Medicare is a federal health insurance program, started in 1966, for United States citizens age 65+ and for people with certain disabilities or end-stage kidney failure. We all pay into this program through our payroll taxes, which makes this a federal benefit that you are entitled to as long as you’ve worked for at least 10 years within the United States. Original Medicare consists of two parts: Part A and Part B.
Part A – Inpatient Hospital Insurance
Medicare Part A covers you when you are admitted into the hospital as an inpatient. Most people will pay $0 for Part A, since they’ve been paying for it through taxes. Part A has a $1484 deductible (Updated for 2021) that can be paid several times a year if you’re really unlucky. After the deductible there are significant out-of-pocket costs if you happen to be in the hospital for longer than 60 days.
Part B – Outpatient Medical Insurance
Medicare Part B covers you for basically everything outside of the hospital, like doctor visits, X-Rays, MRI’s, etc. except for your prescription drugs. Most people will pay the minimum Part B amount of $148.50/mo (Updated for 2021). However, if your income is above a certain limit, the government will add on a “surcharge” that can bring the Part B monthly payment up to as high as $500/month. Coverage wise, Part B has a small yearly deductible of $203 until it kicks in and then Medicare will cover 80% of approved charges, leaving you the remaining 20%. It is important to note that there is no limit on your out of pocket expenses if you stick with just Original Medicare, and that is a lot of risk considering that medical bills can frequently exceed $500,000.
You can think of Original Medicare as being effectively 80/20 coverage. Most people will add on a Medicare Supplement (Medigap) Plan or a Medicare Advantage Plan to help cover the 20% that Original Medicare does not.
Prescription medications are not covered by Original Medicare, so you’ll need to add that coverage with a Part D – Drug plan.