I. An Overview of Medicare and Its Components

The Medicare program originally consisted of just Part A and B. These two parts still exist to provide basic coverage, but the program has expanded since its inception in 1965, and it now has four components that each offer a specific range of health care benefits for Medicare enrollees.

Original Medicare

Parts A and B are the foundation of Medicare coverage. Part A, which is sometimes called hospital insurance, covers your care as a hospital inpatient and necessary stays in a skilled nursing facility after a minimum three-day inpatient stay. Part A also covers the cost of hospice care and some home health care services. Part B, or medical care, covers costs for doctor and specialist visits, outpatient hospital care, preventive care services, and medical supplies.

Medicare Advantage Plans

Medicare Advantage (MA) plans, sometimes referred to as Part C, are offered through private insurance companies as alternatives to Part A and B coverage. They must offer the same core services as original Medicare, with the exception of hospice care, which is still covered through Part A. Most MA plans provide various extra benefits that may include vision and dental care, eyeglasses, hearing aids, prescription drug coverage, transportation to medical appointments, and certain home modifications. There are four main types of MA plans available, and two less common options, and each one has different requirements and limitations.

Medicare Supplement Plans

Medicare Supplement plans, or Medigap policies as they’re often called, don’t replace Part A or B coverage or pay for extras such as prescription drug coverage, dental, vision, or hearing aids. Instead, they help pay costs from coverage gaps in Original Medicare. There are 10 Medigap plans available from private insurance companies, which are standardized by the federal government to cover certain percentages of Part A and B co-payments, coinsurance, and deductibles. Medigap enrollment is limited to those with Original Medicare coverage — you can’t be enrolled in an MA and Medigap plan at the same time.

Medicare Part D

Many people who have original Medicare enroll in a Part D plan to help cover their prescription drug costs. There are a number of different “stand-alone” Part D plans offered through Medicare-approved private insurance companies in each state. The prescription drugs a plan covers can vary between insurers, and most have a network of providers you must use.

Medicare Component Costs

Each of the four types of Medicare coverage has its own potential costs:

  • If you’re enrolled in Original Medicare, in most cases there’s no monthly premium for Part A coverage. You pay a premium each month for Part B, along with co-payments, coinsurance, and deductibles for Part A and B services.
  • If you opt for a Medicare Advantage plan instead of Original Medicare, you’ll have a monthly premium, a Part B premium, and you’ll also be responsible for any deductibles, co-payments, and coinsurance costs.
  • With Supplement plans, you still pay any required premiums for Part A and B coverage as well as a monthly Medigap premium.
  • The cost of Part D coverage can vary greatly between plans, insurers, and the state where you live. You’ll pay a monthly premium, as well as the full cost or tiered co-payments for prescriptions depending on whether you’re at the deductible, initial coverage, coverage gap, or catastrophic coverage stage

II. Who Is Eligible for Original Medicare?

Medicare has strict rules about qualifying for coverage. To be eligible for Original Medicare, you must be a U.S. citizen and resident, or a legal permanent resident who’s lived here continuously for a minimum of five years. Part A and B coverage is available to eligible seniors over age 65, and younger individuals receiving disability benefits through Social Security or the Railroad Retirement Board.

III. Enrolling in Original Medicare

In addition to its eligibility requirements, Medicare also has rules about enrollment for Part A and B coverage. Some people are enrolled automatically and others have to file an application. How a person qualifies for coverage often dictates if it’s necessary to complete an application.

People who’ve accumulated 40 quarters of coverage (QC) by paying Federal Insurance Contributions Act (FICA) taxes through either a job or self-employment are usually enrolled automatically when they turn 65 and begin receiving Social Security or RRB retirement benefits.

Younger individuals who successfully apply for Social Security Disability Insurance (SSDI) or RRB disability benefits are also enrolled automatically after a standard four-month waiting period for their SSDI payments to start. Most then must wait 24 months before their Medicare coverage begins, unless they qualify due to end-stage renal disease (ESRD) or amyotrophic lateral sclerosis (ALS) diagnosis. In these instances, the time frame for Medicare coverage depends on a person’s condition and state of health:

  • Those with ESRD who are in the hospital waiting for a kidney transplant or do home dialysis get Medicare coverage whenever their disability benefits begin. Coverage starts after four months of treatment for those receiving dialysis as an inpatient or outpatient.
  • Anyone diagnosed with ALS qualifies for Medicare Part A and B coverage after the usual four-month waiting period for disability benefits to begin.

If you aren’t enrolled in Medicare automatically, you’ll have to submit an application to the Social Security Administration (SSA), which is the agency that handles eligibility and enrollment for the Centers for Medicare & Medicaid Services (CMS). Filing an application is typically necessary if you:

  • Have less than 40 QC of paid Medicare taxes and need to pay a monthly premium for Part A coverage
  • Remain working after age 65 and opt to keep the health care coverage you have through your employer or spouse’s job
  • Want to sign up for a Medicare Advantage Plan instead of Part A and B coverage
  • Qualify for Medicare coverage based on the work record of a spouse, child, or parent

If you’re not enrolled automatically, you can sign up during one or more of these three Medicare enrollment periods:

Initial Enrollment

Everyone who qualifies for original Medicare has a seven-month initial enrollment period (IEP) that begins three months before their 65th birthday and ends three months after their birthday month. If you enroll within the first three months of your IEP, your Medicare coverage is backdated to the month you first became eligible. Enrolling later in the period delays your coverage start date. If you weren’t enrolled automatically but are eligible for Part A coverage without a monthly premium, you can sign up either during or after your IEP.

General Enrollment

If you’re over age 65 and eligible for original Medicare, you can sign up during the program’s general enrollment period that runs from January 1st through March 31st of each year.

Special Enrollment

If you kept working for an employer with 20+ employees after your 65th birthday and kept your existing health insurance through your job or a union, you may qualify to sign up for Medicare coverage during a special enrollment period (SEP). This also applies if you have coverage through your spouse’s employer. A SEP gives you eight months to sign up, beginning the month after your existing coverage or employment ends, whichever takes place first.

IV. Eligibility and Enrollment for Other Types of Medicare Coverage

To be eligible for Advantage, Supplement or Part D plans, you must meet Medicare’s residency requirements and be age 65 or older, or disabled and qualified for Part A and B coverage. Each of the other types of coverage has its own enrollment rules:

Medicare Advantage Plans

If you want to enroll in an Advantage plan instead of Part A and B, you can do so during your seven-month IEP. You can switch from original Medicare to an MA plan during the annual election period that runs between October 1st and December 7th, or during the Medicare open enrollment period offered from January 1st through March 31st of each year.

Prescription Drug Plans

If you decide to sign up for prescription drug coverage through a Part D plan, it’s best to do so during the seven-month-long IEP you get when you first enroll in Original Medicare. You may also sign up for Part D coverage during the annual election period, but you may have to pay a 1% penalty on your monthly premium if you delay enrolling. In certain circumstances, such as losing your prescription plan through an employer, qualifying for dual coverage through Medicare and Medicaid, or moving to another state, you can qualify for an SEP and enroll without any penalty.

Supplement Plans

Medicare offers a six-month open enrollment period for Medigap plans that begins the month you turn 65. During this period, you can compare policies from all insurers in your state and sign up for a plan that best suits your needs and budget, regardless of any health issues you may have. Although it’s possible to enroll beyond this period, your application may be declined, or you may be charged higher premiums because of your age or health.