Medicare is the federal health insurance program for most Americans aged 65 and older, and for some younger people with disabilities. It is made up of several parts that cover different services, and the alphabet soup of A, B, C and D confuses nearly everyone at first. This guide explains what each part does, what it costs, when to enroll and how to avoid expensive mistakes.
Original Medicare: Parts A and B
Original Medicare is run by the federal government and consists of Part A and Part B. You can use any doctor or hospital in the country that accepts Medicare.
Part A: Hospital Insurance
Part A covers inpatient hospital stays, skilled nursing facility care after a qualifying hospital stay, hospice care and some home health services. Most people pay no monthly premium for Part A if they or a spouse paid Medicare taxes for at least 40 quarters, roughly ten years of work. You still pay a deductible for each benefit period and daily coinsurance for longer hospital stays.
Part B: Medical Insurance
Part B covers doctor visits, outpatient care, preventive services, lab tests, durable medical equipment and some home health care. You pay a monthly premium, which is higher for people with higher incomes, plus an annual deductible and typically 20 percent coinsurance for covered services. There is no annual cap on out-of-pocket costs in Original Medicare, which is one reason many people add supplemental coverage.
Part C: Medicare Advantage
Medicare Advantage plans are offered by private insurers approved by Medicare. They bundle Part A and Part B and often include Part D drug coverage plus extras like dental, vision and hearing. They usually use networks such as HMOs or PPOs, may require referrals and prior authorizations, and set an annual out-of-pocket maximum. Premiums can be low or even zero beyond your Part B premium, but you may face copays, and your choice of doctors is more limited. Plans, benefits and networks change every year.
Part D: Prescription Drug Coverage
Part D is optional coverage for prescription drugs, offered through private plans. Each plan has a formulary listing covered drugs, tiers that set copays and annual cost limits that have been changing under recent law. Compare plans every year, because drug lists and prices change. If you do not sign up when first eligible and have no creditable drug coverage, you may owe a late-enrollment penalty for as long as you have Part D.
Original Medicare vs. Medicare Advantage
| Feature | Original Medicare (A and B) | Medicare Advantage (C) |
|---|---|---|
| Provider choice | Any provider accepting Medicare | Plan network, usually |
| Out-of-pocket cap | None by itself | Yes, annual maximum |
| Extras (dental, vision) | Not included | Often included |
| Prior authorization | Rare | More common |
| Travel coverage | Nationwide | May be limited outside network |
| Drug coverage | Add separate Part D | Often built in |
What About Medigap?
Medicare Supplement Insurance, called Medigap, is sold by private insurers to help pay Original Medicare’s deductibles, coinsurance and copays. Standardized plans are labeled by letters such as G or N. Medigap works only with Original Medicare, not with Medicare Advantage. Your best chance to buy without medical underwriting is during your Medigap open enrollment period, which starts when you are 65 and enrolled in Part B. Premiums vary by age, location and insurer.
When to Enroll
Your Initial Enrollment Period is a seven-month window: the three months before the month you turn 65, your birthday month and the three months after. If you miss it and do not have qualifying employer coverage, you may face lifelong late penalties on Part B. If you are still working and covered by a large employer plan, you may be able to delay Part B without penalty, but confirm with your benefits office first.
- General Enrollment Period. For people who missed the initial window, with possible penalties.
- Annual Enrollment Period. From October 15 to December 7 each year, you can change Medicare Advantage and Part D plans.
- Medicare Advantage Open Enrollment. Early in the year, if you are already in an Advantage plan.
- Special Enrollment Periods. After events like moving or losing coverage.
If you are retiring around this time, our guides on when to claim Social Security and how much to save for retirement help you plan the bigger picture.
Costs to Budget For
Expect to budget for the Part B premium, a possible Part D premium, Medigap or Advantage plan premiums, deductibles, copays and items Medicare does not cover. Original Medicare generally does not pay for routine dental, eye exams for glasses, hearing aids or long-term custodial care. Some people use a health savings account while still eligible to prepare for these expenses, as described in our HSA guide. Remember that you generally cannot contribute to an HSA once you enroll in Medicare.
How to Choose
- List your doctors and prescriptions. Check which options cover them.
- Consider how you use care. If you travel a lot or want freedom to choose specialists, Original Medicare with Medigap may fit. If you want lower premiums and extras, Advantage may fit.
- Compare total costs. Add premiums, deductibles, copays and the out-of-pocket maximum.
- Review plan star ratings.
- Get free counseling. State Health Insurance Assistance Programs offer unbiased help.
The official source for plan comparison, costs and enrollment is medicare.gov.
Steps to Take in the Year You Turn 65
Three months before your birthday, check your Social Security status and decide whether you will sign up for Part B. If you are leaving employer coverage, ask your benefits office how it coordinates with Medicare. Compare Medigap and Medicare Advantage options, list your doctors and prescriptions and use the plan finder on the official website. Mark your enrollment dates on a calendar to avoid penalties.
Review Every Fall
Each October, insurers send an Annual Notice of Change that summarizes plan changes for the next year. Read it carefully, since premiums, formularies, networks and copays may change. Compare it with other plans during the annual enrollment period, even if you were happy last year.
Frequently Asked Questions
Is Medicare free?
Not entirely. Part A is premium-free for many people, but Part B, Part D and supplemental plans carry costs.
Can I switch from Advantage back to Original Medicare?
Yes, typically during open enrollment periods, but Medigap approval may require medical underwriting in many states.
Does Medicare cover long-term care?
Generally not custodial long-term care. It may cover limited skilled nursing after a hospital stay.
Do I have to sign up if I already receive Social Security?
If you collect Social Security before 65, you are usually enrolled in Parts A and B automatically. Otherwise, you must sign up yourself.
Bottom Line
Medicare has four parts, but the main decision is between Original Medicare with optional Medigap and Part D, or an all-in-one Medicare Advantage plan. Enroll on time, compare plans every year and match your choice to your doctors, drugs, budget and travel habits.
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This article is for general education only and is not financial, tax, legal or insurance advice. Rates, limits and rules change, so confirm current details with the provider or a licensed professional before you decide.