What Is Medicare?

• Medicare is a federally run health insurance program for people 65 and older or for people under 65 who have certain disabilities or health conditions.
  
• Medicare provides coverage for a wide range of medically necessary services, hospital and outpatient care, preventative care, doctors visits, and more.
  
• Medicare is composed of four sections called Part A, Part B, Part C and Part D.
• You enroll in Medicare through the Social Security Administration.

Medicare was established when the Medicare & Medicaid Act was signed into law in July 1965 by President Lyndon B. Johnson. The act created a national program to provide people 65 and older with heath care coverage. Initially, the only coverage options were Part A and Part B.

Throughout the years, the coverage has evolved and changed to cover more people than it did in its early years. Today, more than 60 million people have coverage from Medicare.

While Part A and Part B will provide coverage for a majority of your expenses, there are federally regulated supplement policies that you can purchase to help fill in the gaps that aren't fully covered by Medicare.

Part A is hospital insurance that assists you with the cost of inpatient care and skilled nursing facility stays. It also helps with things like home health care and hospice care.

Part A covers the cost of a semi-private room, diagnostic tests, nursing services, and meals. However, it does not cover all of the treatments that might occur in a hospital or clinic setting, such as outpatient surgeries. Those fall under Medicare Part B.

The cost of Part A for most people at age 65 is $0. This is because during your working years, you have paid taxes the qualify you for hospital benefits. However, most Medicare recipients are subject to deductibles ($1,676 for 2025) and coinsurance if hospital stays exceed 60 days during each benefit period. Due to the coinsure requirement, there is no out-of-pocket maximum for Part A.

A Medicare supplement plan or Medicare Advantage plan can reduce deductibles and copays, and they establish an annual maximum on out-of-pocket expenses.

You can also qualify for Part A for $0 through a spouse or ex-spouse's work history. Even if you don't automatically qualify for premium-free coverage, you can still get it at age 65 — you just have to pay a monthly premium for it.

Part B is your outpatient medical coverage. It essentially covers all of your other medical services outside of your  inpatient hospital care. Without Part B, you would be uninsured for doctor's visits (including doctors who treat you in the hospital). You also would not have Medicare coverage for lab work, ambulance services, and outpatient surgeries.

More importantly, Part B covers expensive therapies such as cancer treatment and kidney dialysis that could be prohibitively costly without Part B and supplemental coverage.

Social Security sets the cost of Part B and changes it from year to year. For 2025, it's $185 per month. Individuals in higher income brackets pay more. Your modified adjusted gross income reported to the IRS determines what your Part B premium will be.

Part B includes a deductible ($257 for 2025) that must be satisfied in addition to the Part A deductible. And like part A, there is no out-of-pocket maximum on Part B.

Medicare Part C — today known as Medicare Advantage — was created by Congress in 1997 to give Medicare beneficiaries more coverage choices. It creates an alternate way to receive Medicare benefits provided by Part A and Part B. 

Medicare Advantage plans are offered by private insurance companies approved by Medicare. The plans often include additional benefits such as dental, vision, hearing, and prescription drug coverage, and they can reduce or eliminate co-pays, deductibles, and out-of-pocket spending limits. But they also can impose network restrictions, meaning you have to use certain doctors, hospitals, and other facilities to receive full benefits. 

One of the most important features of all Medicare Advantage plans is the cap they provide on out-of-pocket expenses ($9,350 in 2025) per benefit period.

Costs range from $0 to $300-plus per month for Medicare Advantage, depending on the additional benefits bundled in the plan, the network restrictions, and the limits the plan sets on out-of-pocket spending. However, the national average premium for Medicare Advantage is about $17 per month, as of 2025.

Medicare Advantage premiums are paid in addition to the premiums you pay for Part A or Part B coverage.

Medicare Part D is a government program that started in 2006 to help people with Medicare pay for prescription drugs.The benefit is offered through private insurance companies approved by Medicare.

Medicare Part A and Part B have only limited drug coverage that generally does not include prescriptions filled by a retail pharmacy.

Part D is optional, but most Medicare recipients access the benefit either through a standalone Prescription Drug Plan or through a Medicare Advantage plan that includes drug coverage.

Prescription drug plans have monthly premiums, deductibles, and co-pays, but they can significantly lower prescription drug costs. Every Part D plan has a list of brand name and generic drugs that are covered (called the formulary), and the cost of the plan is related to the formulary. 

The monthly cost for a prescription Drug Plan can range from $ 0 to upwards of $200. The national average is $46 per month for 2025, while the maximum allowable deductible for drug plans is $590 in 2025, and the maximum out-of-pocket expense is $2,000 per year.