Medicare Basics: Parts A, B, C, and D Explained

Medicare Has Several Moving Parts

Medicare is federal health coverage primarily for people 65 and older, and for some younger people with certain disabilities. Unlike a single unified plan, Medicare is made up of distinct parts that cover different types of care, and how you combine them shapes your costs, your provider flexibility, and your prescription drug coverage. Understanding the parts individually makes the whole system much easier to navigate.

Part A: Hospital Insurance

Medicare Part A covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home health care. Most people don't pay a monthly premium for Part A if they or a spouse paid Medicare taxes for a sufficient number of years while working. Part A still involves deductibles and coinsurance for hospital stays beyond a certain length, so it isn't cost-free even without a premium.

Part B: Medical Insurance

Medicare Part B covers outpatient care, including doctor visits, preventive services, durable medical equipment, and many outpatient procedures. Part B does come with a monthly premium for nearly everyone, along with an annual deductible and typically 20% coinsurance for most services after the deductible is met. Together, Part A and Part B are often called Original Medicare.

Part C: Medicare Advantage

Medicare Advantage plans are an alternative way to receive your Medicare benefits, offered by private insurance companies approved by Medicare. Instead of using Original Medicare directly, you get your Part A and Part B benefits (and often Part D drug coverage) through a private plan, which frequently works like an HMO or PPO with a defined network. Medicare Advantage plans often include extra benefits Original Medicare doesn't cover, like vision, dental, or hearing, but typically require using in-network providers and may involve referrals, similar to employer HMO or PPO plans.

Part D: Prescription Drug Coverage

Medicare Part D covers prescription medications and is offered through private insurers as a standalone plan (if you have Original Medicare) or bundled into many Medicare Advantage plans. Each Part D plan has its own list of covered drugs, called a formulary, and its own cost tiers, so the same medication can cost noticeably different amounts on different plans. It's worth checking that your specific prescriptions are covered favorably before choosing a Part D plan, rather than assuming all plans treat a given drug the same way.

Medigap: Medicare Supplement Insurance

Medigap policies are private supplemental plans designed to work alongside Original Medicare, helping cover some of the costs Original Medicare doesn't, like coinsurance, copays, and deductibles. Medigap plans do not work alongside Medicare Advantage. You generally choose either Original Medicare plus an optional Medigap policy (and separate Part D plan), or a Medicare Advantage plan that bundles everything together. Each path has a different balance of premium cost, provider flexibility, and predictability of out-of-pocket spending.

When to Enroll: The Initial Enrollment Period

Most people become eligible for Medicare around age 65 and have an Initial Enrollment Period that spans seven months: the three months before their birthday month, their birthday month, and the three months after. Enrolling during this window helps you avoid gaps in coverage and, importantly, avoid certain late enrollment penalties. If you're still covered by an employer plan (typically through active employment, either your own or a spouse's) when you turn 65, you may be able to delay some parts of Medicare without penalty, but the rules depend on the size of the employer and other specifics, so it's worth confirming your situation rather than assuming you're automatically exempt from the deadline.

The Late Enrollment Penalty

If you don't enroll in Part B or Part D when you're first eligible, and you don't have other qualifying coverage in the meantime, you may face a late enrollment penalty, an increased premium that in some cases lasts for as long as you have that coverage. These penalties exist to encourage people to enroll and maintain continuous coverage rather than waiting until they need care. Because the penalty can compound over time, it's worth understanding your enrollment timeline well before turning 65, or before any employer coverage you're relying on is set to end.

Putting the Parts Together

A common starting framework is to decide first whether Original Medicare with a separate Medigap and Part D plan, or a bundled Medicare Advantage plan, fits your preferences for cost predictability versus provider flexibility. From there, a licensed Medicare provider can walk through specific plan options, formularies, and networks available in your area.