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Medicare was signed into law by President Lyndon Johnson on July 30th, 1965. The original Medicare program included Part A and Part B and is known as “Original Medicare.”  While it was initially created to cover only people 65 and older, changes to Medicare since 1965 have added coverage for people with disabilities and people with End-Stage Renal Disease (ESRD).  It has also added benefits not included with the original legislation. Today, Medicare is the primary health insurance for people 65 and older.

The two original parts of Medicare are:

Part A (Hospital Insurance):

• Part A covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home health care. 
• Part A premiums are paid for through Medicare payroll taxes and most people do not pay additional Part A premiums when they become eligible for Medicare coverage.
• There is a deductible on Part A coverage that usually increases every year. 
• There are also copayments associated with certain expenses.

Part B (Medical Insurance): 

• Part B covers services from doctors and other providers, outpatient care, medical equipment and preventive services. 
• There is an additional premium that must be paid for Part B coverage. This premium may be higher depending on the income of the Medicare beneficiary.
• Part B coverage includes a yearly deductible and coinsurance of 20%. 

While a large part of a beneficiary’s health care expenses are covered by Medicare Parts A & B, the deductibles, copays and coinsurance requirements create a potential for significant out of pocket costs for them.  A Medicare Supplement plan can greatly reduce this liability.

There are two other parts of Medicare that were created after the passage of the original law. In 2003, President George W. Bush signed into law the Medicare Modernization Act (MMA) which established Part C which are private health plans approved by Medicare.  This is also known as Medicare Advantage.  It also created Part D which is an optional prescription drug benefit that became effective in 2006.

Part C (Medicare Advantage Plans):

• A type of health plan offered by a private company approved by Medicare.
• Plans require enrollees to go to specific providers (Hospitals and Doctors). Going outside of the “network” incurs additional costs.
• Enrollees must have Parts A & B and may pay an additional premium.
• Plans include copays for many services, including hospital stays.
• These plans are not available in many areas of the country.
• Part C is administered by a separate set of rules and regulations.
• If a Medicare beneficiary is enrolled in a Medicare Advantage plan, they cannot also have a Med Supp plan.

Part D (Prescription Drug Coverage): 

• Part D plans can vary significantly although they are required to meet a minimum “Basic” model that includes a deductible, formulary, coverage gap (also called a “Donut Hole”) and catastrophic coverage.
• Part D Plans are insured by private insurance companies.
• Medicare Advantage Plans may also offer prescription drug coverage.
• Part D is voluntary but there is a penalty assessed for not enrolling when first eligible.
• While beneficiaries can change a Med Supp plans at any time, Part D plans can only be changed at certain times of the year.

It’s important to note that there are certain expenses that are not covered by Medicare. These include dental and vision expenses as well as custodial long term care.  Fortunately, these expenses can be covered with other insurance plans.

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