A Medicare plan is insurance that covers your medical costs once you turn 65

A Medicare plan is a health insurance policy that pays for doctor visits, hospital stays, prescription drugs, and other medical care. The federal government runs Medicare, and you become may be able to access when you turn 65 (with rare exceptions for younger people with disabilities or end-stage renal disease). You do not have to be retired to join — you just have to meet the age or disability requirement.

Medicare itself is divided into different parts, and each part covers different things. A Medicare plan is your choice of how to receive that coverage. You can either pick Original Medicare (Parts A and B) plus a separate drug plan, or you can pick a Medicare Advantage plan, which bundles hospital, doctor, and drug coverage into one plan. Both routes are free to join, though most people pay a monthly premium for drug coverage and for Part B.

The main reason to understand Medicare plans is that your choice affects what you pay out of pocket, which doctors you can see, and whether you need to file claims yourself. Picking the right plan for your situation can save you hundreds of dollars a year.

Key Takeaways

  • Medicare plans are insurance policies that cover medical costs for people 65 and older, and they come in two main types: Original Medicare plus a drug plan, or Medicare Advantage.
  • Original Medicare is run by the federal government and lets you see any doctor who accepts Medicare, but you pay a deductible and coinsurance for each service.
  • Medicare Advantage plans are run by private insurance companies and often have lower out-of-pocket costs, but they limit you to doctors in their network.
  • You must join a drug plan (either through Original Medicare or as part of Medicare Advantage) if you want prescription drug coverage, or you may face a penalty later.
  • You can change your plan once a year during the open enrollment period, which runs from October 15 to December 7.

Original Medicare: How It Works

Original Medicare is the traditional plan run directly by the federal government. It has two parts: Part A covers hospital stays, skilled nursing care, and hospice; Part B covers doctor visits, outpatient care, lab tests, and medical equipment. Most people pay no premium for Part A (because they paid Medicare taxes while working), but Part B has a monthly premium that changes each year.

With Original Medicare, you can see any doctor or hospital in the United States that accepts Medicare — which is most of them. You are responsible for paying a deductible before Medicare starts to pay, and then you typically pay 20 percent of the cost of services (called coinsurance). This means your costs can add up if you have a lot of medical care in a year.

Original Medicare does not cover prescription drugs. You must join a separate Part D drug plan run by a private insurance company if you want that coverage. Part D plans have their own monthly premiums, deductibles, and copays. If you do not join a drug plan when you first become may be able to access and later decide you want one, you may have to pay a penalty for each month you waited.

Medicare Advantage: An Alternative to Original Medicare

Medicare Advantage (also called Part C) is an alternative way to receive your Medicare coverage. Instead of Original Medicare, you join a private insurance company's plan. That plan must cover everything Original Medicare covers, but it can do so in its own way — usually with lower out-of-pocket costs and often with added benefits like dental or vision care.

The trade-off is that Medicare Advantage plans use a network. You must see doctors and hospitals in that network (except in emergencies), and you usually need a referral from your primary care doctor before seeing a specialist. If you see an out-of-network provider, you may pay much more or the plan may not cover it at all.

Medicare Advantage plans include prescription drug coverage, so you do not need to join a separate Part D plan. The monthly premium for a Medicare Advantage plan varies by plan and location, and some plans have a zero premium (though you still pay Part B premiums to the government). Out-of-pocket costs are usually capped at a maximum amount per year, which can be helpful if you have a lot of medical expenses.

What You Pay: Premiums, Deductibles, and Copays

Your costs depend on which plan you choose. With Original Medicare, you pay a Part B premium (around $165 per month in 2024, though this varies by income), a Part A deductible when you enter the hospital, and then 20 percent coinsurance for most services. You also pay the full cost of your Part D drug plan premium and any copays for prescriptions.

With Medicare Advantage, you pay the Part B premium to the government, plus the plan's monthly premium (which can be zero), plus copays when you see a doctor or fill a prescription. Your out-of-pocket costs are capped at a yearly maximum — once you reach that amount, the plan covers 100 percent of in-network care for the rest of the year.

Some people may have access to for Extra Help (a federal program) or Medicaid (a state program) if their income is low. These programs can pay some or all of your premiums and reduce your copays. Your state Medicaid office or your local Area Agency on Aging can tell you whether you may have access to.

When You Can Join or Change Your Plan

You can join Medicare when you turn 65. If you are still working and have health insurance through your job, you can delay joining Part B without penalty as long as your employer has 20 or more employees — but you should still join Part A. Once you stop working or lose that coverage, you have a limited time to join Part B without paying a penalty.

After you join, you can change your plan during open enrollment, which runs from October 15 to December 7 each year. Changes take effect on January 1. Outside of open enrollment, you can change plans only if you have a may have access to life event — such as moving to a different state, losing other health coverage, or becoming may be able to access for Extra Help.

If you are new to Medicare, you have a special enrollment period of about two months after you turn 65 (or after you become may be able to access due to disability) to join without penalty. After that window closes, joining late can result in a permanent penalty added to your premiums.

Supplemental Insurance: An Option with Original Medicare

If you choose Original Medicare, you can also buy a Medigap policy (supplemental insurance) from a private insurance company. Medigap helps pay the deductibles, coinsurance, and copays that Original Medicare does not cover. It does not cover prescription drugs — you still need Part D for that.

Medigap plans are standardized by the federal government, so a Plan G from one company covers the same things as a Plan G from another company. The main difference is the premium. You can shop around and compare prices. Medigap is optional, but many people find it worth the extra cost because it makes their out-of-pocket expenses more predictable.

You cannot use both Medigap and Medicare Advantage at the same time. If you have Medicare Advantage, the plan's network and copay structure replace what Medigap would do.

How to Learn More About Your Options

Medicare.gov is the official government website where you can compare plans side by side, see which doctors and hospitals are in each plan's network, and read the full details of what each plan covers. You can also call 1-800-MEDICARE to speak with a counselor who can answer questions about your specific situation.

Your State Health Insurance information Program (SHIP) offers free, one-on-one counseling about Medicare plans. You can find your local SHIP office through the Eldercare Locator at 1-800-677-1116 or online at eldercare.acl.gov. A counselor can help you understand your options, compare plans, and understand what you will pay.

If you are low-income, contact your local Area Agency on Aging or your state Medicaid office to learn whether you may have access to for Extra Help or Medicaid. These programs can significantly reduce your out-of-pocket costs.

Frequently Asked Questions

Do I have to join Medicare when I turn 65?

You must join Part A (hospital insurance) and Part B (doctor insurance) when you turn 65, or you may face a penalty. The only exception is if you are still working and covered by your employer's health plan with 20 or more employees — you can delay Part B without penalty, but you should still join Part A. Once you lose that coverage, you have a limited time to join without penalty.

What is the difference between Original Medicare and Medicare Advantage?

Original Medicare is run by the government and lets you see any doctor who accepts Medicare. You pay a deductible and coinsurance for each service. Medicare Advantage is run by private insurance companies, usually costs less out of pocket, and includes drug coverage — but you must use doctors in the plan's network. Both cover the same basic services.

Can I switch from Original Medicare to Medicare Advantage?

Yes, you can switch during open enrollment (October 15 to December 7 each year), and the change takes effect January 1. You can also switch if you have a may have access to life event, such as moving or losing other coverage. If you switch from Original Medicare to Medicare Advantage, you may want to drop your Medigap policy, since Medicare Advantage includes similar protections.

What happens if I do not join a drug plan?

If you do not join a Part D drug plan when you first become may be able to access and later decide you want one, you will pay a penalty for each month you waited. The penalty is added to your premiums permanently. The only exception is if you have other drug coverage (such as through a current employer) that is at least as good as Medicare's.

How much does Medicare cost?

Part A is usually free if you paid Medicare taxes while working. Part B costs around $165 per month in 2024 (higher if your income is above a certain level). Part D drug plans range from about $7 to $100+ per month depending on the plan. Medicare Advantage plans vary widely by location and plan. If you are low-income, you may may have access to for programs that reduce these costs.