Our national health insurance program for people aged 65 and older in America is Medicare. Some individuals under 65 with disabilities can also qualify. Medicare currently covers more than 60 million people in the U.S.

Understanding Medicare begins with first breaking down its parts to see what they cover and cost and then looking into your options for covering the gaps.

The Parts of Medicare

Medicare has two Original Parts. Part A is your hospital coverage and it pays for inpatient stays, skilled nursing facilities, blood transfusions, and hospice benefits. Most people don’t pay anything for Part A. As long as they or a spouse have worked at least 40 quarters (10 Years), then they have already paid taxes during those years to pay for Part A.

Part A has a $1364 deductible that covers your first 60 days in the hospital. Longer stays would result in daily hospital copays that you pay as well.

Part B is your outpatient coverage and it covers preventive care, doctor appointments, lab testing, diagnostic imaging, medical supplies and equipment, outpatient surgeries, chemotherapy, dialysis and much more. Beneficiaries pay a base premium of $135.50/month for Part B in 2019. About 5% of beneficiaries with higher incomes will pay more on a sliding scale.

Part B has an annual deductible of $185 and then covers 80% of your expenses, leaving the other 20% for you to pay. Medicare beneficiaries enroll in these two parts via the Social Security office or Railroad Retirement Board.

Part D is voluntary prescription drug coverage for retail outpatient medications. Beneficiaries sign up for Part D by enrolling in a plan with a private insurance company. The national average premium is around $35/month.

Filling in the Gaps

Since you are responsible to pay for deductibles, co-pays, and co-insurance for Parts A, B, and D, you may be interested in buying supplemental coverage to take care of those for you. This supplemental coverage falls into two camps.

Your first option is to purchase a Medicare supplement that pays a share of your bills after Medicare pays. You can see any provider in the country and no referrals are needed. The coverage costs more up front, but you have very predictable back-end spending.

Medigap plans do not include outpatient medications, but you can sign up for a Part D drug policy to help with your medication costs.

The second option is a Medicare Advantage plan. These are private insurance plans in which you get your benefits from the plan’s network of providers. These plans cost less up front, but you pay for healthcare services on the back end as you go along. Many Advantage plans include a built-in Part D drug plan. These plans also sometimes include ancillary benefits that Medicare doesn’t cover, such as routine dental, vision and hearing benefits.

Advantage plans usually operate either an HMO or PPO network. In HMO Plans, you will usually be required to choose a primary care physician and you may need to see that physician for a referral before you can see a specialist. Many HMO plans only offer coverage in the network, except in emergencies.

PPO plans are more flexible in that you can see providers outside the network, though at a higher cost to you.

Changes for 2019

This year has brought other interesting changes. There is a new election period from January 1st to March 31st for people who are enrolled in Medicare Advantage plans. If you don’t like your plan for any reason, you can use this period to change to a different Medicare Advantage plan or return to Original Medicare and a Part D drug plan. This allows people to try out a plan without being locked in for the entire year.

Advantage plans can also now incorporate some long-term-care type benefits such as adult day care services, in-home custodial care, in-home meal delivery and transportation to and from medical appointments. Plans can even help to pay for home safety modifications like bathroom grab bar or wheelchair/scooter ramps.

Enrolling in Medicare can seem overwhelming at first, but once you set up your Original Medicare and choose your supplemental coverage, the rest is fairly easy.