History
Medicare is a federal health insurance program for people 65 and older and younger people with long-term disabilities, permanent kidney failure, or ALS (also known as Lou Gehrig's disease). It provides healthcare benefits to enrollees no matter their income, medical history, or current health status.
President Lyndon B. Johnson signed the 1965 law that created Medicare and Medicaid, and it has since expanded to cover prescription medications. Today, the Centers for Medicare & Medicaid Services (CMS) oversees Medicare, and the program covers more than 66 million people.
Medicare doesn’t provide for every need — assisted living and long-term care aren’t included. But it does cover a host of preventive, routine, and emergency medical services for older adults and younger people with disabilities.
The uninsured rate for people over 65 is below 3% now versus nearly 50% in the early 1960s.
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Eligibility
The Social Security Administration determines Medicare eligibility. You can qualify for Medicare three ways:
Reaching age 65
Having a disability at any age
Having permanent kidney failure (end-stage renal disease or ESRD) or amyotrophic lateral sclerosis (ALS or Lou Gehrig's disease) at any age
Those who qualify for Medicare based on age become eligible to apply 3 months before they turn 65. People under 65 who receive Social Security Disability Insurance (SSDI) typically have to wait 2 years to become eligible for Medicare. Those who receive SSDI for permanent kidney failure or ALS become eligible right away with no waiting period.
There are several ways to have Medicare coverage. For example, you can be retired and have Medicare as your primary form of coverage or keep working and make Medicare your secondary payer.
Coverage and costs
Medicare is divided into parts to cover different areas of healthcare. Part A is for hospital expenses. Part B is for care you receive in an outpatient or office setting. Parts A and B together are called original Medicare.
Medicare Part C is best known as Medicare Advantage (MA), and it’s a private alternative to Medicare Parts A and/or B. In other words, MA is a different way of getting benefits that packages Medicare’s separate parts together.
Part D is for prescription drug coverage, and it’s also optional. Be careful to avoid a late enrollment penalty if you don’t have other drug coverage once you enroll in Medicare. If you have MA, your prescription medications are typically — but not always — covered by your plan.
Because of the different parts, you may pay two or three Medicare premiums per month. Premiums for Parts B and D likely come out of your Social Security checks.
If you have original Medicare, you also may pay a separate premium for a supplemental insurance policy (Medigap) to cover out-of-pocket costs that can add up, such as Parts A and B deductibles and coinsurance. In some cases, Medigap plans also cover emergency healthcare during international travel.
Medicare Part A
Medicare Part A is designed to pay for the most intensive needs, including:
A limited stay at a skilled nursing facility after hospitalization
Hospice care
Some home healthcare
Most people don’t pay premiums for Part A. You only pay if you or your spouse worked and paid Medicare taxes for less than 10 years. In that case, premiums are either $285 or $518 in 2025.
If you stay in a hospital, you have to pay a portion of your total bill out-of-pocket before Medicare begins to pay your costs. The initial self-pay part is called the deductible. For 2025, the deductible is $1,676.
Medicare Part A pays for up to 90 days of hospitalization during each benefit period. The first 60 days of a hospitalization are covered with no patient cost-sharing. This means you pay nothing out-of-pocket after you meet the deductible. After that, there is coinsurance. Coinsurance rates change at different stages of your care.
You can appeal Medicare payment or coverage decisions.
Medicare Part B
Medicare Part B is medical insurance, which covers outpatient doctor visits. It also covers medications that aren’t included in other parts of Medicare. Services, medications, and vaccines typically covered under Part B include:
At-home dialysis
Injectable and infused drugs
Annual flu shot
Pneumococcal (pneumonia) vaccine
Medical equipment such as walkers, manual wheelchairs, and power scooters
You have to pay a monthly premium for Part B. Many people pay the standard $185 premium in 2025, but those who earn more pay more — up to $628.90, depending on income. After you meet your annual deductible, there is also 20% coinsurance you’ll pay for each service.
People with low incomes may qualify for a Medicare Savings Program (MSP). These state-offered programs help with Part B premiums. If you qualify for an MSP, you automatically get Extra Help, which aids with prescription medication costs, too.
Make sure to sign up for Medicare Part B when you’re first eligible. Otherwise, you could face a late enrollment penalty.
Medicare Advantage (Part C)
About half of Medicare beneficiaries decide to purchase a Medicare Advantage (MA) plan instead of original Medicare.
MA plans bundle Medicare Parts A, B, and even D into their offerings. They often include extras such as routine dental care, vision benefits, hearing aids, or a gym membership. By law, MA plans have to provide at least the same level of coverage as original Medicare, but they can decide how they do it.
A potential downside of MA is that plans come with network restrictions, so you are typically limited in the doctors and hospitals you can use for routine care. Some plans do allow you to go out of network if you’re willing to pay higher costs. Compare that with enrollees in original Medicare, who can go to almost any healthcare provider or hospital in the U.S.
When you’re ready to sign up, it’s not unusual to have a choice of many MA plans in your local market during enrollment. The average enrollee has 34 MA plans to choose from in the 2025 coverage year.
Medicare Part D
Medicare Part D is prescription drug coverage that you can choose to add to original Medicare or an MA plan that doesn’t cover medications — though Part D is included in most MA plans.
If you don’t have “creditable” drug coverage from another plan that matches Medicare’s benefits, you can buy a Part D plan from a private company. Premiums vary, and higher-income enrollees may pay more. Plan deductibles can’t exceed $590 in 2025.
When you’re deciding on a Part D plan:
Check its formulary — the list of covered medications — to make sure it includes your needed prescriptions.
Check which pharmacies are “preferred” in your plan’s network. Using those can help lower your costs.
What you pay for medications also depends on what stage of coverage you’re in. Medicare Part D has three stages:
The deductible stage
The post-deductible or initial coverage stage
Catastrophic stage after you pay $2,000 out of pocket in 2025
Common concerns
Medicare has different enrollment periods depending on eligibility. Around the time you turn 65, you have a 7-month initial enrollment period to sign up for Medicare Part A with or without Part B. This starts 3 months before you turn 65, includes your birth month, and ends 3 months after you turn 65. But if you already receive Social Security or railroad retirement benefits when you turn 65, you don’t need to sign up. You’ll likely be automatically enrolled in Medicare Parts A and B.
The annual open enrollment period in the fall is when Medicare enrollees and those new to the program can make the most changes to their coverage. It runs every year from October 15 to December 7. Changes made during this time take effect January 1 of the following year.
Medicare Advantage enrollees have another chance to make changes during Medicare Advantage open enrollment, which lasts for the first three months of the year.
People who need help enrolling in Medicare can call 1-800-MEDICARE (800-633-4227). You can also visit Medicare Interactive or the State Health Insurance Assistance Program (SHIP) for guidance.
Medicare Parts A and B don’t have caps on yearly out-of-pocket spending. Medicare Advantage plans do have caps, but they can be high — up to $9,350 for in-network services and $14,000 for both in-network and out-of-network services in 2025.
You can choose supplemental insurance (Medigap) if you have original Medicare. It’s easiest to choose Medigap when you first sign up for Medicare because you may need underwriting if you buy a plan later.
There are several imporant changes to Part D in 2025 can help enrollees save money or manage out-of-pocket costs:
No more “donut hole”: The Part D plan design had four phases in 2024 but has three in 2025. This is because the coverage gap known as the donut hole has been eliminated. Now, you have the deductible phase, which lasts until you spend $590 on covered prescriptions in 2025. Next, you enter the initial coverage phase, when you are responsible for copays and coinsurance for all covered prescriptions until you spend $2,000 out of pocket. That’s when you reach the catastrophic phase. At this point, you have no cost sharing for covered medications and your plan pays at 100%.
$2,000 out-of-pocket limit: In 2024, there was an $8,000 out-of-pocket cap. But now you’ll need to spend only $2,000 on covered medications before your cost sharing ends and your plan pays at 100%.
Medicare Prescription Payment Plan: This new payment option lets you spread your costs for covered prescriptions over the year. The plan won’t save you money, but monthly payments can help you manage costs during 2025. You can also avoid paying the $590 deductible up front and fill your prescriptions on time.
Biosimilar substitutions: Biologics are medications derived from natural or living sources instead of chemicals. Their generic versions are known as biosimilars. These are nearly identical to their reference biologics but typically cost less. In 2025, your Part D plan can switch you from a biologic to a biosimilar more quickly if your formulary changes midyear. This can be done immediately if the biologic has an interchangeable biosimilar.
References
Centers for Medicare & Medicaid Services. (2024). Contract year 2025 Medicare Advantage and Part D final rule (CMS-4205-F).
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CMS.gov. (2023). Creditable coverage.
Holder, K., et al. (2024). Most declines in uninsured rates for all age groups occurred between 2013 and 2019. United States Census Bureau.
Cubanski, J., et al. (2023). Changes to Medicare Part D in 2024 and 2025 under the Inflation Reduction Act and how enrollees will benefit. Kaiser Family Foundation.
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Freed, M., et al. (2024). Medicare Advantage 2025 spotlight: First look at plan offerings. KFF.
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Medicare.gov. (n.d.). End-stage renal disease (ESRD).
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Medicare.gov. (n.d.). How original Medicare works.
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Medicare.gov. (n.d.). Medicare Advantage plans cover all Medicare services.
Medicare.gov. (n.d.). Medicare Savings Programs.
Medicare.gov. (n.d.). What’s Medicare supplement insurance (Medigap)?
Medicare.gov. (n.d.). When does Medicare coverage start?
Medicare.gov. (n.d.). Yearly deductible for drug plans.
Ochieng, N., et al. (2023). Medicare Advantage in 2023: Enrollment update and key trends. Kaiser Family Foundation.
Rice, D. P. (1964). Health insurance coverage of the aged and their hospital utilization in 1962: Findings of the 1963 survey of the aged. Social Security Administration.
Social Security Administration. (n.d.). Plan for Medicare.
The Commonwealth Fund. (2015). 50 years of Medicare: How did we get here?
