Medicare basics: What is Medicare and how does it work?
Find out how Medicare works, what it costs and when you should enroll
The federal Medicare program can be complex to navigate. An Ameriprise financial advisor will help you better understand Medicare's costs and complexities, plan what works for you and your overall financial strategy. For an even more in depth look at the Medicare program, review our downloadable guide to Medicare.
Here is what to know about Medicare costs, eligibility and key dates for enrollment.
In this article:
What is Medicare?
Medicare is a nationwide federal health insurance program for people age 65 and older, or those with qualifying illnesses and disabilities. This four-part program is designed to support each individual’s retirement health care needs, hospital services, outpatient services, prescription drug costs or a combination of them.
Those age 65 or older qualify for full Medicare benefits if:
- You are a U.S. citizen or have been a permanent resident for the past five years.
- You are receiving or are eligible for Social Security benefits or Railroad Retirement benefits.
- You or your spouse is a government employee or retiree who has not paid into Social Security but has paid Medicare payroll taxes while working.
Those under age 65 qualify for full Medicare benefits if:
- You have received Social Security disability benefits for at least two years.
- You receive a disability pension from the Railroad Retirement Board and meet certain conditions.
- You have end-stage renal disease kidney dialysis or are a kidney transplant patient.
- You have Lou Gehrig’s disease.
- Learn more: Long-term care insurance: Is it right for you?
What are the different parts of Medicare?
Part A:
Hospital Insurance
Covers the care you receive while an inpatient at a hospital or skilled nursing facility.
Part B:
Medical Insurance
Covers doctor visits, routine medical services such as flu shots, and emergency medical services.
Part C:
Medicare Advantage
Provided by private insurance companies and offer Medicare Part A and Part B coverage, usually with additional benefits, including vision and dental coverage.
Medicare Advantage plans often have more barriers to care and are more restrictive on provider access.
Part D:
Prescription Drug Plan (PDP)
Provides prescription drug coverage through plans administered by private insurers.
What is Medicaid?
Medicaid is a state-run program with income-based eligibility to provide individuals with low- or no-cost health care.
What is Medigap?
Because Original Medicare does not cover every health care expense, many people purchase Medicare supplement insurance, also known as Medigap.
Here’s what to know about these policies:
- The federal government regulates Medigap policies, but they are sold and administered by private insurance companies. The policies are identified by letters and standardized to help consumers compare prices. (Note that Medigap policies in Massachusetts, Minnesota and Wisconsin have slightly different standardization.)
- An ideal time to buy a Medigap policy is during your initial enrollment in Part B. During this period, Medigap providers can’t decline your application or charge a higher premium because of a pre-existing condition. After the Initial Enrollment Period, Medigap plans in most states may reject your application or charge higher premiums.
Social Security benefit calculator
Social Security benefits are an important factor to consider in your future retirement income. Use this calculator to estimate what your retirement benefit amount could be.
Initial Enrollment Period: This period is a seven-month window that begins three months before you turn 65. If you sign up for Original Medicare, the initial enrollment for Medigap, known as your Medigap Open Enrollment, starts six months after initial enrollment in Part B.
Medicare Open Enrollment (October 15 – December 7): This period is for people already enrolled in Medicare and is when you can make changes to your health or prescription drug coverage for the year ahead.
General Enrollment and Medicare Advantage Open Enrollment (January 1 – March 31): This is the enrollment period for those who have never signed up for Medicare (Parts A, B or both), who didn’t sign up during their Initial Enrollment Period or who don’t qualify for a Special Enrollment Period.
- No monthly premium if you worked and paid Medicare taxes for 10 years (40 quarters).
- If you paid Medicare taxes for 30–39 quarters, the standard premium is $278 per month.
- If you paid Medicare taxes for less than 30 quarters, you’ll pay up to $505 each month.
- The standard monthly charge is $174.70, though it could be higher depending on your income.
- If your income is above $103,000 and file your taxes individually (or $206,000 if you’re married and file jointly), you’ll pay an extra amount, known as an income-related monthly adjusted amount (IRMAA) in addition to your premium.
- Monthly premiums will vary based on the type and plan and insurer you choose.
Deductibles and coinsurance
- $240, then 20% of Medicare-approved costs for most services and equipment after meeting the deductible.
- Monthly premiums will vary by your chosen plan and your income, though no drug plan may have a deductible of more than $545 in 2024.
- If your income is above $103,000 and your file your taxes individually (or $206,000 if you’re married and file jointly), you’ll pay an extra amount in addition to your plan premium.
Hospital inpatient deductibles and coinsurance
- $1,632 deductible per each benefit period.
- No coinsurance for days 1–60 per each benefit period.
- $408 coinsurnace per day for days 61/90 per each benefit period.
- $816 coinsurance for each — lifetime reserve day — after day 90 in the hospital for each benefit period (up to 60 days over your lifetime).
- All costs are covered once lifetime reserve days are exhausted.
How to apply for Medicare
- Visit your local Social Security office.
- Call the Social Security Office at 800-722-1213.
- Apply online at ssa.gov.
When you’re ready to reach out to an Ameriprise financial advisor for a complimentary initial consultation, consider bringing these questions to your meeting.
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Download our Medicare guide
Choosing your retirement health coverage is an important decision that can be complicated. This guide will help you to understand Medicare and the choices available to you.
How an Ameriprise financial advisor will help
An Ameriprise advisor will help you understand Medicare’s costs and complexities so you pick a plan that can work for you and your overall financial strategy.
Or, request an appointment online to speak with an advisor.
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