A Medicare plan is a federal health insurance program that covers Americans 65 and older, along with certain younger people with disabilities or permanent kidney failure. Medicare is divided into distinct parts, each covering different services, and you can combine them in different ways depending on your health needs and budget. Understanding how these parts fit together is the key to choosing the right coverage.
The Four Parts of Medicare
Medicare is organized into four lettered parts: A, B, C, and D. Parts A and B together form what’s called Original Medicare, which is the government-run program. Part C (Medicare Advantage) is a private-sector alternative that bundles A and B together. Part D covers prescription drugs. Most people end up with either Original Medicare plus a standalone drug plan, or a Medicare Advantage plan that wraps everything into one package.
Part A: Hospital Coverage
Part A covers inpatient care. That includes hospital stays, skilled nursing facility care after a hospitalization, hospice care, and some home health services. Most people pay no monthly premium for Part A because they or a spouse paid Medicare taxes during their working years. If you haven’t worked long enough to qualify for premium-free Part A, you can still buy into it by paying a monthly premium.
Part B: Medical Coverage
Part B covers outpatient and preventive care: doctor visits, lab tests, imaging, outpatient surgeries, durable medical equipment like wheelchairs, and preventive screenings. Unlike Part A, nearly everyone pays a monthly premium for Part B. In 2025, the standard Part B premium is $185 per month, with an annual deductible of $257. After you meet that deductible, you typically pay 20% of the Medicare-approved amount for most services.
Higher earners pay more. If your income exceeds certain thresholds, an extra surcharge called IRMAA (Income-Related Monthly Adjustment Amount) gets added to your Part B premium. This adjustment is based on your tax return from two years prior.
Part C: Medicare Advantage
Medicare Advantage plans are sold by private insurance companies but approved and regulated by Medicare. They bundle Part A, Part B, and usually Part D into a single plan. Most also include extras that Original Medicare doesn’t cover, like routine vision exams, hearing aids, dental cleanings, and gym memberships or fitness program discounts.
The tradeoff for those extra benefits is less flexibility. Medicare Advantage plans typically use provider networks, meaning you may need to see doctors and hospitals within the plan’s network for non-emergency care. Going out of network usually costs more, and some plans don’t cover it at all. Many plans also require referrals before you can see a specialist, which Original Medicare does not.
One significant advantage of Medicare Advantage: every plan sets a yearly out-of-pocket maximum. Once you hit that cap, you pay nothing for covered services the rest of the year. Original Medicare has no such limit on its own, which means your costs in a bad health year are theoretically uncapped unless you carry supplemental insurance.
Part D: Prescription Drug Coverage
Part D covers outpatient prescription medications. You can get it as a standalone plan added to Original Medicare or as part of a Medicare Advantage plan. Part D plans are sold by private insurers, and premiums, drug formularies, and pharmacy networks vary from plan to plan.
In 2025, Part D works in three phases. First, you pay 100% of your drug costs until you meet a $590 annual deductible. Then you enter the initial coverage phase, where you pay 25% of your drug costs while the plan and drug manufacturers cover the rest. Once your out-of-pocket spending hits $2,000 for the year, you enter catastrophic coverage, where you pay nothing for the remainder of the calendar year. That $2,000 annual cap is new, created by the Inflation Reduction Act, and eliminates the old “donut hole” coverage gap that previously left people paying full price for a stretch of their drug spending.
Original Medicare vs. Medicare Advantage
This is the biggest choice you’ll make. With Original Medicare (Parts A and B), you can see any doctor or visit any hospital in the country that accepts Medicare, no referrals needed. That nationwide flexibility matters if you travel frequently, split time between states, or want access to specialists at major medical centers without worrying about network restrictions.
The downside of Original Medicare is cost exposure. There’s no yearly cap on what you could owe, and the standard 20% coinsurance on Part B services can add up fast during a serious illness or surgery. That’s why many people on Original Medicare also buy a Medigap policy to cover those gaps.
Medicare Advantage plans offer built-in protections through their out-of-pocket maximums and often include dental, vision, and hearing benefits at no extra premium. But you’re locked into a network, may need referrals, and the plan can change its network or benefits from year to year. If your preferred doctors aren’t in the network, or you move outside the plan’s service area, you may need to switch plans.
Medigap: Supplemental Insurance for Original Medicare
If you choose Original Medicare, you can buy a Medigap policy (also called Medicare Supplement Insurance) from a private insurer to help cover the costs Original Medicare leaves behind: coinsurance, copayments, and deductibles. Medigap plans are standardized by letter (A, B, C, D, F, G, K, L, M, N), and each letter offers a specific set of benefits that’s identical regardless of which insurance company sells it. The only difference between companies selling the same letter plan is the price.
Plan G is the most popular option for people newly eligible for Medicare, since Plans C and F are no longer available to anyone who turned 65 on or after January 1, 2020. Plan N is another common choice: it covers most Part B costs but includes small copayments for some office and emergency room visits. Plans K and L take a different approach, covering a percentage of your costs until you hit an annual out-of-pocket limit ($8,000 for Plan K and $4,000 for Plan L in 2026), after which the plan pays 100% for the rest of the year.
You cannot use a Medigap policy with Medicare Advantage. It’s one or the other. And the best time to buy Medigap is during your six-month open enrollment window, which starts the month you turn 65 and are enrolled in Part B. During that window, insurers must sell you any plan they offer at the standard price, regardless of your health. Outside that window, you may face medical underwriting and higher premiums, or even denial.
Who Qualifies for Medicare
Most people become eligible at age 65. You can also qualify before 65 if you’ve been receiving Social Security disability benefits for 24 months, or if you have ALS (Lou Gehrig’s disease), which triggers immediate Medicare eligibility when disability benefits begin. People with permanent kidney failure (end-stage renal disease) qualify at any age if they need regular dialysis or have had a kidney transplant, provided they or a spouse have sufficient work history under Social Security.
When to Enroll
Your Initial Enrollment Period is a seven-month window that starts three months before the month you turn 65 and ends three months after that birthday month. Signing up during the first three months ensures your coverage begins right when you turn 65. Waiting until later in the window delays your start date and could create a gap in coverage.
If you’re still working and covered by an employer plan when you turn 65, you generally have a Special Enrollment Period that gives you eight months to sign up after you leave that job or lose that coverage, without penalty. Missing your enrollment windows can result in late enrollment penalties that permanently increase your Part B and Part D premiums.
Each fall, from October 15 through December 7, the annual Open Enrollment Period lets you switch between Original Medicare and Medicare Advantage, change Medicare Advantage plans, or join or switch Part D drug plans. Changes made during this window take effect January 1 of the following year. Reviewing your plan annually is worth the effort, since costs, drug formularies, and provider networks can shift from one year to the next.