What Is Medicare?

Since its inception in 1965, original Medicare has helped millions of Americans — regardless of income or health status — pay for their medical care. Today, more than 67.4 million Americans are enrolled, with over 60 million age 65 and older and another 7 million younger people with disabilities.Medicare is a federal health insurance program that helps pay for doctor visits, hospital stays, hospice care, preventive care, some medical equipment and supplies, surgery, and more. If you're approaching your 65th birthday, setting aside time to review coverage options that meet your budget and health needs is one of the most important financial decisions you'll make.

How Does Medicare Work? Understanding the Parts

Medicare isn't one single plan. It has several parts, each designed to cover a certain facet of your health care. Understanding how these parts work together is key to choosing the right coverage.

Medicare Part A: Hospital Insurance

Medicare Part A helps pay for:

Inpatient stays in hospitals
Skilled nursing center care
Some home health services
End-of-life hospice care

Most people don't pay premiums for Part A because they or their spouse worked and paid Medicare payroll taxes for at least 10 years.

Medicare Part B: Medical Insurance

Medicare Part B helps pay for:

Doctor services and diagnostic tests
Outpatient care
Preventive care (many services are free)
Some medical equipment and supplies
Some medications administered at a doctor's office

In 2024, Part B premiums cost $174.70 per month per person. High earners pay more based on income.

Medicare Part D: Prescription Drug Coverage

Medicare Part D plans are prescription drug policies you buy separately because Medicare doesn't cover most prescriptions filled at a pharmacy. These plans have their own premiums and cost-sharing. If you don't enroll when first eligible and don't have other creditable drug coverage, you may face a lifetime late enrollment penalty.

Medicare Part C: Medicare Advantage

Part C, better known as Medicare Advantage (MA), is an alternative to original Medicare offered by private insurers. By law, MA plans must cover all Part A and Part B services, and most include Part D prescription coverage. Some plans also provide extra benefits that original Medicare doesn't, such as dental, hearing, and vision coverage.Original Medicare:

Provider Choice: Any provider who accepts Medicare nationwide
Drug Coverage: Must buy separate Part D plan
Extra Benefits: Limited (mostly medical/hospital)
Prior Authorization: Rarely required
Supplemental Insurance: Medigap available

Medicare Advantage:

Provider Choice: Network-based; often charges more for out-of-network care
Drug Coverage: Usually included
Extra Benefits: Often includes dental, vision, hearing
Prior Authorization: Often required for services
Supplemental Insurance: Not applicable

How Much Does Medicare Cost?

Medicare may cover the bulk of your health care costs, but it's not free. You'll pay premiums, deductibles, and copayments or coinsurance for covered care.

2024 Medicare Costs at a Glance

Part A (Hospital Insurance):

Premium: $0 for most people (paid Medicare taxes 10+ years)
Deductible: $1,632 per benefit period
Coinsurance: Daily coinsurance after 60 days hospital or 20 days skilled nursing

Part B (Medical Insurance):

Premium: $174.70 per month
Deductible: $240 per year
Coinsurance: 20% for most doctor services and outpatient care

Important: Part A deductibles apply per benefit period, not annually like workplace insurance.

Additional Coverage Costs

Medigap (Medicare Supplement): Private policies that help pay Medicare deductibles and copayments. Popular if you choose original Medicare.
Part D Premiums: Vary by plan and coverage level.
Medicare Advantage: You still pay Part B premiums (and Part A if not premium-free). Some MA plans have additional premiums and different deductibles/copayments.

The good news: Medicare offers financial assistance programs for people with limited incomes.

How to Apply for Medicare

Automatic Enrollment

If you are receiving Social Security or Railroad Retirement Board benefits at least four months before your 65th birthday, you'll be enrolled automatically in Medicare Parts A and B. Your Medicare card will arrive by mail about three months before your coverage starts.Note: Rules differ for residents of Puerto Rico.

Manual Enrollment Timeline

If you're not automatically enrolled, you must sign up during specific windows:Initial Enrollment Period:

When: 3 months before to 3 months after your 65th birthday month
What to do: Sign up for Parts A & B

Special Enrollment Period:

When: While you have employer coverage + up to 8 months after
What to do: Delay enrollment without penalty if still working

General Enrollment Period:

When: January 1 – March 31 each year
What to do: Sign up if you missed initial enrollment (penalties may apply)

Open Enrollment:

When: October 15 – December 7
What to do: Switch Part D or Medicare Advantage plans

Miss your initial deadline? You may pay a late enrollment penalty for as long as you have Medicare.

Working Past 65?

If you or your spouse still work at 65 and have employer health insurance, you may be able to delay Medicare enrollment. The rules typically depend on your employer's size (20+ employees usually required). You'll have a special enrollment period to sign up while covered and up to eight months after that coverage ends.

What Medicare Decisions Do You Need to Make?

After enrolling in Parts A and B, your next big decision is original Medicare vs. Medicare Advantage.

Original Medicare

Use any provider who participates in Medicare nationwide
Enrollees often buy a Medigap policy and Part D prescription coverage to supplement
No referrals needed
No prior authorization for most services

Medicare Advantage

Provider networks (HMO, PPO, etc.)
Often requires referrals and prior authorization
Usually includes drug coverage and extra benefits
May have lower out-of-pocket costs but less flexibility

Each year, you can switch Part D and Medicare Advantage plans during open enrollment (Oct. 15 – Dec. 7) for coverage starting Jan. 1. You can also reassess whether you want original Medicare or Medicare Advantage.

Pro Tip: Just like your health, costs and coverage change annually. Review all your options every year — especially in 2025 and beyond, when major changes to Medicare laws continue taking effect.

Frequently Asked Questions

Q: Is Medicare free at age 65? A: Part A is premium-free for most people who paid Medicare taxes for 10+ years. However, you'll still pay deductibles, coinsurance, and Part B premiums.Q: What's the difference between Medicare and Medicaid? A: Medicare is federal health insurance primarily for people 65+ and certain younger people with disabilities. Medicaid is a state and federal program for people with limited income and resources.Q: Can I have Medicare and employer insurance at the same time? A: Yes, depending on your employer size. One plan becomes primary and the other secondary.Q: Do I need Part D if I don't take medications? A: Consider enrolling anyway. If you skip it and don't have other creditable coverage, you'll pay a lifetime penalty if you enroll later.

Bottom Line

Medicare is a powerful health safety net, but navigating its parts, costs, and enrollment rules takes planning. Start reviewing your options before you turn 65, understand the difference between original Medicare and Medicare Advantage, and reassess your coverage annually during open enrollment. The right choices today can save you thousands in out-of-pocket costs down the road.Sources: This guide was compiled from authoritative Medicare resources including AARP's Medicare coverage guides and official Medicare enrollment guidelines.