Medicare is a federal health insurance program that provides coverage to certain individuals in the United States. Medicare was signed into law in 1965. To become eligible for Medicare, there are different pathways based on various factors such as:

•  Age (most qualify at age 65)

• Disability (must be deemed disabled for 24 months)

• Specific medical conditions (End-Stage Renal Disease (ESRD), or ALS (also called Lou Gehrig's disease))

• Work history (helps determines associated costs)

• Citizenship or residence (must be a U.S. citizen or have been a lawful U.S. resident for at least 5 years)

The Centers for Medicare & Medicaid Services (CMS) is the federal agency that runs/administers the Medicare Program. CMS is a branch of the Department of Health and Human Services.

Although they're different programs, Medicare and Social Security work together to serve beneficiaries. In fact, the Social Security Administration determines who's eligible for Medicare and handles some of Medicare's administrative duties, like enrollment and collecting premiums.

The Medicare trust fund, which pays claims for Medicare, comprises two separate funds. The hospital insurance trust fund is financed mainly through payroll taxes on earnings and income taxes on Social Security benefits. The Supplemental Medical Insurance trust fund is financed by general revenues, and the premiums enrollees pay. 

Original Medicare has two Parts A and B.

Part A is Hospital Insurance

Part B is Medical insurance

In 1966 Medicare Supplements were added to fill in the gaps in coverage of A/B

In 1997 Part C- Medicare Advantage was added

In 2006 Part D- Drug Coverage was added.

Annual Election Period (AEP)- Period each year (October 15 to December 7) during which beneficiaries can join or change their Medicare managed plans (Part C and D plans).

Annual Notice of Change (ANOC)-Notices sent each year to beneficiaries by their Part C and D plans informing them of changes to their plan in the coming year. ANOCs must be received at least two weeks before the October 15 start of the AEP.

Centers for Medicare & Medicaid Services (CMS)- CMS is the Federal Agency that administers Medicare, Medicaid, and the State Children's Health Insurance Program. It is part of the U.S. Department of Health and Human Services.

Coinsurance- The amount beneficiaries pay for services after deductibles are met. For instance, in Medicare Part B, this is a percentage (20%) of the Medicare approved amount.

Copayment- An amount that beneficiaries pay for each medical service, like a doctor's visit or prescription. It is a set amount rather than a percentage of costs (coinsurance). For instance, it might be $20.00 for each doctor's visit. There are sometimes copayments in Medicare Advantage and Part D plans and for some hospital outpatient services in traditional Medicare.

Cost Sharing- The amount beneficiaries pay out-of-pocket for health care, services, and prescriptions. Cost-sharing includes copayments, coinsurance, and deductibles.

Deductible- The amount of money beneficiaries pay for health care services, or prescriptions before Medicare pays. For example, in traditional Medicare, beneficiaries pay an annual Part B deductible.

Dual Eligible- A beneficiary eligible for both Medicare and Medicaid.

Durable Medical Equipment (DME)- Medical equipment that is ordered by a doctor for use in the home. Examples are walkers, wheelchairs, and hospital beds.

Employer Group Health Plan (EGHP)- Health insurance available through an employer or union.

End Stage Renal Disease (ESRD)- Kidney failure that requires a regular course of dialysis or a kidney transplant. People with ESRD are eligible to receive Medicare benefits prior to age 65.

Enrollment Periods- Enrollment periods are certain periods of time when you can join the Original Medicare program, or enroll in a Medicare Advantage Plan, Part D plan, or supplemental insurance plan (Medigap). AEP is the most used as everyone has an election period, but there are Special Election Periods throughout the year, based on certain circumstances.

Evidence of Coverage (EOC)- A document sent by insurance companies to new and renewing members describing plan benefits and patient rights and responsibilities. This is the bible of the plan, and will state exactly how things will be covered. Typically a very long document (200+ pages)

Extra Help- A low-income subsidy program managed by Social Security to help with Prescription costs.

Formulary- A list of medications covered by a Part D plan and how they are covered. Formularies vary from plan to plan and also change annually.

Guaranteed Issue- The duty of a company to offer an insurance plan to all given certain circumstances. Some Medicare beneficiaries are protected in this way from discrimination by insurance companies that offer Medigap policies. You cannot be denied based on adverse health conditions.

Health Maintenance Organization (HMO)- A style of Medicare Advantage Plan.  Members generally must have a primary care physician and obtain a referral from their primary care physician in order to see a specialist. In most HMOs, except in emergency or urgent situations, beneficiaries must receive care from the healthcare providers within the Plan's network. 

Hospice Care- Team-oriented approach to care that addresses the medical, physical, social, emotional and spiritual needs of dying patients and their caregivers. Medicare has a comprehensive hospice benefit.

Inpatient Care- Healthcare received in a hospital of a skilled nursing facility. It does not include outpatient services at a hospital.

Late Enrollment Penalty (LEP)- An amount added to monthly premiums for Medicare Part B or Part D (and Part A for voluntary enrollees) if a Medicare beneficiary fails to enroll during the initial enrollment period and does not qualify for a "good cause" exemption.

Medicaid- A federal and state joint funded medical assistance program for low-income families, disabled and elderly individuals. Some states have different names for it.

Medicare Advantage Plan (MA or MA-PD)- A private plan, often an HMO, that provides the benefits of Medicare Part A and Part B (MA plan) or Part A, Part B, and Part D (MA-PD plan). Medicare Advantage Plans include PPOs, HMOs, PFFS plans, MSA plans and SNPs.

Out-of-pocket maximum- The most you will pay in any given year for medical procedures, in a Medicare Advantage plan.

Over-the-Counter (OTC) Drugs- Drugs that may be purchased without a medical prescription, like everyday vitamins or aspirin.

Point of Service Option (POS)- An insurance coverage option that permits beneficiaries to use doctors and hospitals outside of the plan’s network for an additional cost to the beneficiary. It’s like a HMO plan but you can be referred outside the network.

Preferred Provider Organization (PPO)- A Medicare Advantage plan that encourages members to use providers in its network by requiring those who use providers outside of the network to pay additional costs. There is usually no need for referrals as well.

Premium- The monthly payment required to keep insurance in effect. This is a fixed cost per month.

Prescription Drug Plan (PDP)- A Part D plan that covers outpatient prescription drug coverage only (no hospital or medical coverage). PDPs are regulated and subsidized by Medicare. They are sometimes referred to as "stand alone" drug plans and are always private plans.

Price vs Cost- The Price is how much do you spend on it to have it. Cost is how much is it to use it. THIS IS AN EXPREMELY IMPORTANT CONCEPT! Getting a plan that cost you very little each month is attractive, but can you afford to use the plan after you have it. Maybe you should look at a plan with a higher monthly premium, that has little to no co-pays. Obviously, it’s based on your comfort level, but it should at least be a part of the conversation.

Primary Care Physician (PCP)- A doctor who provides basic (non-specialized) health care. In many Medicare Advantage HMO plans, beneficiaries must see their primary care physician and obtain a referral before they can see a specialist.

Private Fee-For-Service Plan (PFFS)- A type of Medicare Advantage private plan in which enrollees may go to any Medicare-approved provider that accepts the plan's payment schedule. The insurance company that runs the plan (rather than CMS) decides how much it will pay and how much cost-sharing enrollees must bear. These are typically in rural areas, where setting up networks can be challenging.

Quantity Limits (QL)- One of three utilization management tools used by Part D plans to control costs. The plan places limits on the drug dosages or quantities it will cover usually on a monthly basis.

Referral- A written order from a primary care physician to see a specialist. In many Medicare Advantage plans like HMO’s, payment will not be made for specialist care unless the beneficiary first obtains a referral.

Service Area- The area where a Medicare Advantage Plan or Part D Prescription Drug Plan accepts members and, as a general rule, covers services.

Special Enrollment Period (SEP)- A period triggered by exceptional conditions, as defined by law and CMS policy, during which beneficiaries can enroll or disenroll from their Part C or D plans, outside the normal Annual Election Period.  Call for options.

Special Needs Plan (SNP’s)- A type of Medicare Advantage plan that provides focused health care for specific groups of people, such as those who have both Medicare and Medicaid, who are institutionalized, or who have chronic medical conditions.

Specialist- A physician who treats only certain parts of the body, certain health problems, or certain age groups. For instance, nephrologists diagnose and manage kidney disease.

State Pharmacy Assistance Program (SPAP)- State funded prescription drug assistance for certain lower income older people (65 +) and people with disabilities.

Step Therapy (ST)- A utilization management tool used by Part D plans to control costs. Requires a trial of a less expensive medication and failure on that medication before the plan will pay for a more expensive prescribed medication.

Summary of Benefits- The Readers Digest version of the Evidence of Coverage document. Typically, 25-30 pages.

Part A is “Hospital Insurance”. So think facilities or paying for a specific location. A covers Inpatient Hospital stays. Skilled Nursing facility stays, Home Health Care, and Hospice Care (I know, Hospice is not location based).

Premium: If you have worked 40 quarters/10 years and paid into Medicare, then you get part A for free. For those that do not get premium free A, it’s really expensive. Currently it’s either $285 or $518/ month depending on how many quarters you have contributed.

Cost:

• Inpatient Hospitalization: You pay a $1,676 deductible, which covers you for 60 pays, after that it’s $419/day for days 61-90. Then $838/day for days 91-150. So for a 90-day hospitalization, your costs are over $14,000.

• Skilled Nursing facility: You pay $0/day for days 1-20, after that you pay $209.50/day for days 21-100 (that’s over $16,000).

• Home health care, and Hospice: These services are free.

For a complete breakdown of costs per Medicare: https://www.medicare.gov/basics/costs/medicare-costs

Item Part B is Medical Insurance. Think Doctors and Procedures. This includes Doctors that are Inpatient and Outpatient including Mental health, and labs, test, and procedures.

Premium: Everybody pays for Part B. Currently the premium $185/month, although some pay more depending on their annual income. Some people also get Medicaid (a Federal and State program for people with low incomes), and the state can pay the premium for you.

Costs:

• There is a one time deductible of $257, and then you pay 20% of the costs, with no cap on what you will spend. I had one client who had “neck surgery" on Original Medicare (no extra coverage beyond A/B) and she ran up a bill of $75,000 in one year after Medicare paid.

Part B also covers drugs administered in a doctor office or facility, like chemotherapy.

For a complete breakdown of costs per Medicare: https://www.medicare.gov/basics/costs/medicare-costs

Part C is Medicare Advantage Plans. Medicare Advantage plans are private insurance companies managing your Medicare for Medicare. Medicare actually pays these companies a fee per month to manage your care. If you choose this option then none of the billing goes directly through Medicare. Some people have said they “lose” Medicare, which isn’t true, it’s just being managed by a private insurance company. These plans have to cover at least what Medicare covers under A/B.

These health insurance companies are used to controlling costs as they do with Employer or group health insurance, and they do this with Networks of Doctors and Hospitals, referrals, and sometimes prior authorizations. These are set up like your old employer healthcare with HMO’s, PPO’s and others. These plan can also include your drug coverage as well.

They also vary widely based on location, so most of what I’m saying is a generalization.

Like employer health, they can include things that Medicare doesn’t cover:

• Dental- Medicare covers only highly specific dental procedures, but does not cover routine things like cleanings, fillings and dentures.

• Vision- Medicare covers injury or illness to the eye, not reading glasses or check-ups.

• Hearing- Medicare covers injury or illness to the ear, but not hearing aids…..I SAID HEARING AIDS!

• Over the counter items- Many plans now have allowances to help with all the extras at the pharmacy, like vitamins.

• Transportation- Many plans will help make sure you get to your appointments.

• Worldwide Emergency Care- Medicare covers very little outside of the US.

• AND MANY MORE!

Premium: Now some of these plans have a $0 premium, and some do not. So how can it be a $0 premium, remember they are getting paid by Medicare to manage your care. Most include your drug plan too, so there is a savings to not having to pay for a drug plan too.

Some have deductibles for Medical, but not for emergency care. Emergency care is always covered dollar one, and always in network.

All plans have a Max Out-Of-Pocket. That is the most that you will pay for medical care in any given calendar year. The Maximum Out-of-Pocket (MOOP) limit for Medicare Advantage plans in 2025 is $9,350 for in-network services and $14,000 for combined in-network and out-of-network services, like in the case of a PPO plan.

Costs:

• All plans have co-pays for services rendered. Example: go to the Primary Care Physician, co-pay of $20 at the time of service. Some plans have co-pays of $0 for some services. Some services are less expensive than others like going to an urgent care center (Walk-in Clinic) as opposed to an Emergency Room.

As we all know, there is never a something for nothing. If you want all the extra benefits, then you must go with a network-based plan that is set up as a pay as you go system.

Part D is Drug coverage or medications. These are all private insurance plans that you should check every year to make sure you are on the correct one for you.

Because they are all different, premiums will vary, and people who make more money will pay more for it too. I believe the national average is about $35/month for coverage

Medicare mandates that you have drug coverage, even if you are not on any drugs now. If you do not, you will pay a Late Enrollment Penalty, based on how long you went without, and it will last for the rest of your life. So, make sure you are covered.

Basics:

All Prescription Drug Plans (PDP’s) have formularies. That’s a list of drugs to be covered and how they will be covered. If they are not covered, you pay 100% of the cost. Plans place their covered drugs into different categories called "tiers" based on how much they cost. The higher the tier, the higher the cost

The standard drug tiers are:

• Tier 1- Preferred Generic

• Tier 2- Generic

• Tier 3- Preferred Brand

• Tier 4- Non-Preferred Brand

• Tier 5- Specialty Tier

All drug plans have different Phases you may go through, that will affect how much you pay and when.

First is the deductible phase, which is an amount of money you must pay before getting coverage. Many plans have them, but only for certain tiers of drugs (typically tiers 3-5).

Next is the Initial Phase, which is when you have more set co-pays or co-insurance (a percentage) for meds. You stay in this phase until your costs reach $2,000 for the year.

The last phase is the Catastrophic Phase in which you have no cost sharing for the rest of the year.

Luckily there is no more “Doughnut Hole” which is like avoiding a popsicle headache!

Premiums: They can vary.

Costs: They can vary widely, too.

Things that can affect costs to you:

• Brand names vs Generics. You have a better chance of having a drug covered better if it is generic.

• Preferred Pharmacies. All plans have Preferred Pharmacy networks, which have lower cost sharing. Make sure you specify your pharmacy you use, and understand sometimes going across the street can save you huge money!

• Extra Help. Extra Help is a low income subsidy program from Social Security, which can pay all or some of your drug premium and lower your co-pays.

• State Pharmaceutical Assistance Programs- Some states have special programs that can help with drug costs.

• Other coverage. Tricare-For-Life, VA, and employer coverage can also affect what you are paying for medications.

Medicare Supplements or MediGap plans work in conjunction with Medicare. That means that Medicare gets billed for their portion of the bill, and the supplement gets billed for the balance. These are not managed by Medicare, instead they are managed by the State Department of Insurance, so there are different rules in each state. These are typically long-term plans.

Important points to remember:

• They work with Medicare Parts A and B. Once you are enrolled in Medicare Part A and Part B, you may choose to supplement your coverage with a Medicare Supplement insurance plan sold by a private insurance company.

• They help pay some of the out-of-pocket expenses that Medicare alone doesn’t pay. These out-of-pocket costs may add up. Medicare Supplement insurance plans are designed to help with some of the costs associated with Medicare, like deductibles, co-insurance, and co-payments. Benefits and costs vary depending on the plan you choose.

• Once you are enrolled in Medicare Parts A and B, you can apply for a Medicare Supplement insurance plan at any time. The best time to apply for a Medicare Supplement insurance plan is during your 6-month Open Enrollment Period, which starts on the first day of the month in which you turn 65 and are enrolled in Medicare Part B (except in some states, where open enrollment is ongoing). During this time, you are guaranteed acceptance regardless of any medical conditions you may have. If you do not enroll during this time, you may apply for a Medicare Supplement plan at any time as long as you are enrolled in Medicare Parts A and B. However, you may be underwritten in states that allow it and may not be accepted into the plan if you are outside of Open Enrollment or Guaranteed Issue periods. (This does not apply to residents of Massachusetts, Connecticut and New York where Open Enrollment is ongoing and Medicare Supplement plans are guaranteed available for all formats.)

• They offer guaranteed coverage for life. Your plan will continue year after year, regardless of age or health. The premium will change at least once a year, but as long as you keep paying the premiums, you will have coverage. Premiums will not changed based on your usage!

• There is a choice of plans available, and the pricing varies too. Because everyone’s situation is different, there are various standardized Medicare Supplement insurance plans available. Understanding your health needs, and how you will use a Medicare Supplement insurance plan, may help you choose a plan with the right cost and benefit structure for you. 47 of the 50 states have a standardized format, only Massachusetts, Minnesota, and Wisconsin have different formats for plans.

• They are standardized across insurance companies. The basic benefits provided under each plan are the same from insurer to insurer. For instance, in terms of coverage, one company’s Plan F is the same as another company’s Plan F. Differences may include added innovative benefits that an insurance company may provide and the level of customer service you’ll receive.

• They allow you to choose or keep your doctors and see specialists, without referrals. Say goodbye to network restrictions. With a Medicare Supplement insurance plan, you can continue to see your doctor or specialist as long they accept Medicare patients (98% of doctors and facilities accept Medicare). You control your healthcare!

• There are no claim forms to fill out. To make managing your healthcare easier and more convenient for you, there are no claim forms to complete.

• They go with you when you travel within the United States. From Florida to Alaska and every state in between, your coverage goes with you anywhere you travel within the U.S. Some plans even offer benefits for foreign travel emergency medical care.

• They work with Medicare Part D prescription drug plans. Adding a prescription drug plan along with your Medicare Supplement insurance plan is optional, but enrolling in one may give you more complete coverage than Medicare alone. Medicare Part D plans are offered through private insurance companies approved by Medicare.

• Medigaps generally don’t cover long-term care, vision or dental coverage, hearing aids, eyeglasses, or private-duty nursing.

“I do not offer every plan available in your area. Currently I represent TWELVE organizations which offer THREE product types in your area. Please contact Medicare.gov, 1-800-MEDICARE, or your local State Health Insurance Program (SHIP) to get information on all of your options.”