Medicare: What's Covered and What's Not

Medicare can be confusing. There are a number of pieces to the Medicare puzzle, and understanding how they fit together and where there are gaps is important to knowing where Medicare coverage begins and ends.  For the official U.S. Government perspective on Medicare, visit the Medicare Options Compare website. Remember that Medicare is a financial tool and should be used with your own common sense to determine things you may also want above and beyond Medicare.

Pieces of the Medicare Puzzle

Medicare comes in four parts, with variations, and can be supplemented with other health insurance options purchased privately or from an employer retirement plan. The four parts of Medicare have evolved over time, and names have changed, too. They are now known as Part A (Hospitalization), Part B (Medical), Part C (Medicare Advantage), and Part D (Prescription). The other popularly known piece of the puzzle is Medigap, which is private insurance that supplements the other parts.

Part A: Hospitalization

View an Instructive Diagram of Medicare Part A Coverage

If you end up in the hospital, you're likely to have significant medical bills. Medicare Part A, hospitalization insurance, is intended to help you reduce your liability for those charges that occur when you are in a hospital, a skilled nursing facility, or hospice, along with some home health care expenses.

• Premium: Varies based on your eligibility. Can range from nothing to several thousand dollars depending on whether you've worked the minimum 10 years to qualify.
• Out of pocket: You must pay an annual deductible that is close to $1000 for the first 60 days of hospitalization. For 61-90 days in the hospital, you must pay about $250 a day. For 91-150 days in the hospital, you're on the hook for about $500 a day. Go over 150 days and you pay it all.
• Providers: Anyone who takes Medicare Hospitalization.

Part B: Medical (Doctor) 

View an Instructive Diagram of Medicare Part B Coverage

Unpredictable medical expenses can make your financial life a mess. Medicare Part B, Medical Insurance, is intended to balance out the financial ups and downs to help you stay financially sound in the face of medical needs, including outpatient services, doctor visits, and some home health care. It specifically does not include vision, dental, routine foot care, hearing aids, and routine doctor visits.

• Premium: about $100 a month or more
• Out of pocket: You pay 20% of the total allowable charges, Medicare picks up 80%.
• Providers: Anyone who takes Medicare Medical.

Part A + B Supplement: Medigap 

The Medigap supplement reduces the difference between what is paid by Medicare and what is charged by the healthcare providers. This can really make a difference once you look at the out of pocket costs of Medicare Part A and Medicare Part B. Since it is purchased from private insurers, the quality of the insurance company should be foremost.