Medicare has four parts, each covering a different category of health care. Parts A and B make up “Original Medicare,” the federal program. Part C is a private-sector alternative that bundles A and B together (often with extras). Part D covers prescription drugs. Understanding what each part does, what it costs, and how they fit together is the key to making smart enrollment decisions.
Part A: Hospital Insurance
Part A covers inpatient care. That includes hospital stays, skilled nursing facility care after a hospitalization, hospice care, and limited home health services. If you or your spouse paid Medicare taxes for at least 10 years (40 quarters), you pay no monthly premium for Part A. Most people fall into this category.
If you don’t qualify for premium-free Part A, you can buy it. The monthly cost is either $311 or $565, depending on how long you or your spouse worked and paid into the system. Regardless of premium status, Part A has a deductible of $1,736 per benefit period. A “benefit period” starts when you’re admitted to the hospital and ends 60 days after you stop receiving inpatient care, so it’s possible to pay that deductible more than once in a calendar year if you have multiple separate hospital stays.
Part B: Medical Insurance
Part B covers outpatient and doctor-related care. This is the part that pays for office visits, preventive screenings, lab work, ambulance services, mental health care, durable medical equipment like wheelchairs or oxygen tanks, and limited outpatient prescription drugs (such as insulin delivered through a pump). Most preventive services, including flu shots and cancer screenings, are covered at no cost to you as long as your provider accepts Medicare’s standard payment terms.
The standard Part B premium in 2025 is $185 per month. Higher earners pay more through an income-related surcharge. If you file individually and earn above $106,000 (or above $212,000 filing jointly), your monthly premium increases on a sliding scale, topping out at $628.90 per month for individuals earning $500,000 or more. These brackets are based on your tax return from two years prior.
One useful 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
Part C isn’t a separate benefit. It’s an alternative way to receive your Part A and Part B coverage through a private insurance company instead of directly through the federal government. These plans are called Medicare Advantage plans, and they must cover everything Original Medicare covers. Many also bundle in extras that Original Medicare does not, like routine dental, vision, and hearing coverage.
The tradeoff is flexibility. With Original Medicare, you can see any doctor or hospital in the country that accepts Medicare, and you rarely need referrals or prior authorization. Medicare Advantage plans typically restrict you to a network of providers. You may need referrals to see specialists, and the plan may require prior authorization before covering certain services or supplies. Some plans allow out-of-network care, but at higher cost.
You still pay your Part B premium when you enroll in a Medicare Advantage plan. Some plans charge an additional monthly premium, while others charge nothing extra and compete on the strength of their network and benefits. Every Medicare Advantage plan is required to set a yearly cap on your out-of-pocket spending, something Original Medicare on its own does not provide.
Part D: Prescription Drug Coverage
Part D covers outpatient prescription drugs, the medications you pick up at a pharmacy. It’s offered through private insurance companies, either as a standalone plan paired with Original Medicare or built into a Medicare Advantage plan. Each plan maintains its own formulary, which is the list of drugs it covers. Drugs on a formulary are organized into tiers, with lower tiers generally meaning lower costs for you.
A major change took effect in 2025: your total out-of-pocket spending on Part D drugs is now capped at $2,000 per year. Before this cap, people taking expensive medications could face thousands more in costs once they passed through the coverage gap (sometimes called the “donut hole”). The $2,000 limit applies regardless of which Part D plan you choose.
How the Parts Work Together
Most people on Medicare carry Part A and Part B at minimum. From there, you choose one of two paths. You can stay with Original Medicare (Parts A and B) and add a standalone Part D plan for drug coverage. Many people on this path also purchase a Medigap policy, which is supplemental insurance sold by private companies that helps cover costs Original Medicare leaves behind, like deductibles, coinsurance, and copayments.
Medigap plans are standardized and labeled by letter (A, B, C, D, F, G, K, L, M, and N). Each letter covers a specific combination of gaps. Plan G, for example, covers skilled nursing coinsurance, the Part A deductible, foreign travel emergencies, and excess charges from doctors who bill above Medicare’s approved amount. Plans C and F are no longer available to anyone who turned 65 on or after January 1, 2020. Medigap policies do not cover prescription drugs, so you still need a separate Part D plan.
Your other option is to enroll in a Medicare Advantage plan (Part C), which replaces Original Medicare and usually includes drug coverage. You cannot have both a Medigap policy and a Medicare Advantage plan at the same time.
Who Qualifies for Medicare
Most people become eligible at age 65. Your Initial Enrollment Period is a seven-month window that starts three months before the month you turn 65 and ends three months after it. If you’re still working and covered by an employer plan, you can delay enrollment without penalty, but the rules are specific, so timing matters.
People under 65 qualify in two situations. If you’ve received Social Security disability benefits for 24 months, you’re automatically enrolled. If you have ALS (Lou Gehrig’s disease), Medicare begins as soon as your disability benefits start, with no waiting period. People with permanent kidney failure (end-stage renal disease) also qualify regardless of age, provided they or a spouse have sufficient work history. Coverage for dialysis patients typically begins the first day of the fourth month of treatment, though it can start sooner if you’re training for home dialysis or being admitted for a kidney transplant.
Late Enrollment Penalties
Missing your enrollment window for Part B carries a penalty that lasts as long as you have coverage. Your premium increases by 10% for every full 12-month period you could have had Part B but didn’t sign up. If you delayed three full years without qualifying employer coverage, for example, you’d pay 30% more every month for the rest of your time on Medicare. Part D has a similar structure: a permanent surcharge based on how many months you went without creditable drug coverage. These penalties make it worth understanding your enrollment dates well before you turn 65.