MEdicare 101

Mastering Medicare

The Basics Made Easy!

Medicare can feel like a maze of rules, deadlines, and endless options—but it doesn’t have to be overwhelming. We're here to break it all down in a way that actually makes sense. Whether you’re turning 65, retiring, or just trying to figure out how it all works, this guide will walk you through the essentials. From the different parts of Medicare to enrollment timelines and plan options, we’ll cover what you need to know—without the confusing jargon. Let’s make Medicare simple so you can choose the right coverage with confidence.

Medicare Basics: What It Covers & How It Works

Part A

Medicare Part A is the hospital insurance portion of Original Medicare, covering inpatient hospital stays, skilled nursing facility care, hospice, and some home health services. Most people qualify for premium-free Part A if they or their spouse have worked and paid Medicare taxes for a certain number of years. However, those who do not qualify must pay a monthly premium to enroll. While Part A helps cover essential hospital costs, beneficiaries are still responsible for deductibles and coinsurance. Coverage is based on benefit periods, meaning costs can reset after a hospital discharge. Understanding these expenses is crucial when planning for healthcare needs in retirement.

Part B

Medicare Part B covers outpatient medical services, including doctor visits, preventive care, durable medical equipment, and some home health services. Unlike Part A, Part B requires a monthly premium for all enrollees, which may be higher for those with higher incomes. In addition to the premium, beneficiaries are responsible for an annual deductible and typically 20% coinsurance for most covered services. Preventive care, such as flu shots, cancer screenings, and annual wellness visits, is covered at no cost. Since late enrollment can result in lifelong penalties, it’s important to sign up for Part B when first eligible, unless covered by employer insurance.

For the list of Original Medicare costs for the current year, please go to www.Medicare.gov.

Medicare Plans Explained: Advantage, Supplements & More

Medicare
Supplement
(Medigap)

Medicare Supplement plans, also known as Medigap, help cover out-of-pocket costs that Original Medicare leaves behind, such as copayments, coinsurance, and deductibles. These plans are offered by private insurance companies and work alongside Medicare Parts A and B. Unlike Medicare Advantage, Medigap plans do not include extra benefits like dental or vision, but they allow you to see any doctor nationwide who accepts Medicare. With standardized plan options labeled A through N, beneficiaries can choose a level of coverage that fits their healthcare and financial needs.

Standalone Prescription
Drug Plan
(Part D)

Medicare Part D helps cover the cost of prescription medications and is available to anyone enrolled in Medicare. These standalone plans, offered by private insurers, work alongside Original Medicare or a Medicare Supplement plan. Coverage varies by plan, but all must meet Medicare’s standard requirements and include a range of brand-name and generic drugs. Formularies, or drug lists, determine which medications are covered and at what cost, making it essential to compare plans annually. Enrolling in Part D when first eligible helps avoid late penalties and ensures continuous medication coverage.

Medicare
Advantage
(Part C)

Medicare Advantage (Part C) plans are an alternative to Original Medicare, combining hospital, medical, and often prescription drug coverage into one plan. These plans are offered by private insurance companies and may include extra benefits like dental, vision, hearing, and fitness programs. Many Medicare Advantage plans operate as HMOs or PPOs, requiring members to use provider networks for lower costs. Since benefits and costs can change yearly, it’s important to review plan options during the Annual Enrollment Period to ensure continued access to preferred doctors and services.

Medicare Advantage
+
Hosptial Indemnity

While Medicare Advantage plans offer comprehensive coverage, they often include copays and daily hospital stay costs. Pairing a Medicare Advantage plan with a hospital indemnity plan provides additional financial protection for unexpected inpatient expenses. Hospital indemnity plans pay cash benefits directly to the policyholder, which can be used for hospital bills, transportation, or other out-of-pocket costs. This added coverage is especially useful for those concerned about high inpatient costs or needing flexibility in managing healthcare expenses. By combining these plans, beneficiaries gain peace of mind and greater financial security.

Medicare Enrollment Periods: When & How to Sign Up

Medicare enrollment periods determine when you can enroll in, change, or update your coverage, and missing deadlines could lead to penalties or gaps in care. New beneficiaries have a specific enrollment window when they first become eligible for Medicare Part A, Part B, Medicare Advantage, and Part D prescription drug plans. If you miss your initial opportunity, there are designated Medicare enrollment periods throughout the year to sign up or make changes. Additionally, certain life events—such as losing employer coverage or relocating—may qualify you for a Special Enrollment Period (SEP). Knowing when and how to enroll ensures you get the best coverage without unnecessary costs.

Click on each option to learn more.

Initial Enrollment
Period (IEP)

Who it's For:
New Medicare beneficiaries turning 65.
When It Happens:
7-month window—starts 3 months before your 65th birthday, includes your birthday month, and ends 3 months after.
What You Can Do:
Enroll in Part A, Part B, Part D, or a Medicare Advantage (Part C) plan for the first time. turning 65.

General Enrollment
Period (GEP)

Who it's For:
Those who missed their Initial Enrollment Period and need to enroll in Part A and/or Part B.
When It Happens:
January 1 – March 31 each year.
What You Can Do:
Enroll in Original Medicare (coverage starts the 1st of the following month), but late penalties may apply.

Annual Enrollment
Period (AEP)

Who it's For:
Current Medicare beneficiaries looking to make changes.
When It Happens:
October 15 – December 7 each year.
What You Can Do:
• Switch Medicare Advantage (Part C) plans.
• Join, drop, or switch a Part D prescription drug plan.
• Return to Original Medicare if desired.
Note: Changes take effect January 1 of the following year.

Medicare Advantage Open Enrollment Period (OEP)

Who it's For:
Those already enrolled in a Medicare Advantage (Part C) plan.
When It Happens:
January 1 – March 31 each year.
What You Can Do:
• Switch to another Medicare Advantage plan.
• Drop Medicare Advantage and return to Original Medicare + Part D.
Note: You can only make one change during this period.

Special Enrollment
Periods (SEP)

Who it's For:
Those experiencing qualifying life events, such as losing employer coverage, moving, or gaining Medicaid eligibility.
When It Happens:
Varies based on the life event.
What You Can Do:
Enroll in, switch, or drop a Medicare plan outside of the standard enrollment periods.
To see a more comprehensive list of Special Enrollment Periods, please go to Medicare.gov.

Medicare Drug Coverage: Understanding Part D & Other Options

Medicare offers several ways to get prescription drug coverage, helping beneficiaries lower medication costs and avoid late penalties. Medicare Part D plans, provided by private insurers, cover a wide range of prescription drugs and can be added to Original Medicare (Part A & B). Many Medicare Advantage (Part C) plans also include built-in drug coverage, offering an all-in-one alternative. Each plan has a formulary (covered drug list), tiered pricing, and preferred pharmacies, so comparing options is essential. If you don’t enroll when first eligible, you may face a late enrollment penalty unless you have creditable drug coverage from another source. Understanding these choices ensures you get the most cost-effective prescription coverage for your needs.

Payment Stages

Member Typically Pays

Plan Typically Pays

Stage Limit

Annual
Deductible*

Member Typically Pays

100% until you reach the plan deductible

Plan Typically Pays

0%

Stage Limit

Varies by plan, but this stage ends once your deductible is met

Initial
Coverage

Member Typically Pays

A copay or coinsurance

Plan Typically Pays

The balance after copay and coinsurance

Stage Limit

Once your total out-of-pocket costs reach $2,000, this stage ends

Catastrophic
Coverage

Member Typically Pays

You pay $0**

Plan Typically Pays

Varies, but typically pays the full cost of your covered Part D drugs

Stage Limit

Through the end of the plan year
*If your plan doesn't have a deductible, you skip this stage.
**You'll pay $0 for Medicare-covered Part D medications in the Catastrophic phase.

Prescription Drug Coverage Terminology

Out-of-Pocket Costs

Out-of-pocket costs refer to the expenses you must pay for prescription drugs that aren’t covered by your plan or before reaching certain coverage thresholds. These costs include deductibles, copayments, and coinsurance, as well as payments made until you qualify for additional coverage assistance.

Pharmacy Network

A pharmacy network refers to the group of pharmacies that have contracted with your plan to provide discounted prescription drug prices. These networks typically include preferred and standard pharmacies, with preferred options offering lower copays and out-of-pocket costs. Some Medicare Advantage plans with drug coverage may also include mail-order pharmacy services for added convenience. Using an out-of-network pharmacy may result in higher costs or no coverage at all, so it’s important to choose a Part D plan with a pharmacy network that fits your needs.

Drug List or Formulary

A formulary is the list of prescription drugs covered by a specific plan. Each Medicare drug plan has its own formulary, which is reviewed and updated annually. If your medication is not included, you may need to request an exception or pay the full cost out-of-pocket. Formularies can vary between plans, so it’s important to check if your prescriptions are covered before enrolling or renewing your coverage.

Tiered Formulary

A tier formulary is the system Medicare Part D plans use to categorize covered drugs based on cost. Lower-tier drugs, such as generics, typically have lower out-of-pocket costs, while higher-tier drugs, including brand-name and specialty medications, cost more. The tier structure affects how much you pay in copayments or coinsurance for each prescription. Understanding your plan’s tier formulary can help you manage your medication costs and choose the most affordable options.

  • Tier 1: Preferred Generic Drugs
  • Tier 2: Non-Preferred Generic Drugs
  • Tier 3: Preferred Brand Name Drugs
  • Tier 4: Non-Preferred Brand Name Drugs
  • Tier 5: Specialty Drugs
  • Tier 6: Select Care Drugs (Not all carriers utilize this Tier. It's generally used to subcategorize certain medications such as those used to treat high blood pressure, diabetes, and high cholesterol.)

Step Therapy

Step therapy is a cost-control measure that requires beneficiaries to try lower-cost, clinically effective medications before a plan covers a more expensive alternative. If your prescription drug plan has step therapy requirements, you may need to start with a generic or lower-tier medication before moving to a brand-name or specialty drug. If the initial medication is ineffective or causes side effects, your doctor can request an exception to skip steps and approve the prescribed drug sooner.

Quantity Limits

Quantity limits are restrictions on the amount of a medication a plan will cover within a specific time frame, such as a 30-day or 90-day supply. These limits help ensure safe and appropriate medication use while controlling costs. If you need a higher quantity than what your plan allows, your doctor can request an exception by providing medical justification.

Prior Authorization

Prior authorization is a requirement that you or your doctor get approval from your plan before it will cover certain medications. This process ensures that the prescribed drug is medically necessary and cost-effective before your plan agrees to pay for it. If a medication requires prior authorization, your doctor must submit a request with supporting medical information to justify the need for that specific drug. Without approval, the prescription may be denied or require you to pay the full cost.

Formulary and Utilization Exceptions

A formulary exception allows you to request coverage for a medication that is not on your plan’s formulary or to get a non-preferred drug at a lower cost. Your doctor must provide medical justification explaining why the covered alternatives are not suitable for your condition.

A utilization exception applies to restrictions like prior authorization, quantity limits, or step therapy. If your doctor believes these rules could negatively impact your health, they can request an exception for you to bypass them. Understanding formulary and utilization exceptions can help you access the medications you need when standard coverage rules don’t apply.

Coverage Decision Timelines

Understanding Medicare Part D rules—including formularies, tier structures, prior authorization, step therapy, quantity limits, and exceptions—is key to ensuring you get the medications you need without unexpected costs or delays. If you encounter coverage restrictions, you have the right to request a formulary or utilization exception with support from your doctor. When you submit a request for drug coverage or an exception, your Medicare plan must respond within a set coverage decision timeline—typically 72 hours for standard requests and 24 hours for urgent cases. If your request is denied, you can file an appeal to challenge the decision. Staying informed about these processes helps you navigate Medicare drug coverage effectively and avoid disruptions in your medication routine.