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Medicare

How Medicare Works

Learning the Medicare lingo is the first step in understanding how Medicare works. There are lots of letters, plan names and new terms to understand.

We want you to feel like you have a good grasp on Medicare so you can choose a plan that's right for you. This page will help you understand the common terms and how the different types of Medicare plans on the market compare to each other.

Defining Parts A, B, C and D

Medicare has four parts. Parts A and B are called Original Medicare. They're run by the federal government. Medicare Part C is called Medicare Advantage. You buy Medicare Advantage plans from private health insurance companies that contract with the government. They work with Original Medicare coverage. Part D covers prescription drugs. Many Medicare Advantage plans combine Parts A, B and D in one plan. And each Medicare plan only covers one person.

Here's an overview of some of the things each part covers. Each of these triangles represents a different part of Medicare. Part C shows a full triangle because it covers A, B and D on one card, with some extra benefits, too.

Part A Original Medicare

Hospital care

Skilled nursing facility care

Hospice

Home health care

Part B Original Medicare

Doctor visits

Mental health care

Outpatient surgery

Lab tests

Medical equipment like wheelchairs and walkers

Part C Medicare Advantage

Everything parts A and B cover

Many plans cover prescription drugs

Many plans cover dental and vision

Part D Prescription

Prescription drugs

Original Medicare vs. Medicare Advantage

Medicare Advantage plans are popular because of their convenience. Most plans combine medical and prescription coverage on one card. Some offer dental and vision coverage, too. And you're able to predict your out-of-pocket costs better than you can with Original Medicare.

When you have Original Medicare, you pay 20 percent of the cost, or 20 percent coinsurance, for most medical services covered under Part B. Medicare Advantage plans use copays more than coinsurance. Which means you pay a fixed cost. You might have a $15 copay for doctor office visits, for example.

But if you go this route, you'll need to make sure you have prescription drug coverage. That means that if you don't have a Part D plan through an employer or union, you may face a penalty if you don't buy one on your own. And supplement plans don't come with the extra benefits you often get with Medicare Advantage, like dental and vision coverage.

The triangles to the right show how supplement plans sit on top of Medicare Parts A, B and D. You can get complete coverage, but you still have to coordinate all those pieces on your own. Medicare Advantage Part C gives you all the pieces with one cohesive plan.

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