding whether Original Medicare paired with a Medicare Supplement insurance policy or a Medicare Advantage plan is right for you. These include:13
- Doctor and hospital choice
Doctor and hospital choice
You use the doctors and providers in a Medicare Advantage plan’s network and service area. Some Medicare Advantage plans won’t cover services from providers outside the plan’s network and service area.13
With Original Medicare by itself or paired with a Medicare Supplement insurance plan, you can go to any doctor or hospital in the United States that accepts Medicare. You don’t need a referral to see a specialist in most cases.13
Out-of-pocket costs vary between Medicare Advantage plans. Medicare Advantage plans have a yearly limit on what you pay out of pocket for services covered under Medicare Part A and Medicare Part B. Once you reach your Medicare Advantage plan’s yearly limit, you pay nothing for Medicare Part A and Medicare Part B services the rest of the year.13
Under Original Medicare, for Part B-covered services, you usually pay a 20% coinsurance of the Medicare-approved amount after you meet your deductible, which is $203 for 2021. You pay a monthly premium for Part B.14
The Medicare Part A hospital inpatient deductible for 2021 is $1,484 per benefit period. If you add a Medicare Part D drug plan, you pay that premium separately. There is a $0 coinsurance for each benefit period for days 1-60; $371 coinsurance per day in a benefit period for days 61-90; and $742 coinsurance per each ‘lifetime reserve day’ for days 91 and beyond (up to 60 days over your lifetime). You pay all costs beyond lifetime reserve days. For beneficiaries in skilled nursing facilities, the daily coinsurance for days 21 through 100 of extended care services in a benefit period is $185.50 in 2021.14
There’s no yearly limit on what you pay out of pocket, unless you have supplemental coverage like a Medicare Supplement insurance policy, which can help pay your remaining out-of-pocket costs. Coverage from a former employer union, or Medicaid may also be used.13
Medicare Advantage plans must cover all of the medically necessary services that Original Medicare covers. Some Medicare Advantage plans may offer extra benefits that Original Medicare doesn’t cover eye exams, most dental care, as well as hearing aids and exams for fitting them. Medicare Advantage plans usually include prescription drug coverage.8
In some cases, you have to get a service or supply approved ahead of time for the plan to cover it.13
Original Medicare covers most medically necessary services and supplies in hospitals, doctors’ offices, and other health care settings. Original Medicare doesn’t cover some benefits like long-term care
, eye exams, most dental care, hearing aids and exams for fitting them, and other items and services
. You can add a separate Medicare Part D drug plan to get drug coverage. In most cases, you don’t have to get a service or supply approved ahead of time for Original Medicare to cover it.13
Medicare Advantage plans generally don’t cover care outside the United States.13
Original Medicare generally doesn’t cover care outside the United States either. A Medicare Supplement Insurance policy you purchase may cover limited emergency care outside the United States.13
This is not a comprehensive list of consideration to make when deciding whether Original Medicare paired with a Medicare Supplement insurance policy or a Medicare Advantage plan is right for you.
Original Medicare paired with a Medicare Supplement insurance policy or a Medicare Advantage plan offer similar but different benefits.
Medicare Advantage plans:
- Use a provider network
- Have a yearly limit when it comes to out-of-pocket costs
- Offer the same coverage all of the medically necessary services as Original Medicare
- Do not cover care outside the United States.
- Allows you to go to any doctor or hospital in the United States that accepts Medicare
- Requires, generally speaking, deductibles and coinsurance
- Covers most medically necessary services and supplies
- Does not cover care outside the United States
Speak to a licensed insurance agent with any Medicare-related questions you may have to help you find the right coverage for your situation.
For more information about Medicare, visit Medicare.gov
“Can I have a Medicare Supplement Plan and a Medicare Advantage Plan?
“How Much are the Medicare Deductibles for 2021?
- HHS.gov, Aging, accessed August 2021
- EBRI, A Bit of Good News During the Pandemic: Savings Medicare Beneficiaries Need for Health Expenses Decrease in 2020, 2020
- Medicare.gov, What’s Medicare, accessed August 2021
- CMS.gov, About CMS, accessed August 2021
- SSA, Medicare Benefits, accessed August 2021
- Medicare.gov, What Part A covers, accessed August 2021
- Medicare.gov, What Part B covers, accessed August 2021
- Medicare.gov, How Do Medicare Advantage Plans work?, 2021
- Medicare.gov, What Medicare Part D drug plans cover, accessed August 2021
- Medicare.gov, Original Medicare, accessed August 2021
- Medicare.gov, What's Medicare Supplement Insurance (Medigap)?, accessed August 2021
- Medicare.gov, Medicare Advantage Plans, accessed August 2021
- Medicare.gov, Medicare & You 2021, 2020
- Medicare.gov, Medicare Costs at a Glance, 2021