Medicare

Medicare: Understanding the Basics

Medicare can seem complicated at first because it is not one single health insurance plan. It is a system made up of several different parts, each designed to cover different types of healthcare expenses.

Understanding the basic parts is the first step toward making good decisions about your healthcare in retirement.

The Four Basic Parts of Medicare

Medicare Part A — Hospital insurance

Part A primarily covers care when you are admitted to a hospital or need certain types of inpatient care.

It generally helps cover:

• Inpatient hospital stays
• Skilled nursing facility care following a qualifying hospital stay
• Hospice care
• Certain home healthcare services

For many people, Part A does not have a monthly premium if they or their spouse have enough Medicare-covered work history.

However, Part A still has deductibles and other cost-sharing rules.

Medicare Part B — Medical insurance

Part B covers many of the medical services you receive outside of a hospital.

It generally covers:

• Doctor visits
• Outpatient care
• Preventive services
• Lab tests
• Medical equipment
• Certain surgeries and procedures
• Ambulance services in qualifying situations
• Some medically necessary home healthcare

Part B has a monthly premium, and higher-income beneficiaries may pay an additional amount through IRMAA (Income-Related Monthly Adjustment Amount).

Part B generally requires you to pay a deductible and a percentage of the Medicare-approved amount for covered services.

Medicare Part C — Medicare Advantage

Part C is an alternative way to receive your Medicare benefits through a private insurance company.

Medicare Advantage plans combine Part A, Part B, and usually Part D prescription drug coverage.

Many plans also provide additional benefits that Original Medicare generally does not cover, such as:

• Dental coverage
• Vision coverage
• Hearing benefits
• Fitness programs
• Certain transportation or other supplemental benefits

Medicare Advantage plans operate differently from Original Medicare. They typically use provider networks and may require referrals or prior authorization for certain services.

Costs and benefits vary significantly from plan to plan.

Medicare Part D — Prescription drug coverage

Part D helps pay for prescription medications. It can cover:

• Prescription drugs purchased at retail pharmacies
• Certain specialty medications
• Some prescription drugs administered outside of a hospital

Part D is offered through private insurance companies, and plans have their own premiums, deductibles, drug formularies, copayments or coinsurance, and pharmacy networks.

Choosing a Part D plan that covers the medications you actually take can make a significant difference in your annual healthcare costs.

Original Medicare vs. Medicare Advantage

One of the most important Medicare decisions is understanding the difference between Original Medicare and Medicare Advantage.

Neither approach is automatically best for everyone. The right choice depends on healthcare needs, doctors, medications, travel habits, income, budget, and other insurance coverage.

What Medicare Does Not Cover

An important misconception is that Medicare pays for everything once you turn 65. It does not.

Depending on the circumstances, Medicare generally does not provide comprehensive coverage for things such as:

• Routine long-term custodial care
• Most routine dental care
• Most routine vision care, including eyeglasses
• Hearing aids
• Cosmetic procedures
• Some non-medically necessary services

This is why retirement healthcare planning should go beyond simply asking, “Do I have Medicare?”

The more important question is:

How will all of my healthcare costs be covered after I retire?

The Bigger Picture

Medicare is best thought of as a foundation, rather than a complete retirement healthcare solution.

For some retirees, the foundation may be:

For others, it may be:

And some retirees may have additional coverage through an employer or retiree plan, such as FEHB, which can significantly change how Medicare is used.

The key is to understand what each layer covers, what it costs, and what gaps remain before making a decision.

Medicare planning is ultimately not just about choosing a plan. It is about creating a healthcare strategy that fits your retirement, your finances, and your family.