Since its inception in 1966, the Medicare program has undergone several changes. Understanding how this program is organized into different parts can help Medicare recipients better navigate their care and coverage.
History of the Medicare Program
The Social Security Amendments of 1965 led to the establishment of Medicare and Medicaid. From the beginning, services covered by Medicare were split under two main categories: hospital insurance, which is called Part A, and medical insurance, which is called Part B.
The way each part of the program is funded helps explain why they’re separate from one another. Part A is funded in large part from a specific payroll tax paid by employers and workers; while some recipients may be obligated to pay a monthly premium for Part A, most receive Part A premium-free. Part B, on the other hand, is funded through a combination of U.S. Treasury revenue and the premiums Medicare beneficiaries pay for being enrolled in Part B.
In the years following its creation, changes to how beneficiaries receive their Medicare benefits gave rise to the common practice of referring to the combined benefits of Part A and Part B as Original Medicare. This can help Medicare recipients identify their basic level of benefits from other programs that may package Original Medicare with other types of coverage, or simply enhance the existing coverage available under Original Medicare.
Identifying Original Medicare Benefits
Medicare Part A hospital insurance generally covers:
- Hospital services during inpatient stays
- Skilled nursing facility services for qualifying conditions
- Hospice care services
- Qualifying home health services
Medicare Part B medical insurance generally covers:
- Preventative outpatient health services
- Medically necessary and urgent care outpatient health services
- Emergency or medical transportation services
- Laboratory tests and other diagnostic services
- Durable medical equipment (DME)
- Mental health inpatient and outpatient services
- Medications that must be administered by a health care professional
With either plan, beneficiaries may have cost-sharing obligations for certain services in addition to any monthly premiums they pay. This may be due as a copayment, which is a fixed dollar amount, or a coinsurance, which is a percentage of the Medicare-approved amount.
Other Medicare Plans
In an effort to provide Medicare beneficiaries with more choices when it comes to receiving their benefits and managing the cost of their care, Medicare contracts with private insurers to offer enhancement and expansion to the Original Medicare program.
Medicare Supplement Insurance, better known as Medigap, helps cover costs of premiums, deductibles, copayments and coinsurance amounts. How much is covered and what other benefits may be provided by a Medigap plan is largely standardized in most states, which use letter-based names to identify each plan. Availability of these plans may be different in each location.
Medicare Advantage Plans, also called Medicare Part C or MA Plans, bundle Original Medicare benefits with coverage that isn’t included in Part A or Part B. This could be routine vision, dental and eye exams. Some Part C plans offer Part D prescription drug coverage, but recipients who have Original Medicare either on its own or with a Medigap plan can also enroll in a standalone Part D Prescription Drug Plan.