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What is Medicare? And How Does It Work?

Retirement Funding Insights

Whether you're turning 65 in the next few years or you won't be 65 for a few decades, understanding what Medicare is and its different parts is critical. Increasingly, Americans are starting to look at this government-sponsored program and incorporating it into their future health care decisions. We think there is good reason for that and we want to help you decipher the different parts of Medicare to determine what plans will work for you and your health care needs.

Medicare Parts A and B: The Original Medicare

There are two components to Medicare.

  • Part A: covers inpatient hospital care, skilled nursing facility costs, hospice services, lab tests, surgeries, and some home health care services. While many Americans will not have to pay for Part A premiums out of pocket, the annually adjusted standard deductibles still apply.1,2

We have to warn you, Medicare will only cover a maximum of 100 days of nursing home care, provided certain conditions are met. Part A is the plan with these provisions.

  • Under current Part A rules, a beneficiary would pay $0 for days 1–20 of care in a skilled nursing facility (SNF). During days 21–100, a $176 daily coinsurance payment may be required.1,2

Knowing the limitations of Part A, some look for alternatives to manage the costs of extended care.

  • Part B covers physicians’ fees, outpatient hospital care, certain home health services, durable medical equipment, and other services that are not covered by Part A.3

Part B does come with some costs, however, which are adjusted annually. The premiums vary, according to the Medicare recipient’s income level, but the standard monthly premium amount is $170.10 for 2022, and the current yearly deductible is $198.1

Part C: Medicare Advantage Plans

Sometimes called Medicare Part C, Medicare Advantage (MA) plans are often viewed as an all-in-one alternative to the Original Medicare - think Part A + Part B + Part D = Part C. MA plans are offered by private companies approved by the federal government.

Although these plans come with standardized minimum coverage, the amount of additional protection can drastically differ from one person to the next. This is due to unique provider networks, premiums, copays, coinsurance, and out-of-pocket spending limits. In other words, comparing prices and services offered by different vendors may be the best way to find a Medicare Advantage plan that works for you.3

Part D: Prescription Drug Plans

While Medicare Advantage plans often offer prescription drug coverage, a Medicare Advantage plan may not be right for you. If this is the case, insurers also offer federally standardized Medicare Part D plans as a standalone product to those with Medicare Part A and/or Part B or a Medigap plan. Every Part D plan has its own formulary, or list, of covered medications. Visit Medicare.gov to explore the formulary and prices of approved drugs for your Part D plan, organized by tier.

Medicare.gov is a great place to start all your research. There, you’ll find answers to your most common questions and more information on the different Medicare plans offered in your area.4 We are also here to help with any questions you have and we can help you work through the process of finding the right plan for your healthcare needs.

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About the Author

James M. Comblo, CFF
is a Partner and the Chief Compliance Officer at FSC Wealth Advisors. His greatest passion in the financial services industry is helping clients accomplish their dreams both with investments and their personal lives. To learn more about him click here.


  1. https://www.cms.gov/Medicare/Eligibility-and-Enrollment/OrigMedicarePartABEligEnrol
  2. https://www.medicare.gov/what-medicare-covers/what-part-a-covers 
  3. https://www.medicare.gov/what-medicare-covers/what-part-b-covers 
  4. https://www.medicare.gov/drug-coverage-part-d/what-medicare-part-d-drug-plans-cover