Medicare Basics

Medicare is a federal medical insurance program, which includes Original Medicare. Original Medicare is a low-cost government insurance program that guarantees access to health insurance for Americans age 65 and older and younger people with certain medical disabilities. It pays for many health care expenses, but not all.

How It Works

Medicare covers its share of an approved amount and you pay the rest through deductibles and coinsurance. Original Medicare is made up of two parts:

  • Part A is hospital insurance. It covers inpatient hospital care, skilled nursing facilities, hospice, lab tests, surgery, and home health care.
  • Part B is medical insurance. It covers things like clinical research, ambulance services, durable medical equipment, mental health services, limited outpatient prescription drugs, and more.

You are automatically eligible for Medicare Parts A and B when you become Medicare-eligible. If you are receiving Social Security benefits, you may be enrolled in Medicare automatically.

If you have to sign up to get coverage, you can enroll starting three months before the month you turn age 65. The deadline to enroll is three months after the month you turn age 65. (Note: You can wait to enroll in Part B; however, you may have to pay a late enrollment penalty. In general, you can wait to enroll in Medicare Part B without facing a late enrollment penalty until your active employment ends or the date your coverage under your employer’s plan ends, whichever occurs first. Consult your Medicare advisor for more details.)

Part D is optional prescription drug coverage. You can enroll in Part D if you want coverage to help pay for your prescription drug costs.

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How Medicare Works with Company Coverage

If you are actively employed and enrolled in your employer’s health plan, that plan will serve as your primary medical coverage. Should you elect to also enroll in Medicare, Medicare will function as secondary coverage.

In cases where you are eligible for Medicare due to End-Stage Renal Disease (ESRD), your employer sponsored group health plan will be the primary payer for a coordination period of up to 30 months, during which Medicare will act as the secondary payer. After this 30-month period, Medicare will become the primary payer, with the group health plan providing secondary coverage.

It is important to note that once you enroll in any part of Medicare (whether Part A or Part B), you will no longer be eligible to contribute to a Health Savings Account ("HSA"), even if you remain enrolled in an HSA eligible medical plan.

If you are retired and receive coverage through a former employer, Medicare will be your primary medical coverage, and the employer sponsored health plan will serve as secondary coverage.

As you prepare to transition to Medicare, you will want to understand if your dependents under age 65 will be eligible for coverage under your company's health plan.

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How Medicare Works With COBRA

If you are eligible for Medicare Parts A and B but you choose to not enroll in Medicare Parts A and B, you may face potentially significant out-of-pocket expenses. COBRA coverage pays secondary to Medicare Parts A and B. Therefore, the plan will pay as if Medicare has already made a payment, even if the Medicare-eligible individual did not actually enroll in Medicare.

If your Medicare benefits (Parts A or B) become effective on or before the day you elect COBRA coverage, you can have COBRA and Medicare coverage. This is true even if your Part A benefits begin before you elect COBRA coverage but you don’t sign up for Part B until later.

If you become entitled to Medicare after you’ve signed up for COBRA coverage, your COBRA coverage may be terminated by your plan as of the day you enroll in Medicare. (But if COBRA covers your spouse and/or dependent children, their coverage may continue.) 

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To Learn More

Below are resources where you can find additional information and help:

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