What does Medicare cover and what it doesn’t cover?

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Medicare has multiple parts, coverage, rules and choices. What Medicare covers and what it doesn’t can be confusing.

This guide can help you better understand Medicare Parts A, B, C, and D and make a more informed decision about your options. Here’s what Medicare covers — and what it doesn’t.

What does Medicare cover?

Funded by the federal government, Medicare is our nation’s health insurance program for eligible Americans at least 65 years of age, certain people younger than 65 with qualifying conditions, people with end-stage renal disease, and those with ALS.

Medicare is broken up into four distinct parts:

Part A (hospital insurance) — Covers inpatient hospital stays, some care in a skilled nursing facility, hospice care and some home health care.
Part B (medical insurance) — Covers doctors’ services, outpatient care, medical supplies and preventive services. Together, Parts A and B are regarded as “Original Medicare.”
Part C (Medicare Advantage) — An alternative to Original Medicare, private insurers provide Medicare Advantage plans, which cover everything available in Parts A and B and can include prescription drugs and other benefits not found in Original Medicare like vision, dental and home health care.
Part D (prescription drug coverage) — Administered by private insurance companies, these drug plans are for people with Part A and/or Part B.

How does Medicare work?

You become eligible for Medicare when you turn 65, or if you are eligible early due to a qualifying medical condition.

Medicare is funded through payroll taxes. If you’ve worked for at least 10 years and paid sufficient Medicare taxes, Part A coverage is free. Most people are charged a premium for Part B, but you can decline or delay this coverage. However, if you decline coverage, you may incur a penalty later.

Recipients receive a red, white, and blue Medicare card in the mail that shows whether you have Part A, Part B or both. You present this card to health care providers you visit. It also displays the date your coverage starts.

Most people with Part D are also charged a premium. You aren’t automatically enrolled in Part D, but you can pair a Part D plan with Part A and Part B, which don’t have prescription drug benefits. You can shop for Part D plans on the Medicare.gov site.

Instead of going with Original Medicare, you can enroll in a Medicare Advantage plan through a private insurer. Medicare Advantage plans vary by coverage and costs, so you’ll want to get that information for specific plans.

You’re able to shop for Medicare Advantage plans on the Medicare.gov site.

How has Medicare changed over the years?

Original Medicare started in 1965. There have been numerous changes to offerings, benefits and costs over the years.

Andrew Vasta, a Medicare insurance broker with New Jersey Medicare Brokers, explains that Medicare is always changing, at least in small ways.

“For example, the out-of-pocket costs for individuals on Medicare have continued to go up in recent years,” he says. However, for example, the Part B premium and deductible cost less in 2023 than in 2022.

Shelley Grandidge, owner of the Medicare insurance agency Southwest Health Options, says that while Medicare is more expensive, it also covers more people today than years ago.

“Prescription drugs were not originally included in Medicare. Part D was only signed into law in 2003,” she says. “Also, the Affordable Care Act added free preventive care.”

What does Medicare Part A cover and not cover?

Part A covers inpatient hospital, hospice and home health care. And it helps pay a stay in a skilled nursing facility like a nursing home for up to 100 days for rehabilitative care (Part A doesn’t cover custodial care if that’s the only care needed).

“As long as someone or their spouse has worked and paid taxes for 40 quarters, or 10 years, they will receive Medicare Part A at no charge,” Vasta says.

Otherwise, in 2024 you could pay a premium as high as $505 a month.

If you’re admitted to a hospital in 2024:

Part A coverage kicks in after you pay a deductible of $1,632 per stay.
Days 1-60 in the hospital are free to you.
Days 61-90: $408 coinsurance per day.
Days 91 and beyond: $816 coinsurance per each “lifetime reserve day” after day 90 for each benefit period (up to 60 days over your lifetime).
Each day after  lifetime reserve days : All costs.

“Part A doesn’t cover everything,” Grandidge adds. “For example, it won’t pay for private-duty nursing, a TV or phone in your room if they carry a separate charge or personal care items like razors. It doesn’t include a private room unless medically necessary. And inpatient psychiatric care in a freestanding psychiatric hospital is limited to 190 days in a lifetime.”

Fortunately, you can choose to purchase a Medicare supplement plan called Medigap to help pay for many Part A out-of-pocket costs.

What does Medicare Part B cover and not cover?

Part B pays for doctor visits, lab tests, diagnostic screening, mental health, outpatient care at hospitals and clinics, emergency care, durable medical equipment and associated expenses. But first, you have to pay a $240 annual deductible (in 2024) before Medicare starts paying for care.

“After the deductible is met, you typically pay 20% of the Medicare-approved amount,” says Colleen Corrigan, life and health agent with Wallace & Turner Inc.

Part B also carries a monthly premium of $174.70 for most Americans.

“But this amount will depend on your income,” explains Vasta. If you earn more than $103,000 individually or over $206,000 with your partner, you’ll fall into one of five higher monthly fee brackets for the monthly premium.

As with Part A, a Medigap plan can help pay for these and other out-of-pocket Part B costs.

Note that if you decide not to enroll in Part B but choose to do so later, your coverage could be delayed and you may pay a penalty. Your monthly premium will rise 10% for each 12-month period that you were eligible for Part B. Those who decline enrollment in Part B during their initial enrollment period must enroll during a special enrollment period or during the general enrollment period. The higher monthly premium will last as long as you have Part B.

Be forewarned: Part B, like Part A, doesn’t provide coverage for all services. Common services not covered by Part B include:

Long-term (custodial) care
Most dental care
Dentures
Acupuncture
Eye exams involving prescribing glasses
Cosmetic surgery
Routine foot care
Hearing aids and exams for fitting hearing aids

What does Medicare Part C (Medicare Advantage) cover and not cover?

Not everyone chooses to get their Medicare through Original Medicare. Vasta says one in every three people eligible for Medicare enrolls instead in Medicare Advantage plans, offered through private insurance carriers.

Vasta says Medicare Advantage plans must provide at least the same benefits as Original Medicare. They can also offer supplemental benefits not found in Parts A and B.

Medicare Advantage plans are typically structured as either a health maintenance organization (HMO) or preferred provider organization (PPO) plan.

“HMO plans only allow their members to see doctors and hospitals in-network, except in an emergency. PPOs allow you to see out-of-network doctors, but there may be a higher out-of-pocket cost to do so,” Vasta says.

Most Medicare Advantage plans include prescription drug coverage.

What does Medicare Part D cover and not cover?

Part D, a prescription drug plan, is available separately if you’re enrolled in Parts A and/or B. Part D plans are provided via private companies.

Once your deductible is reached, you pay a copay or coinsurance for each medication. Deductibles can vary between drug plans. No Medicare drug plan is allowed to have a deductible more than $505 in 2024, according to Medicare.gov. The CMS managed website also notes some Medicare drug plans don’t have a deductible.

“The cost per medication can vary from plan to plan and pharmacy to pharmacy,” Vasta cautions. “That’s why it’s important to shop the market or use a Medicare insurance broker to help find a plan that makes the most sense for the prescriptions and pharmacy that are being used.”

Part D doesn’t cover:

Over-the-counter drugs
Drugs sold outside of the United States
Drugs not approved by the Food and Drug Administration
Drugs not used for a medically accepted reason

If you choose to initially not enroll in Part D, you may be charged a late enrollment penalty if you sign up later. This penalty fee will be tacked onto your Part D monthly premium once you enroll. And you’ll have to pay this penalty for the rest of your life. So be sure you have credible insurance coverage when you first become eligible.

Medigap plans can help Original Medicare beneficiaries

If you have Original Medicare, you may want to look into a Medigap plan to help pay for your care.

“Medigap [helps fill] in the gaps that Original Medicare does not pay for,” says Corrigan. “For instance, when you visit the doctor, Parts A and B will only pay for its part of the covered costs. But a Medigap plan will pick up at least some of the remaining medical cost.”

Deciding between Original Medicare and Medicare Advantage

When choosing between Original Medicare or a Medicare Advantage plan, “look closely at your finances and health care needs. Determine what you can afford versus the cost of using the health care,” suggests Vasta. “Be sure your insurance accepts the doctors you prefer and the prescriptions you take, as well.”

Grandidge advises doing your homework before committing to a Part C plan.

“A Medicare Advantage plan will come with a tight network,” she says. “Also, Plan C is not recommended if you frequently travel or have more than one home. Copays can be high if you need to see specialists. And your max out-of-pocket can be up to three times higher than for a Medigap plan that supplements Parts A and B.”

Sources:

Medicare.gov. “Yearly deductible for drug plans.” Accessed August 2022.

Medicare.gov. “Inpatient hospital care. ” Accessed August 2022.

Disclaimer:

Insure.com is not affiliated with or endorsed by the government or Federal Medicare program. Plans are insured or covered by a Medicare Advantage organization with a Medicare contract and/or a Medicare approved Part D sponsor. Enrollment in the plan depends on the plan’s contract renewal with Medicare. We do not offer every plan available in your area. Currently we represent 10 organizations which offer 100 products in your area. Please contact Medicare.gov, 1800-MEDICARE, or your local State Health Insurance Program (SHIP) to get information on all of your options. Not all plans offer all of these benefits. Benefits and availability may vary by carrier and location. Limitations and exclusions may apply. Every year, Medicare evaluates plans based on a 5-star rating system. Part B Premium give-back is not available with all plans. Actual Part B premium reduction could be lower. Deductibles, copays and coinsurance may apply. Enrollment in the described plan type may be limited to certain times of the year unless you qualify for a Special Enrollment Period.

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Erik Martin

Contributing Researcher

Erik J. Martin is a Chicago area-based freelance writer whose articles have been published by AARP The Magazine, The Motley Fool, The Costco Connection, USAA, US Chamber of Commerce, Bankrate, The Chicago Tribune, and other publications. He often writes on topics related to insurance, real estate, personal finance, business, technology, health care, and entertainment. Erik also hosts a podcast and publishes several blogs, including Martinspiration.com and Cineversegroup.com.