Medicare has four main parts, each covering a different category of health care: Part A for hospital stays, Part B for doctor visits and outpatient care, Part C (Medicare Advantage) as a bundled alternative through private insurers, and Part D for prescription drugs. Most people end up with some combination of these, depending on their health needs and budget. Here’s what each part actually covers, what it costs, and how they fit together.
Part A: Hospital Insurance
Part A covers inpatient care. That means stays in hospitals and critical access hospitals, skilled nursing facility care after a qualifying hospital stay, hospice care, and some home health services. If you’re admitted to a hospital for surgery, recovering in a skilled nursing facility after a hip replacement, or receiving end-of-life hospice care, Part A is the piece of Medicare that pays for it.
Most people pay nothing for Part A. If you (or your spouse) worked and paid Medicare taxes for at least 10 years (40 quarters), the premium is $0. If you haven’t met that threshold, you’ll pay a monthly premium. Either way, there are still deductibles and coinsurance costs when you actually use inpatient services.
Part B: Medical Insurance
Part B is the outpatient side. It covers two broad categories: medically necessary services (things your doctor orders to diagnose or treat a condition) and preventive services (screenings, vaccines, and wellness visits designed to catch problems early). Specific covered items include ambulance services, durable medical equipment like wheelchairs and oxygen tanks, mental health and substance use treatment, clinical research participation, and limited outpatient prescription drugs.
In 2025, the standard Part B premium is $185 per month, and the annual deductible is $257. After you meet the deductible, you typically pay 20% of the cost for most services. One notable detail: if you use an insulin pump covered under Part B’s equipment benefit, your cost for a month’s supply of insulin for that pump is capped at $35, and the deductible doesn’t apply.
Higher earners pay more. An income-related surcharge kicks in if your modified adjusted gross income exceeds $109,000 for a single filer or $218,000 for a married couple filing jointly. The surcharge increases at several income tiers above those thresholds.
Part C: Medicare Advantage
Part C isn’t a separate benefit so much as a different way to receive your Medicare coverage. Medicare Advantage plans are offered by private insurance companies approved by Medicare. They bundle Part A and Part B together, and most also include Part D drug coverage, into a single plan. You’re still in Medicare, but the private insurer manages your care and sets rules about networks, referrals, and copays.
The biggest draw of Medicare Advantage is extra benefits. Most plans cover things Original Medicare does not, including routine vision exams, hearing aids, dental cleanings, and even fitness programs like gym memberships or discounts. The tradeoff is that you typically need to use doctors and hospitals within the plan’s network, and you may need referrals to see specialists. Plans vary widely in cost, coverage, and quality, so comparing options carefully matters.
You still pay your Part B premium when you enroll in a Medicare Advantage plan. Many plans charge an additional monthly premium on top of that, though some charge $0.
Part D: Prescription Drug Coverage
Part D helps cover the cost of prescription medications. Like Part C, these plans are run by private insurance companies approved by Medicare. You can add a standalone Part D plan to Original Medicare, or get drug coverage built into a Medicare Advantage plan.
Every Part D plan maintains a formulary, which is its list of covered drugs. That list must include at least two drugs in the most commonly prescribed categories, and it must cover most drugs in six protected classes: cancer drugs, HIV/AIDS drugs, antidepressants, antipsychotics, anticonvulsants, and immunosuppressants for organ transplants. If none of the drugs on your plan’s formulary work for your condition, you can request an exception to get a non-listed drug covered.
Plans use a tier system to set your out-of-pocket costs. Lower tiers cost less. A typical structure looks like this:
- Tier 1 (lowest cost): most generic drugs
- Tier 2 (medium cost): preferred brand-name drugs
- Tier 3 (higher cost): non-preferred brand-name drugs
- Specialty tier (highest cost): very expensive drugs
Starting January 1, 2026, negotiated prices for the first 10 drugs selected under Medicare’s new drug pricing program will take effect, which is expected to lower costs for some of the most commonly used medications.
What Original Medicare Does Not Cover
Parts A and B together leave some significant gaps. Original Medicare does not cover long-term care (like a nursing home stay that isn’t tied to a qualifying hospital admission), routine dental work (cleanings, fillings, extractions, dentures), eye exams for glasses, hearing aids and fitting exams, cosmetic surgery, massage therapy, or routine physical exams outside of the annual wellness visit. These gaps are a major reason people turn to Medicare Advantage plans, Medigap supplemental policies, or separate dental and vision plans.
How the Parts Work Together
You have two basic paths. The first is Original Medicare: you enroll in Part A and Part B through the federal government, then add a standalone Part D plan for drug coverage. Many people on this path also buy a Medigap (Medicare Supplement) policy from a private insurer to help cover deductibles, coinsurance, and copays that Original Medicare leaves behind. The second path is Medicare Advantage: you enroll in a Part C plan that wraps A, B, and usually D into one package, often with added benefits like dental and vision. You generally cannot have both a Medigap policy and a Medicare Advantage plan at the same time.
Enrollment Timing and Late Penalties
Your Initial Enrollment Period lasts seven months. It starts three months before the month you turn 65 and ends three months after that month. If you miss this window and don’t qualify for a special enrollment period (for example, because you had employer coverage), you may have to wait for the next General Enrollment Period and pay a late enrollment penalty that increases the longer you delay. For Part B, that penalty is added to your monthly premium for as long as you have coverage, which can add up substantially over time.