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Blood Money – Vol. 1, Chapter 3

Explaining the basic Medicare framework in simple language.

What is Medicare?

Medicare is a federal health insurance program overseen by the Centers for Medicare & Medicaid Services (CMS) for individuals aged 65 and older, younger people with disabilities, and those with permanent kidney failure.

People age 65 or older, who are citizens or permanent residents of the United States, are eligible for Medicare Part A. You’re eligible for Part A at no cost at age 65 if one of the following applies:

• You receive or are eligible to receive benefits from Social Security or the Railroad Retirement Board (RRB)
• Your spouse (living or deceased, including a divorced spouse) receives or is eligible to receive Social Security or RRB benefits
• You or your spouse worked long enough in a government job through which you paid Medicare taxes
• You are the dependent parent of a fully insured deceased child

If you don’t meet these requirements, you may be able to get Medicare Part A by paying a monthly premium. Usually, you can purchase this coverage only during designated enrollment periods.

Before age 65, you are eligible for Medicare Part A at no cost if one of the following applies:

• You’ve been entitled to Social Security Disability Insurance (SSDI) benefits for 24 months
• You receive SSDI benefits and have Lou Gehrig’s disease (amyotrophic lateral sclerosis)
• You’re the child or surviving spouse age 50 or older, including a divorced surviving spouse, of a worker who has worked long enough under Social Security or in a Medicare-covered government job.
• You have permanent kidney failure (end-stage renal disease) and you receive maintenance dialysis or a kidney transplant and one of the following applies:

Anyone who’s eligible for Medicare Part A at no cost can enroll in Medicare Part B by paying a monthly premium. Some people with higher incomes will pay a higher monthly Part B premium.

If you’re not eligible for Part A at no cost, you can buy Part B without having to buy Part A. You must be age 65 or older and one of the following:

• A U.S. citizen
• A lawfully admitted noncitizen who has lived in the United States for at least five years

You can only sign up for Part B during designated enrollment periods. If you don’t enroll in Part B when you’re first eligible, you may have to pay a late enrollment penalty for as long as you have Part B coverage.

What are the different types of Medicare?

There are Four Parts of Medicare:

• Part A (hospital insurance) helps cover inpatient care in hospitals (including critical access hospitals) and skilled nursing facilities (not custodial or long-term care). Part A also pays for some home health care and hospice care and inpatient care in a religious non-medical health care institution
• Part B (medical insurance) helps cover
  medically necessary doctors’ services, outpatient care, home health services, durable medical equipment, mental health services, limited outpatient prescription drugs, and other medical services. Part B also covers many preventative services.
• Part C (Medicare Advantage) includes all benefits and services covered under Part A and Part B, plus prescription drugs and additional benefits such as vision, hearing, and dental, bundled together in one plan.
• Part D (prescription drug coverage) helps cover the cost of prescription drugs.
• Supplemental (Medigap) policies help pay Medicare out-of-pocket copayments, coinsurance, and deductible expenses.

Social Security enrolls you in Original Medicare (Part A and Part B).

Some people are eligible for both Medicare and Medicaid.

Medicaid and Medicare are two different programs.

Medicaid is a state-run program that provides hospital and medical coverage for people with low income. Each state has its own rules about who’s eligible and what Medicaid covers.

If you have Medicare Parts A and B, you can join a Medicare Advantage plan. With these plans, you can’t have a Medigap policy, because Medicare Advantage plans cover many of the same benefits a Medigap policy covers. This includes benefits like extra days in the hospital after you’ve used the days that Medicare covers.

Medicare Advantage plans include all the following:

• Health Maintenance Organization (HMO) plans
• Preferred Provider Organization (PPO) plans
• Private Fee-for-Service (PFFS) plans
• Special Needs Plans (SNPs)

If you decide to join a Medicare Advantage plan, you use the health card that you get from your Medicare Advantage plan provider for your health care. Also, you might have to pay a monthly premium for your Medicare Advantage plan because of the extra benefits it offers.

You can enroll in a Medicare Advantage plan during your Initial Enrollment Period (IEP), as explained under the “Signing up for Medicare” section, once you become eligible for Medicare. You can also enroll during the annual Medicare open enrollment period from October 15 to December 7 each year.

The effective date for the enrollment is January 1 of the following year. For example, if you signed up on November 8, 2025, your coverage would become active on January 1, 2026. There are also special enrollment periods for some situations.

Overall, Medicare has several key enrollment periods depending on your age and needs:

• Annual Enrollment Period (AEP / Open Enrollment): October 15 – December 7. You can change your Medicare Advantage or prescription drug coverage. Changes start on January 1.
• Initial Enrollment Period (IEP): A 7-month window around your 65th birthday. It starts 3 months before your birthday month and ends 3 months after.
• General Enrollment Period: January 1 – March 31. You can sign up for Part A and Part B if you missed your initial window. Penalties may apply. 
• Medicare Advantage Open Enrollment Period: January 1 – March 31. You can switch Medicare Advantage plans or return to Original Medicare.
• Special Enrollment Period (SEP): Available anytime for specific life events, like moving or losing other insurance.

Medicare sales is seasonal, with the Enrollment Period effectively being Mid-October to March, skipping December, for a total of 4.5 months.

This overlaps with tax season, which is from late January to mid April, for a total of 2.5 months.

Choosing a Medicare plan is mainly about deciding how you want to receive your Medicare coverage, then comparing doctors, prescriptions, costs, and benefits.

Choosing between the two main paths

Option A — Original Medicare

• Part A: hospital coverage
• Part B: doctor/outpatient coverage
• Add Part D for prescriptions
• Consider Medigap to help pay deductibles and coinsurance
• You can generally see any doctor or hospital that accepts Medicare anywhere in the U.S. 

Option B — Medicare Advantage (Part C)

• Private Medicare-approved plan
• Combines Part A and Part B
• Most plans include Part D
• Often includes dental, vision, hearing, fitness, or other additional benefits
• Usually requires you to use the plan’s network for non-emergency care
• Has an annual out-of-pocket maximum for covered Medicare services. 

Check your doctors first

Before choosing a Medicare Advantage plan, verify that:

• Your primary-care doctor is in-network
• Your specialists are in-network
• Your preferred hospitals are in-network
• Your preferred pharmacy participates

This can be more important than a plan’s advertised extras.

Check every prescription

Make a list of every medication, dosage, and frequency you take.

Then compare:

• Whether each drug is covered
• Drug tier
• Copay/coinsurance
• Deductible
• Preferred pharmacies
• Estimated annual drug cost

Medicare’s plan comparison tool lets you enter your prescriptions and estimate your costs. 

A $0-premium Medicare Advantage plan isn’t necessarily the cheapest plan overall. Your actual costs depend on how much healthcare and medication you use. 

If considering Original Medicare + Medigap

This can be attractive if you:

• Want broad doctor/hospital choice
• Travel frequently
• Have significant healthcare needs
• Prefer more predictable medical costs

Medigap policies are standardized by letter in most states, and the benefits of the same letter are generally the same regardless of the insurance company; prices can differ substantially. 

Important: Your initial Medigap enrollment period is especially important. Generally, you have a 6-month Medigap Open Enrollment Period beginning when your Part B coverage starts, when you can buy available Medigap policies without medical underwriting. 

Don’t forget Part D

Even if you don’t currently take prescriptions, going 63 days or more without creditable prescription coverage can potentially result in a Part D late-enrollment penalty later. 

A simple decision rule

Consider Original Medicare + Medigap + Part D if:
You prioritize flexibility, broad provider choice, and predictable medical costs.

Consider Medicare Advantage if:
You want an integrated plan, potentially lower premiums, extra benefits, and you’re comfortable with provider networks and plan rules.

There isn’t one universally “best” Medicare plan—the best choice depends heavily on where you live, your doctors, medications, healthcare usage, budget, and whether you travel.

Our job is to help our clients navigate all the options available to them, before moving on to our other categories of products; long-term care, life insurance, annuities, and accounting/bookkeeping services.