What Is Medicare?

The United States created Medicare in 1966 as a national health insurance primarily for the nation’s older population. Today, it is administered by the Centers for Medicare and Medicaid Services (CMS). It is the second largest social insurance program in the country, behind Social Security.

Medicare covered 59.9 million Americans and spent $741 billion on their health care in 2018, according to CMS. But people on Medicare still faced out-of-pocket expenses because Parts A and B — known collectively as Original Medicare — don’t cover all medical costs.

Private companies contract with CMS to sell Medicare Advantage plans, also known as Medicare Part C. These plans are an alternative to Original Medicare and offer extra benefits, including vision and dental.

Medicare Supplement insurance, or Medigap, is an addition to Original Medicare that can help offset coverage gaps. Medigap policies are also sold by private insurers.

Medicare is divided into four parts, named alphabetically from Part A through Part D.

Parts A and B are sometimes referred to as Original Medicare. Parts C and D are newer options. Generally, you can get coverage through Original Medicare or through Medicare Advantage plans if you qualify.

Medicare Advantage plans require that you live in the service area of the plan you want to join.

Medicare Part A is hospital insurance. It covers the costs of a hospital or nursing facility stay, but does not cover long-term care.

Part A does not cover the costs of treatments you receive while in the hospital. That falls under Part B.

Medicare Part B is medical insurance that covers doctor visits. It also covers the costs of what CMS calls medically necessary services and preventative services.

Medicare Part C is also called Medicare Advantage, a form of private insurance. Enrollment in Part C is voluntary.

These plans are sold through insurance firms that have contracted with the federal government. All Medicare Advantage plans must provide the same coverage as Medicare Part A and Part B, but other benefits vary from plan to plan.

Most Medicare Advantage plans also offer prescription drug coverage. Medicare Advantage plans may also bundle coverage beyond what Original Medicare plans cover and may include vision, hearing and dental coverage.

Medicare Part D covers the cost of prescription drugs and is provided through private insurers. People who enroll in Part D pay a monthly premium. It covers the prescription drugs you buy at your local or mail-order pharmacy.

Most states have more than two dozen private insurers to choose from for Part D coverage.

A Medicare Supplement plan, commonly known as Medigap, is an additional coverage option to Original Medicare.

Medicare Part A and Part B only covers 80 percent of services. Adding a Medigap plan covers the remaining 20 percent, eliminating coinsurance or copayments as well as some additional out-of-pocket costs.

These policies are sold by private insurance companies. You cannot have Medigap coverage with a Medicare Advantage plan.

Not everyone qualifies for Medicare Parts A and B. Still, others may be able to get it if they pay premiums.

If you or your spouse didn’t pay Medicare taxes while working but are a U.S. citizen or legal permanent resident and 65 or older, you may be eligible to buy Medicare Part A coverage.

You can also qualify for premium-free Medicare Part A if you are under 65 and require dialysis or are a kidney transplant patient.

People younger than 65 diagnosed with Lou Gehrig’s disease (ALS) also qualify the first month after they receive disability benefits.

If you are already receiving Social Security benefits when you turn 65, you’ll automatically be enrolled in Medicare Part A and B, if you are eligible.

There are costs and fees associated with Medicare. These include premiums, deductibles and coinsurance. You may also pay penalties for waiting to enroll in Medicare Part B.

Most people don’t have to pay a premium for Medicare Part A because they paid for it through years of payroll taxes while they worked.

The chart below shows how much you would have to pay while on Medicare.

Medicare Parts A and B do not cover everything. Medicare Advantage plans may offer extra benefits that Original Medicare does not cover. If there are specific services you want covered, you should consider that when purchasing a Part C plan.

The most expensive thing Medicare Parts A and B does not cover is long-term care. Medicaid, another federal health insurance, will sometimes cover these costs, but generally only for low-income Americans with little or no savings.

Some of the most frequently asked questions about Medicare are about basic services and costs. Here are the most frequently asked questions and some answers.