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Medicare 101: A Must-Read Guide to the Basics

Answers to frequently asked questions about the health insurance program for people 65+

Medicare for Dummies book excerpt by Patricia Barry. (Mark Hooper/Gallery Stock)

Medicare's different parts and plans provide differing types of medical coverage. — Mark Hooper/Gallery Stock

En español l When the prospect of becoming a Medicare beneficiary looms on the horizon, you suddenly become aware — if you’re like most people — of how little you know about the program. And can you be sure what you think you know is accurate?

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Based on the questions I receive as the Ask Ms. Medicare columnist for AARP, I can tell you that a lot of perceptions about the program are way off base. Often, they’re gleaned from the Internet or even mass emails that are deliberately misleading. And if you’ve had health insurance in the past, especially from an employer, you may naturally be nervous about how Medicare coverage compares with it.

In writing the new AARP book Medicare for Dummies (see the box below), I include questions people frequently raise about the program. Here is a sample:

Q: As a government-run system, will Medicare provide me with inferior care?

A: No — or at least, not inherently. The federal government runs and regulates Medicare, and also pays around 75 percent of the cost of the medical services you use. Even so, those actual services are almost wholly private. The doctors you go to are not government employees; the hospitals and laboratories that provide services to you are not government-owned. Instead, they’re free to enter (or not enter) into contracts with Medicare as they choose. Those who accept you as a Medicare patient are the same kind of private practitioners you would have seen for care before your Medicare coverage began.

Q: Is Medicare free?

A: No, you pay monthly premiums unless you qualify for low-income assistance from your state. (If your income is over a certain level, you pay a surcharge on your premiums.) You also pay deductibles and copayments, which vary according to the type of coverage you choose.

Q: Will Medicare allow me fewer choices than I have now?

A: No. In fact, the reverse may be true. If you’ve had health insurance from a private employer, for example, you probably had only two or three plans to choose from each year. In contrast, Medicare offers a choice between the traditional program — which allows you to go to any doctor or other provider in the United States that accepts Medicare patients — and a variety of Medicare Advantage private health plans (such as HMOs and PPOs), which are likely similar to plans you’ve known in the past. Depending on where you live, you may be overwhelmed by the number of options. In some areas, as many as 50 Medicare Advantage plans are available. Also, at least 25 private Part D plans in each state offer Medicare prescription drug coverage.

Q: Will my out-of-pocket expenses be capped in Medicare?

A: Not necessarily. Traditional Medicare sets no limit on out-of-pocket expenses during a year (although many people buy separate medigap supplemental insurance to cover them). However, all Medicare Advantage plans are required by law to set annual caps on these ex­penses (up to $6,700 in 2013). In Part D, after you’ve spent a certain amount out of pocket on prescription drugs in a year, you qualify for catastrophic coverage, which greatly lowers your costs for the rest of the year.

Next page: Deductibles and preexisting medical conditions. »


PART A: Coverage for hospital stays, home health services and hospice care.

PART B: Coverage for doctors' services, outpatient care and medical equipment.

PART C (Medicare Advantage): Private plans that provide Part A, B and (often) D services, as an alternative to traditional Medicare, usually through managed care.

PART D: Prescription drug coverage, offered through private "stand-alone" drug plans or Medicare Advantage plans.

TRADITIONAL MEDICARE: The original program that covers Part A and B benefits by paying providers directly for each service.

MEDIGAP: Private, optional supplemental insurance that covers many of traditional Medicare's out-of-pocket expenses.

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