Original Medicare, sometimes called traditional Medicare, is the federal government’s health insurance system for people ages 65 and up. Individuals under age 65 may be eligible to get Medicare if they have a disability, End-Stage Renal Disease (ESRD), or ALS (Lou Gehrig’s Disease).
This article explains how Original Medicare works, what it costs, how to use it with other parts of Medicare, and how it interacts with coverage from private insurance companies.
What is Medicare?
In 1965, the Johnson Administration signed Medicare and Medicaid into law and created the Centers for Medicare & Medicaid Services (CMS) to oversee the programs. Medicare is the federal health insurance program primarily for people aged 65 and older. Medicaid is a combined federal and state program that provides health coverage to people with limited income and resources.
The term Original Medicare came into being when the G.W. Bush Administration enacted the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), which allowed private companies to offer health and prescription drug plans to people on Medicare.
Medicare Parts
When first established in 1965, Medicare was organized into two parts: A and B. Benefits have expanded over the years, but the two parts have primarily remained the same.
Part A is hospital insurance. It covers the costs of inpatient care.
Part B is medical insurance. It covers doctor visits, screenings, tests, medical supplies, and durable medical equipment.
When Medicare was modernized in 2003, the Medicare program kept its “parts” nomenclature and added Part C (private health plans) and Part D (private prescription drug plans).
Part A: Hospital Insurance
You learned above that Medicare Part A covers you when you are hospitalized. But it offers more than just that.
It also covers you if you need skilled nursing facility care or home health care after being discharged from the hospital.
Part A also covers hospice care at home or in a hospice facility and the cost of an emergency room visit if you are subsequently admitted as an inpatient.
Part A Qualification & Enrollment
Most legal U.S. residents who are 65 qualify for Medicare Part A. Non-legal residents do not qualify.
If you or your spouse have worked at least ten years (40 quarters) and paid Medicare taxes, you receive Part A premium free (no monthly cost). You must pay a monthly premium if you or your spouse did not work and pay Medicare taxes for the minimum period.
In some cases, Medicare Part A enrollment is automatic, but not for everyone. For example, people receiving Social Security benefits when they turn 65 will automatically enroll in Part A. The same is true for retired railroad workers.
Unless you know you will be automatically enrolled, you should begin online at https://www.ssa.gov/medicare/sign-up (or on Medicare.gov) or by calling +1 800-772-1213. You can start enrolling three calendar months before you turn age 65. This is your Initial Enrollment Period, which lasts seven calendar months.
Part A Costs (2024)
Although most people get Part A benefits without a monthly premium, there are out-of-pocket costs, including benefit period deductibles and copayments.
In most cases, the benefit period deductible ($1,632 in 2024) will cover all of your hospitalization and skilled nursing costs. You will only pay a daily copayment if your stay in the hospital or a skilled nursing home exceeds the deductible limit.
Here are the costs with Part A:
Medicare Part A Monthly Premium
- No monthly premium (free) for most beneficiaries.
- $278/month for beneficiaries who paid into Medicare for 7.5 to 10 years.
- $506/month for beneficiaries who paid into Medicare for less than 7.5 years.
Medicare Part A Deductible
- $1,632 per benefit period
- Covers up to 60 days in the hospital
- A benefit period begins the day you’re admitted as an inpatient to a hospital or skilled nursing facility (SNF) and ends when you haven’t received any inpatient hospital care (or skilled nursing care in an SNF) for 60 days.
- Supplemental Medicare coverage will pay some or all the Part A deductible, depending on your Medigap policy.
Medicare Part A Coinsurance
- $408 per inpatient day, days 61-90 of the benefit period.
- $816 per inpatient day for day 91 and beyond of the benefit period (lifetime reserve days).
- $204 per day for skilled nursing facility care (day 21+). Medicare Part A covers 100 percent of the cost of skilled nursing facility care for the first 20 days, so long as you have at least a three-night inpatient hospital stay before the skilled nursing facility stay.
- Supplemental Medicare coverage helps pay some or all your Part A coinsurance. All standardized Medicare Supplement Plans cover 365 additional days in the hospital after Medicare benefits are exhausted.
Part B: Medical Insurance
Medicare Part B covers doctor’s visits, outpatient care, tests, diagnostic services, preventive services, medical supplies, durable medical equipment, and other medical services.
Medicare Part B coverage is limited to medically necessary services. For this reason, secondary medical care, such as routine dental care, vision care, and hearing aids, are not covered; the same goes for long-term care.
Part B Qualification & Enrollment
Qualification for Medicare Part B is the same as Part A. However, enrollment in Part B is separate.
Part B is separate from Part A because it is funded differently. Whereas Part A is funded through payroll taxes, Part B isn’t. Part B is funded through monthly premiums.
Part B is also separate because if you are still working, you can delay enrollment for as long as you have qualifying employer health coverage.
Part B Costs (2024)
Medicare Part B has several costs, including an annual deductible, a 20% coinsurance, and potentially excess charges.
Medicare Part B Monthly Premiums
- $174.70 per month is what most beneficiaries will pay in 2024. Your actual rate will depend on the Social Security cost of living adjustment (COLA).
- High-income enrollees pay an additional Income Related Monthly Adjustment Amount (the high-income threshold is $103,000 for an individual and $258,000 for a married couple).
- Part B premiums will be higher if you delay your enrollment (due to a late enrollment penalty).
Medicare Part B Deductible
- The Part B deductible is $240 per year. If you receive a Part B-covered service during the year, you will pay all costs out-of-pocket until the deductible is met.
- Medicare Plan C and Plan F will pay your Part B deductible for you, but these plans are no longer available for newly eligible Medicare enrollees. (Plan G is the same as Plan F, except you pay the Part B deductible.)
Medicare Part B Coinsurance:
- After your Part B deductible, you pay 20 percent of all Medicare-approved costs for Part B services. There is no maximum out-of-pocket limit. However, you can get a Medigap plan to cover some or all of the Part B coinsurance.
Choosing Original Medicare Providers and Getting Care
Original Medicare beneficiaries can access care from any provider who accepts Medicare. However, it is important to verify provider participation in Medicare before receiving care.
Fortunately, Medicare has made it easy to find a provider (like physicians, hospitals, nursing homes, and others), using a single online tool that lets you:
- Find information about providers and facilities.
- Get helpful resources to choose your healthcare providers.
- Make informed decisions about where you get your healthcare
Original Medicare Coordination with Other Coverage
Original Medicare does not stand alone as an island. It works together with other types of insurance.
Original Medicare and Medigap
As you discovered above, Medicare has many costs. It’s that way by design. Medicare is an 80/20 system. It pays about 80% of all major medical costs; the beneficiary pays the remaining 20% (or gets additional coverage).
Medicare Supplement Insurance (Medigap plans) is additional coverage that helps pay some out-of-pocket costs in Original Medicare. These indemnity insurance policies, sold by private insurance companies, work in lockstep with Part A and Part B.
As a general rule, Medigap plans do not add additional benefits, although some plans did in the past. Ten standardized plans cover different costs, allowing you to get just the needed coverage.
The following chart shows what each Medigap plan covers:
NOTE: It’s easy to confuse the lettered Medigap Plans (A, B, C, D, F, G, K, L, M, and N) with the various parts of Medicare. Medigap plans are separate policies.
Original Medicare and Medicaid
Even with the benefits offered by Medicare, millions of Americans can’t afford the care they need.
That’s where Medicaid comes in. It works with Medicare to help qualifying individuals afford their monthly premiums and out-of-pocket costs.
RELATED: How to Qualify for Both Medicare and Medicaid
Original Medicare and VA Healthcare
Millions of Veterans qualify for Veterans Administration Healthcare benefits. When they do, they can receive healthcare at a VA facility or through a Medicare provider.
When a Veteran enrolled in Medicare uses a VA facility, the VA bills Medicare for its portion of the services because Medicare is the primary payor.
If the Veteran is in priority group 7 or 8, they will pay a copay for the services they receive at the VA. They pay either the full copay rate or the reduced copay rate. If you live in a high-cost area, you may qualify for a reduced inpatient copay rate, no matter your priority group.
Original Medicare and Prescription Drug Plans
Original Medicare covers drugs administered in your doctor’s office or as an inpatient in the hospital. However, it does not cover prescription medications you take at home. For prescriptions, you need a Part A plan.
Medicare Part D plans are separate policies approved by Medicare and sold by private insurance companies. Most of these plans have an annual deductible and copayments when you pick up your prescriptions.
If you don’t have regular prescriptions, you can safely choose one of the low-cost plans available in your area to have prescription drug coverage when needed. This is essential because Medicare will apply a penalty to your monthly premium if you have a lapse in coverage.
Original Medicare and Medicare Advantage Plans
Medicare Advantage (Part C) is a private health plan option in most areas. These plans are not used together with Original Medicare, like Medicare Supplements and Medicare Part D.
When you join a Medicare Advantage plan, you are disenrolled from Original Medicare. All Medicare Advantage plans are required to cover all Part A and Part B services, and you receive these benefits through the plan.
However, there is a difference. What you pay out-of-pocket to receive your Part A and Part B services is determined by the plan, not by Medicare. For some services, you may pay less, more, or the same amount.
Also, most plans have provider networks and may require referrals, whereas Original Medicare Doesn’t. With an HMO plan, you pay all costs if you go outside of the plan’s network. With a PPO plan, you pay higher costs.
Conclusion
When combined with a Medicare Supplement or Medicaid, Original Medicare coverage is widely considered the best option for Medicare beneficiaries. However, it is crucial to explore your coverage options and make informed decisions based on your needs.