In the summer of 1965, President Lyndon Johnson ratified legislation that created and established the health insurance program called Medicare.

The new health insurance program which was designated for seniors consisted of two coverage parts intended to help enrollees with the cost of hospitalization (Part A) and physician services (Part B).

Since the program was primarily funded by deductions from workers’ paychecks, Part A was available at no cost to the enrollee.

However, Part B (physician services) did require a monthly premium from each enrollee to support the federal government’s cost of that part of the program.

What does Original Medicare Cover?

The Original Medicare program is divided into four coverage Parts: A, B, C, and D.

• Part A is for hospitalization (only after being formally admitted to the hospital), skilled nursing care (after being formally admitted to the hospital for three days), and hospice care
• Part B is for outpatient care and includes some services while inpatient at a hospital, outpatient hospital charges, and visits to provider offices- even if they are located within a hospital. Most prescribed drugs that are professionally administered are also covered.
• Part C is an alternative to Parts A and B of the Medicare program. With Part C, patients can choose between various plans, including both traditional Medicare and a managed care plan that is at least as good as Parts A and B, often with more benefits. It includes an annual out-of-pocket limit for covered services, which Parts A and B do not have. To get this coverage, a patient must first enroll in Parts A and B of Medicare.
• Part D is stand-alone Prescription Drug Coverage that helps pay the cost of out-patient self-administered prescription drugs.

Who Administers Medicare?

Medicare is the federal government’s health insurance program for people who are 65 or older, certain younger people with disabilities, and people with end-stage kidney disease.

Medicare’s first twelve and a half years were uncontrolled for claims and payments from Medicare to providers which resulted in inflated rates and increased expenses, putting a major strain on the Medicare trust fund.

In 1983, Medicare switched to a fixed-rate payment plan. Doctors and hospitals can no longer charge Medicare whatever they want.

Instead, they accept payments from Medicare as “paid in full” for services. This means that non-participating providers can increase the cost of the service by only 15% over what Medicare approves.

How Much Does Original Medicare Cost?

Although Medicare Part A is offered at no charge and is automatic coverage at age 65, Part B and Part D do require a monthly premium from each enrollee:

Part A

There is no cost for Medicare Part A since the premiums were collected as FICA payroll taxes during the years an enrollee was employed or self-employed.

Part B

Medicare Part B premiums are $148.50 per month for 2021, an increase of $3.90 from $144.60 in 2020 except for beneficiaries who will be charged an income-related monthly adjustment. The annual deductible is $203 in 2021, up from $198 in 2020.

Part B income-related monthly adjustments for high-income beneficiaries are:

The monthly Part B premiums for high-income beneficiaries who file income taxes as married and filing separately are:

Part C

Part C is Medicare Advantage and is administered by private insurance companies. Monthly premiums are based on the plan selected and the company it is purchased from. The Part C premium is in addition to the Part B premium unless the plan chosen provides a refund of some or all of the Part B premium.

Part D

If you choose Original Medicare, you can purchase a Medicare Part D plan. These plans are available through private health insurance companies and premiums are based on the prescription drugs you are currently taking.

If you enroll in a Medicare Advantage (Medicare Part C) plan, most policies include prescription drug insurance. Currently, about a third of all Part D enrollees have chosen a Medicare Advantage drug plan (MA-PD) and over 85% of Medicare Advantage (Part C) enrollees choose MA-PD plans.

All Part D drug plans cover outpatient prescription drugs that are self-administered and vaccines like the shingles vaccine that are not covered under Medicare Part B. Enrollees should consult with a Part D specialist to determine drug coverages and limitations.

How to Enroll in Original Medicare

There are three easy methods for enrolling in Original Medicare. Although many individuals are enrolled automatically, others must use one of the following methods:

• Online at www.SocialSecurity.gov.
• By calling Social Security at 1-800-772-1213 (TTY users 1-800-325-0778), Monday through Friday, from 7AM to 7PM.
• In-person at your local Social Security office.

However, if you worked at a railroad, you can enroll in Medicare by contacting the Railroad Retirement Board (RRB) at 1-877-772-5772.

When Should I Enroll in Original Medicare?

You are eligible to enroll in Original Medicare when you turn 65 or if you are disabled and have been collecting disability benefits for 24 months, you will automatically be enrolled in Original Medicare Part A and Part B. An exception to this is made for individuals under age 65 who have end-stage renal disease (ESRD) and are on dialysis or have had a kidney transplant. Individuals under age 65 who have amyotrophic lateral sclerosis (ALS) will automatically be enrolled in Medicare as soon as disability benefits have begun.

Individuals who want to opt-out of automatic Part B coverage can do so by following the instructions that came with their Medicare card.

If, however, you’ve signed up for Original Medicare through Social Security, you must contact them to drop your Part B coverage.