Medicare has four main parts, each covering a different category of healthcare. Part A covers hospital stays, Part B covers outpatient and doctor visits, Part C (Medicare Advantage) bundles everything through a private insurer, and Part D covers prescription drugs. Understanding what each part does, what it costs, and how they fit together helps you make smarter choices during enrollment.
Part A: Hospital Insurance
Part A pays for care you receive as an inpatient. That includes hospital stays, skilled nursing facility care after a hospitalization, hospice care, and some home health services. If you’re admitted to the hospital for surgery, recovering in a rehab facility after a hip replacement, or receiving end-of-life hospice care, Part A is the coverage that applies.
About 99% of Medicare beneficiaries pay no monthly premium for Part A because they (or a spouse) paid Medicare taxes for at least 10 years of work. If you haven’t met that threshold, you can still buy into Part A, but you’ll pay a monthly premium. Even with premium-free Part A, there’s a deductible each time you’re admitted to the hospital: $1,676 in 2025, rising to $1,736 in 2026. That deductible covers the first 60 days of each hospital stay.
Part B: Medical Insurance
Part B covers two broad categories: medically necessary services and preventive care. On the medical side, that includes doctor visits, outpatient procedures, ambulance services, durable medical equipment like wheelchairs and oxygen supplies, mental health care, and even limited outpatient prescription drugs. On the preventive side, it covers screenings, vaccines, and wellness visits designed to catch problems early.
Unlike Part A, nearly everyone pays a monthly premium for Part B. The standard premium is $185.00 per month in 2025. Higher earners pay more through an income-related surcharge. If you file individually and earn more than $106,000 (or more than $212,000 filing jointly), you’ll pay an additional $74 to $443.90 per month on top of the standard premium, depending on your income bracket. After meeting your annual deductible, you typically pay 20% of the Medicare-approved amount for most Part B services, with no built-in cap on your total out-of-pocket spending for the year.
One notable detail for people with diabetes: if you use an insulin pump covered under Part B’s equipment benefit, your cost for insulin is capped at $35 per month’s supply.
Part C: Medicare Advantage
Medicare Advantage is not a separate benefit. It’s an alternative way to receive your Part A and Part B coverage through a private insurance company approved by Medicare. These plans must cover everything Original Medicare covers, but many add extras like dental, vision, hearing, and fitness benefits that Original Medicare does not include.
The trade-off is flexibility. With Original Medicare, you can see any doctor or hospital in the country that accepts Medicare. With Medicare Advantage, you typically need to stay within the plan’s provider network for non-emergency care, and you may need referrals to see specialists. Some plans do allow out-of-network visits, usually at a higher cost.
Cost structures differ significantly. Medicare Advantage plans have an annual out-of-pocket maximum, meaning once you hit that limit, the plan covers 100% of your remaining costs for the year. Original Medicare has no such cap on its own. On the other hand, you still pay your Part B premium with Medicare Advantage, and some plans charge an additional monthly premium (though many advertise $0 premiums). Most Medicare Advantage plans bundle prescription drug coverage, so you won’t need a separate Part D plan.
One important rule: you cannot have both a Medicare Advantage plan and a Medigap supplemental policy at the same time. If you want supplemental coverage to help with copays and deductibles, you need to stick with Original Medicare.
Part D: Prescription Drug Coverage
Part D covers outpatient prescription drugs, the medications you pick up at a pharmacy. These plans are sold by private insurers and vary in which drugs they cover, which pharmacies they work with, and what they charge. If you have Original Medicare (Parts A and B) and want drug coverage, you enroll in a standalone Part D plan. If you have Medicare Advantage, drug coverage is usually built in.
Starting in 2025, Part D includes a $2,000 annual cap on out-of-pocket drug costs. Once you’ve spent $2,000 on covered prescriptions in a calendar year, you pay nothing more for covered drugs for the rest of that year. This is a major change from previous years, when some beneficiaries faced thousands of dollars in costs for expensive medications.
How the Parts Work Together
Original Medicare refers to Parts A and B combined. This is the government-run program that covers hospital and outpatient care. From there, you have two paths. You can stay with Original Medicare and add a standalone Part D drug plan, plus optionally a Medigap policy to reduce your cost-sharing. Or you can switch to a Medicare Advantage plan (Part C), which replaces Original Medicare and typically includes drug coverage.
Medigap policies are worth understanding if you choose Original Medicare. These supplemental plans, sold by private insurers, help pay costs that Original Medicare leaves behind, like the 20% coinsurance on Part B services and the Part A hospital deductible. When you receive care, Medicare pays its share first, then your Medigap policy covers some or all of what’s left. You pay a separate monthly premium for Medigap on top of your Part B premium.
Who Qualifies for Medicare
Most people become eligible at age 65 if they or a spouse have paid Medicare taxes through work. You’re automatically enrolled in Part A if you’re already receiving Social Security benefits when you turn 65.
You can also qualify before 65 through disability. If you’ve been receiving Social Security disability benefits for 24 months, you’re automatically enrolled in Part A. People diagnosed with ALS (Lou Gehrig’s disease) are an exception: they qualify for Part A immediately with no waiting period. Those with end-stage renal disease who need regular dialysis or a kidney transplant also qualify, though the timing of coverage depends on when dialysis begins or a transplant occurs.
Late Enrollment Penalties
Signing up late for Part B or Part D can result in permanent surcharges added to your monthly premiums. These penalties exist to discourage people from waiting until they get sick to enroll.
For Part B, the penalty is an extra 10% on your premium for every full year you delayed enrollment without qualifying coverage. If you waited two years, you’d pay 20% more than the standard premium for as long as you have Part B. For Part D, the penalty is 1% of the national base beneficiary premium ($38.99 in 2026) for every month you went without creditable drug coverage. Waiting 14 months, for example, adds a 14% surcharge. Both penalties typically last for life.
If you have employer-based health coverage or another qualifying plan when you first become eligible, you generally won’t face penalties for delaying enrollment, since you’ll qualify for a special enrollment period when that coverage ends.