Medicare Is Federal Health Insurance for People 65+
Medicare is a federal health insurance program run by the Centers for Medicare and Medicaid Services (CMS). It covers Americans who are 65 or older, as well as certain younger people with disabilities or End-Stage Renal Disease. It is not run by private insurance companies — though private companies do offer plans that work alongside or within Medicare.
Medicare Is NOT Free Health Insurance
Most people pay $0 for Part A (hospital insurance), but Part B (medical insurance) costs $202.90/month in 2026. There are also deductibles, copays, and coinsurance. Many people are surprised by how much they still owe out of pocket — even with Medicare.
Medicare Does NOT Cover Everything
Original Medicare covers about 80% of approved medical costs. The remaining 20% is your responsibility — and there is no annual out-of-pocket maximum. That means a $200,000 hospital bill could leave you owing $40,000. A $500,000 cancer treatment could mean $100,000 out of pocket. This is the primary reason supplemental coverage exists.
Two Paths to Get Medicare Coverage
Once you have Medicare, you choose one of two paths for how you receive and supplement your benefits:
Path 1: Original Medicare + Medigap
Parts A & B + a Medicare Supplement plan + a standalone Part D drug plan. Maximum freedom, predictable costs.
Path 2: Medicare Advantage
Part C — a private plan that replaces Original Medicare. Bundles hospital, medical, and usually drug coverage into one plan.
You Do Not Choose Between Medicare and Private Insurance
Medicare IS your primary insurance after 65 (unless you have qualifying employer coverage from an employer with 20+ employees). The choice is not whether to have Medicare — it is how you receive and supplement your Medicare benefits. Everyone on Medicare still needs to make decisions about supplemental coverage.
Here is the single most important thing to understand: Medicare covers 80% of your approved medical costs. There is no annual out-of-pocket maximum on Original Medicare. That means without supplemental coverage, your financial exposure is unlimited. A serious illness or hospital stay could cost you tens of thousands of dollars. That is why almost everyone needs either a Medigap plan or a Medicare Advantage plan on top of Original Medicare.
Knowledge Check
Answer all questions to unlock the next lesson
Q1.Medicare is primarily designed for which group of people?
Q2.True or false: Medicare covers 100% of your healthcare costs with no out-of-pocket expenses.
Q3.Which of the following is NOT covered by Original Medicare?
0/3 questions answered