Medicare Explained: Understanding the Basics from Part A to Part D

MCT / Getty Images
Health care is one of the toughest financial challenges you'll face in retirement. For millions of retirees, Medicare coverage that takes effect for most people at age 65 is the key to being able to afford health care costs that would otherwise quickly sap their retirement savings.

But over the years, Medicare has gotten increasingly complicated, and with the emergence of Obamacare, Americans are struggling to understand exactly how to get their health care covered.
To help you get a handle on Medicare, let's run through the different types of coverage the program provides.

The Medicare Alphabet

Since 1965, Medicare's two original components have helped cover basic health needs.

The first, known as Part A, focuses on the costs of health care at medical facilities, providing coverage for medically necessary care at hospitals while you're receiving inpatient care. Under some circumstances, it also covers costs for home health services, hospice care, and skilled nursing facilities. However, nursing home costs are covered only for limited purposes and time periods.

Medicare Part B covers the costs of health care outside medical facilities, such as doctors' visits, outpatient procedures, and lab tests. It also helps cover the cost of services related to health care, such as wheelchairs and scooters, oxygen tanks, and ambulance services. In addition to providing coverage for health care needs that qualify as medically necessary, Part B also covers certain preventive-care services, such as screening for heart conditions, diabetes, and certain types of cancer.

In addition to government-provided Parts A and B, Medicare Part C is optional private insurance that Humana (HUM), Aetna (AET), UnitedHealth (UNH), and others provide. Better known as Medicare Advantage Plans, Part C involves paying premiums to those insurers, which then provide coverage for charges that Parts A and B don't pay for. Medicare Advantage Plans vary greatly both in cost and in scope of coverage, so you have to look closely at all your options to make sure they fit what you want from a plan.

Finally, Medicare Part D provides prescription drug coverage. Like Medicare Advantage Plans, Part D plans are offered through private insurance companies, and the coverage that different policies offer can vary widely from insurer to insurer and from plan to plan. In fact, many Part C Medicare Advantage Plans include Part D options within a single package.

How You Pay for Medicare

Each part of Medicare has different charges associated with it. For Part A, those who've had Medicare taxes withheld from their pay for at least 40 calendar quarters during their lifetime are eligible for free coverage.

Part B coverage requires a monthly premium that varies depending on your income level. Individuals with yearly income in 2011 of $85,000 or less, or joint tax-return filers with $170,000 or less in income, all pay $104.90 in monthly premiums for Part B. Above those levels, premiums are higher, topping out at $335.70 per month for incomes above $214,000 for singles and $428,000 for joint filers.

Private insurance for Medicare Advantage and prescription drug coverage involves paying monthly premiums to the insurers that provide your policy. What you'll pay in premiums depends in large part on the extent of the coverage the policy provides, with more all-inclusive policies charging higher monthly premiums.

In addition to premiums, you may also be responsible for deductibles, copayments, and other costs. For instance, hospital stays and covered skilled-nursing care often requires a per-day copayment from the patient.

Adding It All Together

Medicare is a complex system that has many interlocking parts. By understanding how they all work, however, you'll be in the best position to get everything you're entitled to receive under Medicare.

For more information on Medicare, visit the government's Medicare website here.

Motley Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends UnitedHealth Group.

Increase your money and finance knowledge from home

Managing your Portfolio

Keeping your portfolio and financial life fit!

View Course »

Introduction to Retirement Funds

Target date funds help you maintain a long term portfolio.

View Course »

Add a Comment

*0 / 3000 Character Maximum


Filter by:
Lawrance Jackson

It is true that medicare is getting complicated as years passing, but best way to deal with is to study medicare thoroughly. If you are not able to understand anything by yourself, go to medicare site. You may also get good advice here also if anyone wants to...

May 22 2013 at 8:00 AM Report abuse +1 rate up rate down Reply

Thank you for this helpful info.

May 18 2013 at 6:46 PM Report abuse rate up rate down Reply

freekin MORONS gushing about obummer care via the angelina jolie announcement
the duMMies hysterically ranting
oboMba's gonna pay mah mortgage
gas for mah cah
THEY BELIEVE THAT EVERY ONE OF THEM with some bs predisposition and GENETIC CRAP WILL GET this--

AND medicare is simply ANOTHER RIP OFF

can't wait for TSTHTF.

May 15 2013 at 10:01 PM Report abuse rate up rate down Reply

Wonder how the 11+ million illegals will be covered when Obama care is legal next year.The law will state they do not get coverage but tricky Dick Durbin wants to pass an amendent this year that will allow most of them to apply for coverage and guess who will pay for it. Thats right me and you and all the working middle class in this country.

May 15 2013 at 10:22 AM Report abuse +2 rate up rate down Reply
1 reply to mantoll's comment

what do you propose we watch these people die on our streets?

Does compassion humanity ever come into your mind?

May 15 2013 at 12:06 PM Report abuse -2 rate up rate down Reply

In response to your comments about Medciare parts AB and C. What is really sad is around the country compared to what used to happen in home based care. No longer will the client be able to choose the company that provides the service be it home oxygen, wheelchairs, hospital beds walkers and such. They will be told by the companys that used to provide their services that for medicare to pay for extremly reduced monthly fees they have to use one or two of the companys that have WON the contract. All this will do is reduce the service level the customer will recieve as well as the equipment quality will go down as the company that Won the contract will buy the cheapest equipment they can possibly find. Beware what is currently happening in your country. There are way to many good companies that are shutting their doors because of this fantastic medicare competitive bidding . The ulitmate loosers in all this are the clients that are on Medicare. They will not be given the choice anymore.

May 14 2013 at 10:42 PM Report abuse rate up rate down Reply

Someone said none of Medicare is optional. Actually, most of it is optional. For several Social Security programs, there is no medicare made available or its a two year period after social security benefits begin.
If its SSI, they get medicaid, since that social security disability program is income based and they do not have 40 quarters. SSDI is for over 40 quarters and its OK if you already have money.
Medicare A is free.
Medicare B is optional. Its the outpatient care. If there is another means of getting your medical care, like spouse's insurance or clinic use only, the VA, whatever, you do not have to take it. If you do take it and you are of low income, there are federal programs to assist you with the premiums administered by states. You must qualifty for A to get B and must have B or C to get D. If you are low income and you get D, you may have little or no out of pocket payment for the policy and a reduced co-pay. This is where the no discount for the fed for drugs issue comes in. If they are paying the premiums, and you are in the donut hole, the insurance isnt paying for the drugs. But the gov cant get the discount, so they are paying the whole premium for the discount. Thank you insurance lobby.
There are some medicaid programs, as when medicare wont cover all nursing home needs etc, where this will be taken back from your estate and you may have to spend any savings before you are eligible at all. There may be a monthly amount that must be spent out of pocket before medicaid kicks in.
Yep, its complicated. It is there if you need it. And most people do need it. If you do not, you decide if it is worth it. Once a year.
The piece did not go into detail on co-pays and deductibles and there big ones. B is under 150 annual ded with 20% co-pays. Hosp deductables are over 1000.00 so with dr and lab and radiology and pathology etc B copays may still end up in a couple thousand dollar hosp bill. The worst thing that can happen is a severe injury or illness requiring a second facitity for physical rehab. There is yet another huge deductible there.
Its odd how many people say this is the best insurance they have ever had and they have paid for insurance their entire working lives. That says a lot about private insurance. Billing offices love that it pays fast without a fight. And there is the advantage of finally having time to have 40 years of pre-eixisting conditions treated.

May 14 2013 at 7:28 PM Report abuse rate up rate down Reply
Tom Harrell

I've had Medicare for almost a Year now. my Doctor sent me for a Nuclear Stress test because of some tests that came back Positive and my "ADVANTAGE PLAN" refused to pay for it !--------It just shows me that you can Die of incompetence WITH Medicare just as easilly as WITHOUT Medicare..

May 14 2013 at 5:07 PM Report abuse +4 rate up rate down Reply

the idiots are out today. blaming obama for everything.

May 14 2013 at 4:07 PM Report abuse +3 rate up rate down Reply

i worked and paid for my part A medicare....I am paying 104.90 for part B.....I am paying for part C $180.60 this year for...........For part D I am paying 43.00 dollars a month for this year only, these get higher every year, that I get older. I am in good health and I don't run to the doctor everytime i get a pain. thats a lot of money that I pay out and if I were not married I could not afford it. So if every gets cut Iam up the creek. thankfully my h usband goes to the veterans hospital and medical facility for part C, but still pays co- pay for part C.

May 14 2013 at 1:13 PM Report abuse +2 rate up rate down Reply
1 reply to lcvickers8's comment

Correct, and while very affordable, still not as cheap as me going to our local VA Hospital, which provides me with excellent care. Paid to have served our country during a time of war while others like little teddie nugent played insane and others ran to Canada.

May 14 2013 at 4:21 PM Report abuse +5 rate up rate down Reply

Thank you for this information. I am making a copy of it and will use it to good advantage in future medical situations. Your concern is much appreciated. J. Keller

May 14 2013 at 1:06 PM Report abuse rate up rate down Reply
1 reply to kellerkatz's comment

When you sign on to Medicare, each year they send youa booklet with all the information you need as to what Medicare covers and does not cover. The only thing which it will not give is the monthly cost of Medicare Premium as it depends on what Congress wants Medicare to cost. You also have a deductible to pay before Medicare starts paying. Just be sure you do not attempt to use Medicare until the day of your (in this case) 65th birthday and not in the Month of your birthday even though it says you are covered. You have to be at least 65.

May 14 2013 at 7:03 PM Report abuse rate up rate down Reply