Alyssa Lane
Medicare and private health insurance are two types of health insurance plans available to Americans. The federal government provides Original Medicare, while private companies administer private health insurance and Medicare Advantage plans on behalf of the government. Medicare is mostly for Americans aged 65 and older, while private health insurance allows coverage for dependents. Medicare offers more coverage combinations and choices than private health insurance, which has a limited number of offices, hospitals, and healthcare providers that they contract with. Private health insurance plans vary in cost by plan type and coverage levels, while Medicare Part A usually has no monthly premiums, and Medicare Part B had a standard premium of $164.90 in 2023.
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What You'll Learn
Eligibility for Medicare
Medicare is a government-sponsored programme designed to help cover health care costs for certain American residents. Some people get Medicare automatically, while others have to actively sign up—it depends on whether you start receiving Social Security benefits before turning 65. Generally, Medicare is for people 65 or older. However, you may be eligible for Medicare earlier if you have a disability, End-Stage Renal Disease (permanent kidney failure requiring dialysis or a transplant), or ALS (also known as Lou Gehrig's disease).
If you are 65 or older and you (or another qualifying person, like your current or former spouse) paid Medicare taxes while working for a certain amount of time (usually at least 10 years), you won't pay a premium for Part A coverage. This is sometimes called "premium-free Part A". Part A coverage is also available for free if you qualify for (or are already receiving) retirement or disability benefits from Social Security (or the Railroad Retirement Board). If you don't qualify for premium-free Part A, you might be able to buy it.
Part B coverage is optional and comes with a standard monthly premium. As of 2024, the standard monthly Part B premium is $174.70, increasing to $185 in 2025. This is generally deducted from Social Security or Railroad Retirement payments. Individuals with a modified adjusted gross income (MAGI) of more than $106,000 per year ($212,000 for a couple) are required to pay more for this program. If you have health insurance through your employer when you turn 65, you can opt to wait to sign up for Part B. However, if you don't have employer-sponsored insurance and decide later that you want to sign up, you may have to pay a late-enrollment penalty.
Individuals eligible for Medicare Part A are also qualified for Part B, which covers medically necessary services and equipment. This includes doctor's office visits, lab work, X-rays, wheelchairs, walkers, and outpatient surgeries, as well as preventive services such as disease screenings and flu shots. Additionally, those eligible for Medicare Parts A and B are also eligible for Part C, also known as Medicare Advantage. Medicare Part C plans are offered by private companies approved by Medicare and typically offer additional benefits such as prescription drug coverage, vision, hearing, and dental coverage.
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Eligibility for Medicaid
Medicaid is a joint federal and state program that helps low-income Americans of all ages pay for the costs associated with medical and long-term custodial care. The eligibility rules differ among states, and certain groups do not require a determination of income by the Medicaid agency. These groups may be covered based on enrollment in another program, such as SSI (Supplemental Security Income) or the breast and cervical cancer treatment and prevention program. Children with an adoption assistance agreement under the Social Security Act are automatically eligible, as are young adults who meet the eligibility requirements as former foster care recipients.
To be eligible for Medicaid, individuals must meet specific non-financial criteria. They must be residents of the state in which they are receiving Medicaid and be either US citizens or qualified non-citizens, such as lawful permanent residents. Additionally, some eligibility groups are limited by age, pregnancy, or parenting status. For example, all states provide health coverage to children, parents, pregnant people, elderly people with certain incomes, and people with disabilities.
The Affordable Care Act of 2010 established a new methodology for determining income eligibility for Medicaid, based on Modified Adjusted Gross Income (MAGI). MAGI considers taxable income and tax filing relationships to determine financial eligibility. This methodology replaced the former process, which was based on the methodologies of the Aid to Families with Dependent Children program that ended in 1996. MAGI-based eligibility does not allow for income disregards that vary by state or eligibility group and does not include an asset or resource test.
Some individuals are exempt from the MAGI-based income counting rules, including those whose eligibility is based on blindness, disability, or age (65 and older). Eligibility for individuals in these categories is generally determined using the income methodologies of the SSI program administered by the Social Security Administration.
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Medicare Part A
If an individual is receiving monthly Social Security or Railroad Retirement Board (RRB) benefits, they will get Part A automatically at age 65 without needing to file a separate application. If they are not receiving these benefits, they must file an application for Medicare by contacting the Social Security Administration. Part A coverage begins the month the individual turns 65, provided they file an application within 6 months of turning 65. If the application is filed later than this, Part A coverage will be retroactive for 6 months.
Individuals who must pay a premium for Part A do not automatically get Medicare when they turn 65. To keep premium Part A, the person must continue to pay all monthly premiums and stay enrolled in Part B. This means that they must pay both the premium for Part B and the premium for Part A to keep this coverage.
Individuals who are eligible for Medicare Part A are also eligible for Part B, which covers medically necessary services and equipment. This includes doctor's office visits, lab work, X-rays, and outpatient surgeries, as well as preventive services such as disease screenings and flu shots. Part B is optional, and most people pay a monthly premium for it.
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Medicare Part B
Medicare is a US government-sponsored programme designed to help cover healthcare costs for certain American residents. Medicare Part B is an optional component of Medicare that helps pay for basic healthcare services. It covers medically necessary services and equipment, including doctor's office visits, lab work, X-rays, wheelchairs, walkers, and outpatient surgeries. It also includes preventive services such as disease screenings, flu shots, and the flu vaccine.
Part B is available to those who are eligible for Medicare Part A. Individuals can add Part B during specific enrolment periods. If an individual has health insurance through their employer when they turn 65, they can choose to wait to sign up for Part B. However, if they decide later that they want to enrol, they may have to pay a late-enrolment penalty. The standard monthly Part B premium for 2025 is $185, up from $174.70 in 2024. This fee is generally deducted from Social Security or Railroad Retirement payments. Deductibles and coinsurance apply.
If an individual has been covered by an active employer group health plan (either theirs or their spouse's) since turning 65, and it ended within the last 8 months, they can enrol in Part B without penalty during a "Special Enrollment Period". This period is available at any time of the year. To enrol in Medicare, individuals can refer to their "Medicare & You" handbook, call Social Security, or visit their local Social Security office.
Medicare Supplement Insurance, or Medigap, can be purchased to help cover expenses such as copayments, coinsurance, and deductibles that accompany Original Medicare. If an individual has Part B and Medigap, which pays their Part B coinsurance, their Medigap plan should cover the cost of insulin (up to $35).
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Medicare Advantage
It is important to note that joining a Medicare Advantage Plan may cause you to lose your employer or union coverage. If you were to drop or lose your employer or union coverage, you might also lose coverage for your spouse and dependents, and regaining this coverage could be challenging. Before enrolling in a Medicare Advantage Plan, it is advisable to consult your employer, union, or benefits administrator to understand their rules and any potential impact on your existing coverage.
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Frequently asked questions
Medicare is a government-funded, multi-part health insurance program. Original Medicare, which includes Part A and Part B, is provided by the federal government. Medicare Advantage plans are administered by private companies on behalf of the government.
Medicare Part A is hospital insurance. It covers inpatient hospital care, skilled nursing facilities, hospice care, and some home healthcare.
Medicare Part B is medical insurance. It covers doctor visits, outpatient care, some home healthcare, durable medical equipment, and preventive services.
Medicare is generally for individual Americans aged 65 and older, while private health insurance allows coverage for dependents. Medicare offers more coverage choices than private insurance. Private insurance plans also have limited networks of healthcare providers, which can result in higher out-of-pocket costs if you seek care outside of your network.
The best option depends on your healthcare needs and financial situation. You should consider the types of services you typically use and whether they are covered by each plan. Additionally, you should compare the costs, including premiums, deductibles, and copays, to determine which option is more affordable for you.
