Created in 1965, Medicare is a federal health insurance program that helps eligible Americans pay for necessary healthcare services. The program primarily serves people over 65, but it also covers dialysis patients and disabled people. Medicare may be confused with Medicaid, an assistance program that provides health coverage to low-income people of all ages.

Over the years, Medicare has expanded to provide coverage for more healthcare services, but it doesn’t cover everything. There are many gaps in Medicare coverage, and seniors who need services that aren’t covered by Medicare may need to pay out of their own pockets. This guide explains what Medicare does and doesn’t cover and suggests other ways to pay for services that aren’t covered.

The Basics of Medicare

Seniors become eligible for Medicare when they turn 65. Seniors who already receive Social Security benefits will receive Medicare automatically, but all other seniors need to sign up. When seniors sign up for Medicare coverage, there are two options to choose from: Original Medicare and Medicare Advantage.

Original Medicare

This type of Medicare is managed by the federal government. It has two components: Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance). Most Medicare beneficiaries have both Part A and Part B.

Part A generally covers hospice care, inpatient hospital care and home health care. It also covers short-term skilled nursing care if certain conditions are met. For Medicare to pay for nursing home care, seniors must have been admitted to a hospital for at least three days and require nursing care for a condition that was treated during that hospital stay.

Part B covers a wide variety of preventative and medically necessary services. Some of these services include:

  • Ambulance services
  • Durable medical equipment, such as canes, crutches and walkers
  • Emergency department services
  • Hearing exams
  • Physical therapy
  • Screenings for cancer, diabetes and cardiovascular disease
  • Some vaccines, including flu shots

Original Medicare doesn’t provide prescription drug coverage, but seniors can add it by signing up for a Medicare Prescription Drug Plan. These plans, known as Medicare Part D, are offered by insurance companies approved by Medicare.

Seniors who have Original Medicare have the freedom to see any doctor or healthcare provider, as long as those providers are enrolled in Medicare and taking new Medicare patients. Seniors don’t need to select a primary care doctor and usually don’t need a referral to see a specialist.

Medicare Advantage Plans

Seniors may decide to sign up for Medicare Advantage Plans. These plans, which are sometimes called Medicare Part C, are offered by private companies and are required to cover Medicare Part A and B services. Most plans also offer a number of benefits that Original Medicare doesn’t cover. These may include coverage for vision, hearing or dental services. Most Medicare Advantage Plans cover Part D, too. Depending on a senior’s location, they may be able to sign up for some of these five types of Medicare Advantage Plans.

Health Maintenance Organization (HMO) Plans

These plans provide a network of doctors, hospitals and medical facilities, and unless it’s an emergency or urgent care situation, seniors get their care in-network. Outside of the network, they may need to pay the full cost of their healthcare services. For specialist care, most HMOs require a referral from a primary care doctor.

Preferred Provider Organization (PPO) Plans

Like HMOs, PPOs provide a network of medical providers and facilities. Seniors are allowed to see out-of-network providers, but they can usually save money by using the plan’s preferred providers. Referrals aren’t required for specialist care, but the costs for services from in-network specialists will usually be lower.

Private Fee-for-Service (PFFS) Plans

These Medicare Advantage Plans allow seniors to see any Medicare-approved provider that will agree to accept the plan’s payment terms. Some PFFS plans have a network, but seniors are allowed to see out-of-network providers. If seniors receive treatment, providers are required to bill the plan, but seniors may have a copayment or coinsurance. If the provider’s charge is more than the amount allowed by the plan, some plans let providers bill seniors for the difference.

Special Needs Plans (SNPs)

Special Needs Plans are designed for people with specific chronic illnesses, such as diabetes, cancer or chronic heart failure. These plans may provide additional benefits, such as extra days in the hospital, to accommodate these illnesses. Like HMOs, plan members are usually required to stay in-network.

Medical Savings Account (MSA) Plans

These plans deposit money they receive from Medicare into a senior’s medical savings account. Seniors can use this money to pay for any of their healthcare costs, even those that aren’t covered by Medicare. Once they meet a high yearly deductible — the amount varies from one plan to another — the plan kicks in and covers Medicare-covered services.

What Medicare Doesn’t Cover

There are many healthcare services that Medicare doesn’t pay for. For seniors who’ve signed up for Original Medicare, these coverage gaps include dental, hearing and vision care. Seniors are responsible for the costs of most dental care, including cleanings, fillings and dentures. While Medicare Part B covers diagnostic hearing exams, it doesn’t pay for hearing aids. These seniors are also responsible for 100% of the costs of their eye exams, eyeglasses and contact lenses.

Since Medicare Advantage Plans may cover extra services, such as dental or vision care, seniors who sign up for these plans may notice fewer coverage gaps. However, there are still some services that Medicare Advantage Plans don’t cover. Like Original Medicare, these plans don’t cover long-term care in assisted living facilities or nursing homes. The costs of these facilities can be significant: The annual median cost of assisted living in the U.S. is $48,612, and nursing homes are even pricier at $90,155.

Starting in 2020, some Medicare Advantage plans will cover limited supports that may help seniors remain in their own homes. These supports, which aren’t covered by Original Medicare, may include home modifications, home care and non-medical transportation, depending on the plan.

Are There Other Options?

Many healthcare services aren’t covered by Original Medicare or Medicare Advantage Plans. Fortunately, there are many other ways that seniors may pay for some of these services.

Medicare Supplement Insurance

Seniors who have Original Medicare may choose to purchase a Medigap policy, also known as Medicare Supplement Insurance. Sold by private companies, these policies may help seniors pay for services that Original Medicare doesn’t cover, such as Medicare copayments, coinsurance or deductibles and foreign travel emergency care.

Medigap policies are designed to supplement Original Medicare, and it’s illegal for companies to sell these policies to seniors who have Medicare Advantage Plans. Unfortunately, Medigap policies don’t fill all Medicare coverage gaps. Generally, they don’t cover vision care, dental care or long-term care.

Medicaid

Some seniors who receive Medicare may also be eligible for Medicaid, a joint federal and state program that helps low-income people pay for necessary healthcare services. For these seniors, known as “dual eligible beneficiaries,” Medicaid may help fill some of Medicare’s coverage gaps.

Since each state operates its own Medicaid program, the eligibility requirements and the benefits available to seniors will vary depending on where they live. Medicaid may help eligible seniors pay for their Medicare premiums, deductibles, coinsurance and copayments. It may also cover some of the services that Medicare doesn’t, such as nursing homes, personal care and home and community-based services. The latter may include care in assisted living facilities.

Long-Term Care Insurance

Long-term care insurance policies are sold by insurance companies, and they may help seniors pay for care that isn’t covered by Original Medicare or Medicare Advantage. Depending on the individual policy, this may include care provided in assisted living facilities, nursing homes, adult day care centers or other long-term care settings.

Seniors purchase these insurance policies before they need them, and then they pay monthly premiums in exchange for coverage. In the event that a senior needs long-term care, the insurer will pay for covered services up to the maximum benefit limit. This limit may be expressed as a number of years or a total dollar amount.

FAQS

How much do Medicare beneficiaries pay for services that aren’t covered by Medicare?

In 2016, the most current year of data available, seniors with Original Medicare spent an average of $3,166 on services that weren’t covered by Medicare. Long-term care facilities, at an average of $1,014, are responsible for nearly one-third of these costs. For seniors with Medicare Advantage, out-of-pocket costs will vary based on the services the plan covers and the yearly limit on out-of-pocket costs.

Do pre-existing conditions affect the services that are covered by Medicare?

Seniors can join Original Medicare or a Medicare Advantage Plan if they have pre-existing conditions. However, Medigap policies, which some seniors use to supplement their Original Medicare coverage, are generally allowed to deny coverage based on pre-existing conditions. An exception is during a senior’s 6-month open enrollment period, which starts the month they turn 65.

Can seniors switch between Original Medicare and Medicare Advantage Plans?

Yes. Seniors can make changes to their Medicare coverage during the fall open enrollment period. Between October 15 and December 7, seniors can switch between the two types of Medicare coverage. Any changes they make will take effect on January 1.

How often can seniors switch Medicare Advantage Plans?

Since covered services vary from one Medicare Advantage Plan to another, seniors may sometimes want to switch to a new plan that better suits their needs. They can do this during the fall open enrollment period or during the Medicare Advantage Open Enrollment Period, which occurs between January 1 and March 31.

How can seniors get help understanding their Medicare options?

The State Health Insurance Assistance Programs (SHIPs) provide one-on-one insurance counseling. Seniors can contact their local SHIP for help reviewing health plan options. SHIPs can also explain the services that are and aren’t covered by Medicare and suggest assistance programs that can help seniors pay for out-of-pocket costs. To learn more, seniors can call the SHIP National Network at (877) 839-2675.